New Indian Economy..1

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2009

18/9/2009

.

Development of

IndianEconomy.



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KET’S V.G.VAZE

COLLEGES.Y.B.Com.

(Accounting &

Finance)

Semester -III

Year: 2009-10Subject: Economics

Submitted to:

Miss.Pranali



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Group Members

Roll no:.

SWAPNA JAGTAP

023

PANKAJ KAKAD

024

DEEPTI MHASKE031

NIKET MORE

032



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TEJASHRI PARULKAR

037

ASHWINI SONAWANE

054

CONTENTS:

What is Economy?

Past of Indian Economy.

India V/s China.

SWOT analysis on Indian Economy:

a. Strength.

b. Weakness.

c. Opportunities.



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d. Threats.

What is Indian Economy?

Pandit Jawaharlal Nehru, the great leader & first

Prime Minister of India had sown the seeds of Indian

Economy.



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Economy is more than just a currency. An economy is a

market where people produce goods & services. India is a

part of the economy. Indeed every country in the world

can be considered an economy as long as it is involved in

the production of goods & services.

The seeds sown by Pandit Jawaharlal Nehru, took

the form of a “Large Tree”.

Past of Indian Economy.

Jawaharlal Nehru, the first prime minister , along with the statistician

Prasanta Chandra Mahalanobis, carried on by Indira Gandhi formulated andoversaw economic policy. They expected favorable outcomes from this strategy,

because it involved both public and private sectors and was based on direct and

indirect state intervention, rather than the more extreme soviet-style

centralcommand system.

http://en.wikipedia.org/wiki/Jawaharlal_Nehru

http://en.wikipedia.org/wiki/Prime_minister_of_India

http://en.wikipedia.org/wiki/Prasanta_Chandra_Mahalanobis

http://en.wikipedia.org/wiki/Indira_Gandhi

http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union

http://en.wikipedia.org/wiki/Prime_minister_of_India

http://en.wikipedia.org/wiki/Prasanta_Chandra_Mahalanobis

http://en.wikipedia.org/wiki/Indira_Gandhi

http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union

http://en.wikipedia.org/wiki/Jawaharlal_Nehru



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The history of Indian economy can be broadly divided into three phases: Pre-

Colonial, Colonial and Post Colonial.

Pre Colonial: The economic history of India since Indus Valley Civilization to

1700 AD can be categorized under this phase. During Indus Valley CivilizationIndian economy was very well developed. It had very good trade relations with

other parts of world, which is evident from the coins of various civilizations found

at the site of Indus valley.

Before the advent of East India Company, each village in India was a self

sufficient entity. Each village was economically independent as all the economic

needs were fulfilled with in the village.

Then came the phase of Colonization. The arrival of East India Company in India

ruined the Indian economy. There was a two-way depletion of resources. British

used to buy raw materials from India at cheaper rates and finished goods were sold

at higher than normal price in Indian markets. During this phase India's share of

world income declined from 22.3% in 1700 AD to 3.8% in 1952.

After India got independence from this colonial rule in 1947, the process of

rebuilding the economy started. For this various policies and schemes were

formulated. First five year plan for the development of Indian economy came into

implementation in 1952. These Five Year Plans, started by Indian government,

focused on the needs of Indian economy.

If on one hand agriculture received the immediate attention on the other side

industrial sector was developed at a fast pace to provide employment opportunities

to the growing population and to keep pace with the developments in the world.

Since then Indian economy has come a long way. The Gross Domestic Product

(GDP) at factor cost, which was 2.3 % in 1951-52 reached 9% in financial

year 2005-06 .

Trade liberalization, financial liberalization, tax reforms and opening up to foreign

investments were some of the important steps, which helped Indian economy to

gain momentum. The Economic Liberalization introduced by Man Mohan Singh in

1991, then Finance Minister in the government of P V Narsimha Rao, proved to be



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the stepping-stone for Indian economic reform movements.

To maintain its current status and to achieve the target GDP of 10% for financial

year 2006-07, Indian economy has to overcome many challenges.

Challenges before Indian economy:

Population explosion: This monster is eating up into the success of India.

According to 2001 census of India, population of India in 2001 was

1,028,610,328, growing at a rate of 2.11% approx. Such a vast population

puts lots of stress on economic infrastructure of the nation. Thus India has to

control its burgeoning population.

Poverty:As per records of National Planning Commission, 36% of the

Indian population was living Below Poverty Line in 1993-94. Though this

figure has decreased in recent times but some major steps are needed to be

taken to eliminate poverty from India.

Unemployment: The increasing population is pressing hard on economic

resources as well as job opportunities. Indian government has started various

schemes such as Jawahar Rozgar Yojna, and Self Employment Scheme for

Educated Unemployed Youth (SEEUY). But these are proving to be a drop

in an ocean.

Rural urban divide: It is said that India lies in villages, even today when

there is lots of talk going about migration to cities, 70% of the Indian

population still lives in villages. There is a very stark difference in pace of

rural and urban growth. Unless there isn't a balanced development Indian

economy cannot grow.

These challenges can be overcome by the sustained and planned economic

reforms.

These include:

Maintaining fiscal discipline.

Orientation of public expenditure towards sectors in which India is faring

badly such as health and education.



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Introduction of reforms in labour laws to generate more employment

opportunities for the growing population of India.

Reorganization of agricultural sector, introduction of new technology,

reducing agriculture's dependence on monsoon by developing means of

irrigation.

Introduction of financial reforms including privatization of some public

sector banks.



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India V/s China.

Comparing the Economies of India and China is to embark on an old

puzzle that has fascinated smart people for centuries. Although it is urgent andimportant to discuss it because China and India are the world's next major powers.

It is also important because the two countries have embraced very different models

of development.

Looking at the Similarities between the Economies of India and China, both are

conscious of their role in the world economy. Both seek to play a bigger political

role on the world stage. China is already doing that as a permanent member of the

U.N. Security Council. Now observing the Differences between the Economies of India and China we see that China is taking tangible but slow steps towards

embracing private entrepreneurship. India on the other hand is continuing to

struggle with making things easier for multinationals. Although the differences are

arguably narrowing, but the first-order effect of all this is still “a big difference”.

In general, FDI has been positive to both the Economies of India and China. It has

provided goods and services that did not otherwise exist. It has also introduced

competition into moribund sectors.

Both countries have clocked up strong economic growth since 1980, China at a

spectacular 9 per cent plus and India at nearly 6 per cent. Both countries have

opened up to international trade and capital in the past quarter of a century,

decisively in China and more hesitantly in India.

China's per capita GDP growth has averaged 8 per cent in the 25 years since 1980,

more than double the growth rate of Indian per capita GDP. Somewhere between

1975 and 1985 China's average income is believed to have surpassed India's. Sincethen it has kept moving ahead. By 2003 China's per capita GNP was at least 70 per

cent higher than that of India's and her economy was more than twice as large as

India's. Much of China's growth was powered by labor-intensive manufactured

exports, which took the share of manufacturing in GDP to nearly 40 per cent,

compared to a mere 16 per cent in India.



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Other indicators like living standards were just as decisively in China's favor by the

turn of the millennium. China's poverty ratio was less than half India's 35 per cent.

Female adult literacy was nearly double India's pathetic 45 per cent. Life

expectancy in China was a solid 8 years higher than that in India.

Looking at the future, it is easier to forecast a widening of the existing Economic

disparities between China and India than a reduction.



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SW0T ANALYSIS

STRENGTHS

• Highly educated , skilled ,young, capable & dynamic human resources• English speaking & analytical students• World class business-social-spiritual –political leader, Professor, scientist,

Manager-Doctor-Engineer-Civil servants etc• Very rich in Natural & Living resources• Biodiversity & Traditional knowledge base• Diversity vs. Ideas-Innovation-Integration• Powerful spiritual strength (yoga-Ayurvada-Healing-therapy services)• Geographical location (whole markets are shifting toward Asian nations)• India Strategic position at various platforms• Big democracy, Big market & free media• Range of emerging professional champions• IT & Software superpower

WEAKNESSES:

• Lack of trained & skill work force• Small supply of specialize professional• Lack of spirits of entrepreneurship, patriotisms and leadership skill• Lack of effective & execution framework • Lack of Indian management models• Lack of transparency-Trust-Responsibility• Lack of learning habits & Team work spirit• Fear of sharing knowledge & taking risk • Thinking win-lose lose-win look-outside

• Slow absorption of Innovation & change• Lack of Indian management models• Absence of greater technology impetus• Unawareness: Quality-Standardization• Lack of Emotional-Spiritual development• Rush of getting high marks not Development• Blindly respect anything taught by elders

http://greathumancapital.wordpress.com/






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THREATS (Internal & external):

• A feeling of unstable government• Self centered political leadership• Slow & Dysfunctional judiciary and corrupt law enforcers• Regulation, protection and restriction• Mechanistic -stable-Layered-complex system• Corruption, Ignorance & Complacency• High competitive & marketing forces• To patent Indian intellectual property by outsider (unawareness about own

research)• Fast change Internet-information technology& new Inventions-Technology-

Innovations• Diversity vs. Imbalance- clashes• Regional-Religion-caste-culture conflicts• Migration of all branch to software job• Job seeking mind sets, not job creator • Unnecessary social pressure on students• Excessive rich & powerful mindsets

OPPORTUNITIES

• Big potential market in education Sector & emerging new market Segmentin services (create it)

• General Agreement of trade on Services• Research & Development capability• Generate intellectual property• Resource Building capacity• Competition- cost – Quality service

• Collaboration : win-win thinking• Hybrid solution–balancing & blending• Tourism, health sector, food processing• Rural economy development & social transformation ( PURA model )• Need modernization of infrastructure , Library and laboratory• Internet institute network & e-Library• Councilors and student advisors.•







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Indian Economy Overview

Indian economy has been witnessing a phenomenal growth since the last decade.

The country is still holding its ground in the midst of the current global financial

crisis.

Quarterly gross domestic product (GDP) at factor cost at constant (1999-2000)

prices for Q3 of 2008-09 is estimated at US$ 171.24 billion, as against US$ 162.57

billion in Q3 of 2007-08, showing a growth rate of 5.3 per cent over the

corresponding quarter of previous year.

Despite the global slowdown, the Indian economy is estimated to have grown atclose to 6.7 per cent in 2008-09. The Confederation of Indian Industry (CII) pegs

the GDP growth at 6.1 per cent in 2009-10. This scenario factors in sectoral growth

rates of 2.8-3 per cent, 5-5.5 per cent and 7.5-8 per cent, respectively, for

agriculture, industry and services.

A number of leading indicators, such as increase in hiring, freight movement at

major ports and encouraging data from a number of key manufacturing segments,

such as steel and cement, indicate that the downturn has bottomed out and

highlight the Indian economy's resilience. Recent indicators from leading indices,

such as Nomura's Composite Leading Index (CLI), UBS' Lead Economic Indicator

(LEI) and ABN Amro' Purchasing Managers' Index (PMI), too bear out this

optimism in the Indian economy.

Meanwhile, foreign institutional investors (FIIs) turned net buyers in the Indian

market in 2009. Direct investment inflows also remain strong, prompting official

expectations that foreign direct investment (FDI) inflows in 2009 would better the

realised inflows of US$ 33 billion in 2008 and touch US$ 40 billion.

According to the Asian Development Bank's (ADB) 'Asia Capital Markets

Monitor' report, the Indian equity market has emerged as the third biggest after

China and Hong Kong in the emerging Asian region, with a market capitalisation

of nearly US$ 600 billion.



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The Economic scenario

Investor sentiment in India has improved significantly in the first quarter of 2009,

according to a survey conducted by Dutch financial services firm ING. With

foreign assets growing by more than 100 per cent annually in recent years, Indianmultinational enterprises (MNEs) have become significant investors in global

business markets and India is rapidly staking a claim to being a true global

business power, according to a survey by the Indian School of Business and the

Vale Columbia Center on Sustainable International Investment.

Despite the global financial crisis, inflow of foreign capital to the country has

increased sharply in 2008-09.

• India's foreign exchange reserves increased by US$ 4.2 billion to US$ 255.9 billion for the week ended May 8, 2009, according to figures released in the

Reserve Bank of India's (RBI) weekly statistical supplement.

• Net inflows through various non-resident Indians (NRIs) deposits surged

from US$ 179 million in 2007-08 to US$ 3,999 million in 2008-09,

according to the RBI.

• FDI inflows during April 2008-January 2009 stood at US$ 23.9 billion

compared with US$ 14.4 billion in the corresponding period of the previous

fiscal, witnessing a growth of 65 per cent, according to the Department of Industrial Policy & Promotion.

• FIIs have made investments of around US$ 2 billion as of May 14, 2009,

including a record single day net purchase of US$ 824.72 million on May

13, 2009, according to the Securities and Exchange Board of India (SEBI).

• Inflation for the week ended March 7, 2009, fell to an all time low of 0.44

per cent. The sharp fall in inflation was due to several factors including

easing prices of food articles and fuel items along with a high base effect.

Currently, the inflation rate stood at 0.7 per cent for the week ended April

25, 2009.

• The year-on-year (y-o-y) aggregate bank deposits stood at 21.2 per cent as

on January 2, 2009. Bank credit touched 24 per cent (y-o-y) on January 2,

2009, as against 21.4 per cent on January 4, 2008.



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• Since October 2008, the RBI has cut the cash reserve ratio (CRR) and the

repo rate by 400 basis points each. Also, the reverse repo rate has been

lowered by 200 basis points. Till April 7, 2009, the CRR had further been

lowered by 50 basis points, while the repo and reverse repo rates have been

lowered by 150 basis points each.• Exports from special economic zones (SEZs) rose 33 per cent during the

year to end-March 2009. Exports from such tax-free manufacturing hubs

totaled US$ 18.16 billion last year up from US$ 13.60 billion a year before.

The rural India growth story

The Indian growth story is spreading to the rural and semi-urban areas as well. The

next phase of growth is expected to come from rural markets with rural India

accounting for almost half of the domestic retail market, valued over US$ 300

billion. Rural India is set to witness an economic boom, with per capita income

having grown by 50 per cent over the last 10 years, mainly on account of rising

commodity prices and improved productivity. Development of basic infrastructure,

generation of employment guarantee schemes, better information services and

access to funding are also bringing prosperity to rural households.

Per Capita Income

The per capita income in real terms (at 1999-2000 prices) during 2008-09 is likely

to attain a level of US$ 528 as compared to the Quick Estimate for the year 2007-

08 of US$ 500. The growth rate in per capita income is estimated at 5.6 per cent

during 2008-09, as against the previous year's estimate of 7.6 per cent.

Advantage India

• According to the World Fact Book, India is among the world's youngest

nations with a median age of 25 years as compared to 43 in Japan and 36 inUSA. Of the BRIC—Brazil, Russia, India and China—countries, India is

projected to stay the youngest with its working-age population estimated to

rise to 70 per cent of the total demographic by 2030, the largest in the world.

India will see 70 million new entrants to its workforce over the next 5 years.



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• India has the second largest area of arable land in the world, making it one

of the world's largest food producers—over 200 million tonnes of foodgrains

are produced annually. India is the world's largest producer of milk (100

million tonnes per annum), sugarcane (315 million tonnes per annum) and

tea (930 million kg per annum) and the second largest producer of rice, fruitand vegetables.

• With the largest number of listed companies - 10,000 across 23 stock

exchanges, India has the third largest investor base in the world.

• India's healthy banking system with a network of 70,000 branches is among

the largest in the world.

• According to a study by the McKinsey Global Institute (MGI), India's

consumer market will be the world's fifth largest (from twelfth) in the world

by 2025 and India's middle class will swell by over ten times from its currentsize of 50 million to 583 million people by 2025.

Growth potential

• Special Economic Zones (SEZs) are set to see major investments after the

straightening out of certain regulatory tangles. The commerce department

expects about 120 SEZs to be operational by 2009-end, up from existing 87.

• According to the CII Ernst & Young report titled 'India 2012: Telecom

growth continues,' India's telecom services industry revenues are projectedto reach US$ 54 billion in 2012, up from US$ 31 billion in 2008. The Indian

telecom industry registered the highest number of subscriber additions at

15.84 million in March 2009, setting a global record.

• A McKinsey report, 'The rise of Indian Consumer Market', estimates that the

Indian consumer market is likely to grow four times by 2025, which is

currently valued at US$ 511 billion.

• The volume of mergers and acquisitions (M&As) and group restructuring

deals in India witnessed a sharp nine times jump at US$ 2.27 billion duringMarch 2009 against the volume of deals in February 2009, according to a

Grant Thornton report.

• India ranks among the top 12 producers of manufacturing value added

(MVA)—witnessing an increase of 12.3 per cent in its MVA output in 2005-



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07 as against 6.9 per cent in 2000-05—according to the United Nations

Industrial Development Organization (UNIDO).

• In textiles, the country is ranked fourth, while in electrical machinery and

apparatus it is ranked fifth. It holds sixth position in the basic metals

category; seventh in chemicals and chemical products; 10th in leather,leather products, refined petroleum products and nuclear fuel; twelfth in

machinery and equipment and motor vehicles.

• In a development slated to enhance India's macroeconomic health as well as

energy security, Reliance Industries (RIL) has commenced natural gas

production from its D-6 block in the Krishna-Godavari (KG) basin.

• India has a market value of US$ 270.98 billion in low-carbon and

environmental goods & services (LCEGS). With a 6 per cent share of the

US$ 4.32 trillion global market, the country is tied with Japan at the third position.



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Future of Indian Economy.

It is generally said that future is always uncertain. This saying is correct

to some extent. But at the same time it is also said that exceptions are always there.

This exception is about India's certain higher rate of growth in the coming future.

The future of Indian economy is brighter because of its huge human resources,

rapidly upcoming service sector, availability of large number of competent

professionals, vast market for every product, increasing impact of consumerism,

absence of controls and licenses, interest of foreign entrepreneurs in India and

existence of four hundred million middle class people. Even today, India is

producing largest number of billionaires in a year, take over by Indian

multinationals is amazing, the craze of Indians to go abroad is rapidly diminishing,

the Rupee is becoming stronger and stronger in relation to Dollar. Our country's

say in the international diplomacy and political affairs has now become

meaningful, thousands of foreigners are working as executives in India, packages

are becoming lucrative and competitive and annual rate of growth is highest after

China. This present picture gives some reflections of the future. But this is all in

the absolute sense and not in the relative terms. We are afraid, in future also

problems of poverty, unemployment, illiteracy, conservatism, criminalization of

politics and economic and social disparities will be prevailing nearly in the sameway. This is the contradiction of present delighting picture and fearful

apprehensiveness of future. What is the actuality? This question is not only

relevant but has to be necessarily replied. That is way the book "Future of Indian

Economy" has been written to analyze the conditions in the field like role of micro

financing in eradicating problems of poverty and unemployment, the problems and

prospects of knowledge economy, chances and challenges of outsourcing in service

sector, role of insurance companies in making the future brighter and safer,

aggressive retailing and millions of retailers, impact of future trading incommodities on smaller traders, reforms and changing pattern of lending and

borrowing and challenges before the Public Sector.



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New Indian Economy..1