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Position Of India Last Two Decades World Economy Economics Essay

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Published: Mon, 5 Dec 2016

The 12th largest economy in the world in terms of the market exchange rate, the Indian economy has come a long way to become one of the fastest growing economies. In order to have an idea of the various economic stages, one needs to make an analysis of the Indian economic history.

IN 1990

After India gained independence, stress was given to stabilize the economic system of the country. Wide scale development was made in sectors such as agriculture, village industries, mining and so on. New roads were built, dams and bridges were constructed, and electricity was spread to the rural areas to improve the standard of living.

In the subsequent Five Year Plans, a number of economic reforms and policies were formulated. Public and rural sectors were developed, emphasis was given to increase the quantity and quality of the export items, making the country self sufficient and minimize imports and other related reforms. The political leaders also put stress on business regulations, central planning and nationalization of the industries in mining, electricity and infrastructure.

It was in July 1991, when foreign currency reserves had tumbled down to almost $1 billion; inflation was at a soaring high of 17%, highest level of fiscal deficit, and foreign investors loosing confidence in Indian Economy. With all these coupling factors, capital was on the verge of flying out of the country and we were on the brink of become loan defaulters. It was at this time that with so many bottlenecks at bay, a complete overhauling of the economic system was required. Policies and programs changed accordingly. This was the best time for us to realize the importance of globalization.

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Indian economy in the initial stage of the 1990s was dismal. The main trading partner, Soviet Union was dissolved and India faced huge balance of payment problems. The loans kept on increasing and the IMF asked for a bailout loan. In this situation, the then Finance Minister initiated the liberalization plan. This is one of the milestones in the history of Indian Economy. In the liberalization plan, foreign direct investments were welcomed, public monopolies were abolished and banking, service and tertiary sectors were developed. Boost was also given to develop the money and capital market.

Since the open market plan in the 1990s, India has experienced favourable economic growth. Today it has become one of the fastest growing economies in the world with a GDP growth rate of around 6-7 %. To complement the growing GDP, the country has also experienced growth in per capita income, standard of industrial development.

ECONOMY REFORM IN INDIA

Globalization is a term that includes a wide range of social and economic variations. It can encompass topics like the cultural changes, economics, finance trends, and global market expansion. There ought to be positive and negative effects of globalization – it all comes as a package. Globalization helps in creating new markets and wealth, disorder and unrest.

INTEGERATION of economies across the globe

Majorly there have been positive impacts of this global phenomenon – through liberalization, privatization and globalization (LPG). Due to globalization, there has been significant flow of inward foreign direct investment. MNC are getting a chance to explore various different markets across economies and explore the untapped potential.

I

The India GDP is a combination of all the differential factors, contributing to the welfare of the India economy. India GDP gives us a combined report of the performance of the Indian economy. ‘Cost factor’ or ‘Actual price’ method – these are the two methods to calculate Indian Gross Domestic Product. The main factor that contributed to the growth of India GDP post 1990s was the opening-up of the Indian economy.

Gauging the health of the India economy – India GDP is the best tool! Going by figures, India GDP has already crossed the trillion-dollar mark, other peers in this sphere being US, Japan, Germany, China, UK, France, Italy, Spain, Canada, Brazil and Russia.

After the liberalization era of the India economy, the growth story of the India GDP was driven by the following sectors of Indian industry –

The GDP of India, even after the opening up of the economy and other relaxed norms couldn’t survive the aftermath of the global financial crisis. The GDP of India over the past two fiscals (2008-09 and 2009-10) experienced considerable slowdown.

This moderate growth of the India economy has given rise to moderate expectations with respect of India GDP. Though various rating agencies, economists, business houses predict a healthy growth in India GDP in the next two years, yet skepticism is still the order of the day. Achieving a 9% GDP growth by 2012 is immensely impractical, looking at the rate at which things are improving.

Reasons for fall in India’s GDP growth

Interest rates are at its peak (experiencing a 6-year high), thus consumer spending has gone down considerably and in a way investments have also reduced. Else than exploring better export prospects, Indian economy doesn’t have any other elements which can steer its growth path. Year-on-year GDP growth rate stood at around 8.8% for first three months of 2009 but then again experienced a fall.

Is the Indian economy severely affected?

Countering the inflationary pressures had been the main agenda of the Government for a long time during the initial months of the financial year. But, the Government must aim at achieving a high GDP growth rate, rather than aiming at countering other external pressures. A dramatic improvement might not be expected, but a slow and steady growth path is surely desirable.

SECTORS WHERE THERE HAS BEEN TREMENDOUS

IMPROVMENT 1-Indian Economy, India Social Sector, India Agriculture and Development, span of time it is sure to register a tremendous growth rate on all fronts. There has been a rapid increase in the industrial sectors in India in recent times. and computer industry in India has made a rapid improvement recently.

2-Improvement in industry sector

There was lot of improvement in this sector TODAY Indian economy is largely dependent on textile manufacturing and exports. There is speculation in the industry that profits have been FOR INDIA IN MALAYSIA’S BIOTECH, OFFHSHORE SERVICES AND REAL ESTATE SECTORS: … Over this period the country has witnessed a tremendous improvement IN India Textile Industry is one of the largest textile industries in the world. Today, Indian economy is largely dependent on textile manufacturing and exports. India earns around 27% of the foreign exchange from exports of textiles Textile Industry involves around 35 million workers directly and it accounts for 21% of the total employment generated in the economy. The Indian Textile Industry contributes approximately 12 percent to industrial production, 15 per cent to the manufacturing sector, 4 percent to the GDP and 12 per cent to the country’s total export earnings. The sector provides direct employment to over 35 million people, the second largest provider of employment after agriculture.

3. INDUSTRIAL SECTOR

Biotechnology is among the fast growing knowledge-based industrial sectors which have the immense potential to revolutionize agriculture, healthcare, industrial processing and environmental sustainability. Indian biotech segment has been making rapid strides on the global platform. There are large number of therapeutic biotech drugs and vaccines, being currently produced and marketed in the country and helping mankind enormously. The sector registered revenue of $ 1.07 billion and recorded a 36.55 per cent growth in the year 2005-06.

Drugs and pharmaceutical is another significant industry showing considerable progress over the years. It is one of the largest and most advanced sectors in the world, acting as a source for various drugs, medicines and their intermediates as well as other pharmaceutical formulations. Being the intense knowledge-driven industry, it offers innumerable business opportunities for the investors corporate the world over. India has been recognized as one of the leading global players in pharmaceuticals.

TELECOM SECTOR

India’s telecommunication network is the third largest in the world and the second largest among the emerging economies of Asia. It is also amongst the fastest growing telecom markets in the world. Indian telecom industry manufactures a complete range of telecom equipments using the state of the art technologies designed specifically to match the diverse terrain and climatic conditions.

There has been an expansion in global trade in recent months. …. lead to some gains for Indian exporters, especially in sectors like textiles, footwear,etc. Over this period the country has witnessed a tremendous improvement .

So for, the Indian textile industry has targeted traditional textile markets such as USA and Western Europe. Even though tremendous improvements have been made to enhance the cotton.

3. IMPROVMENT IN AGRICULTURE SECTOR OF PUNJAB

Punjab farmers of secondary and tertiary sector, for removing distortions in the Indian economy and ceramics, information technology, textiles, plastics etc.

fibres and yarns. These can find application in geo textiles and composite sectors.

Indian economy grew by 7.4% in 2009-10, with a better than expected. There has been an expansion in global trade in recent .To some gains for Indian exporters, especially in sectors like textiles, footwear, and machinery. Over this period the country has witnessed a tremendous improvement in the Innovation in Manufacturing relatively higher margins in the services economy greatly impede the ability of Indian manufacturing dominance tends to converge towards those sectors . On an average, there were over 10 improvement suggestions per employee per … Technology has been a tremendous driving force for innovation in businesses.

The textile industry plays a pivotal role in the Indian economy in terms of … workers directly and 47 Million workers in allied sectors like Agriculture. .over from the third quarter of 2009-10, there has been improvement in technology.

4. BIOTECHNOLOGY

Biotechnology is among the fast growing knowledge-based industrial sectors which have the immense potential to revolutionize agriculture, healthcare, industrial processing and environmental sustainability. Indian biotech segment has been making rapid strides on the global platform. There are large number of therapeutic biotech drugs and vaccines, being currently produced and marketed in the country and helping mankind enormously. The sector registered a revenue of $ 1.07 billion and recorded a 36.55 per cent growth in the year 20

SECTORS where the POSITION has worsened for INDIA

The sectors least affected (directly) by the slowdown are Pharmaceuticals, Oil & Gas, FMCG, Media & Entertainment

Those which will feel a moderate impact of the global crises are Power, Automobiles, Retail, Hospitality and Tourism

The sectors most severely affected are Banks, Financial Services, Real Estate, Infrastructure and Information Technology

AUTOMOBILES

This sector, like the real estate sector, was already facing problems due to increase in interest rates and the auto sector more so due to increase in fuel costs, but now the demand for automobiles has sunk further due to an overall slowdown in the economy. The auto companies bottom lines will suffer as their exports will take a hit but even then as compared to other countries Indian Auto companies will suffer less as their sales from exports is less.

Overall, exports are down. And this affects all industries with any export component, particularly textiles, jewellery and so on.

2. Hospitality, travel and tourism

Not only are travel budgets of companies being slashed, tourist flow from foreign countries is set to reduce. This will continue for at least 6-9 months. Hotels, as they face greater competition, will see their profitability affected as they slash rates and give discounts.

There will be an indirect impact on all industries. For example, FMCG (Fast Moving Consumer Goods) companies will be affected indirectly as consumer spending will reduce. High spenders are believed to be those from the IT sector and this will effect spending, particularly of luxury items.

3.Banks

Banks have suffered losses, including some public sector banks like Punjab National Bank, Bank of India, State Bank of India and Bank of Baroda as they had an exposure to the instruments issued by Lehman and Merrill Lynch. It wasn’t just the private bank ICICI, although the latter posted the maximum losses due to their exposure.

However, if we take the overall the Banking sector in India, there is nothing to worry as heavy regulation coupled with the tendency of banks to be cautious (more than regulations stipulated) has protected the Indian banking industry. Even ICICI can easily handle the loss it has suffered. What it might Impact is ICICI future plans to expand, but deposits are safe.

Infrastructure companies:

Ongoing projects may not be affected but future ones might, by both private companies and the government. For example in Mumbai the future phases of the Metro might get hit. Many such future plans of all cities in India will get delayed and/or stalled. Stocks of infrastructure companies will take a hit.

Real Estate

The industry has taken a hit, with builders begging the government to reduce interest rates and give them other sops. But the sluggishness has been good for buyers. Housing prices have dropped 5 to 20 percent in all major cities.

When it comes to a slowdown in the housing market, one of the reasons put forward is that now speculators are wary of entering the market for short-term gains and this has reduced demand. Genuine buyers are more picky and hunt for bargains.

As to how much further the real estate prices will decrease is a tricky question because even now there are some areas where the prices have hardly fallen at all. Clearly real estate at some prime locations is likely to remain more stable. With builders facing liquidity problems, their expansion plans have been hit and their present projects are being delayed. The minute the oversupply situation is corrected the real estate prices will stabilize.

.SUGGESTION innovative ways to economy grow

SOURCES OF GROWTH IN THE INDIAN ECONOMY

In a capital constrained economy like India, investments are determined by the aggregate saving. The biggest component of aggregate savings is the savings in the household sector. This component has been the pivot of the Indian savings and the significant increases in the saving rate can be largely attributed to increased savings in this sector. The household saving rate was 10.15 percent in 1970, and has increased steadily throughout the period to reach 19.77 percent in 1999. The second component of aggregate saving is corporate saving. The final component of aggregate saving is that in the public sector, and it is here that the performance has been very poor. This is especially true during the eighties and the nineties, when it came down from 4.55 percent in 1978 to -1.19 in percent 1999. It should be clear from these trends that the savings in the household sector is quite high and may have already reached its limits in terms of saving, given the low levels of per capita income of the economy. Another problem associated with increasing the household saving is the turmoil in the financial sector [1] . The upshot of all this is that any significant increase in the aggregate savings rate has to come primarily from the corporate and the public sector. The Savings and investment lead to growth through the accumulation of capital. The efficiency of capital is of course, the other important factor determining growth .The aggregate investment has mirrored the aggregate savings during the last three decades. The aggregate and sectoral investment rates over the last three. One way to increase investment rate would be to augment domestic savings with foreign investment. Of course, foreign investment is a double-edged sword as there are problems associated with servicing this investment.

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