Indian Economy

Presented by Mallela Hemchand Mansoor Ahmed Siddiqui Meghana Reddy Nabanisha Mahanta Naina Gupta

#he $xplosi!e Story o" %ndian $conomy

Consumption led rather than export led, gro th ith democracy, gro th in ser!ices rather than manu"acturing, entrepreneurial rather than Go!ernment led

Contents
Introduction History Features Sectors Positive Aspects of Indian Economy Developmental Issues Approach to Economic Development Effect of Recession on India

Introduction

GDP Growth
1990 4.9 percent

Forex
< USD 1 billion

FII Flow
USD 1 million 199!"

FDI
USD 9# million

Per Capita
USD !90

Inflation
9 percent

$00%&

%.# percent

USD !09 billion a' on (ar $%) $00%

USD 1*.1 billion in $00#+0%

USD 1$.# billion in $00#+0% till December

USD #40

&'( percent as on March )*, )++,

History of Independent Indian Economy

Steel, mining, machine tools, ater, telecommunications, insurance, and electrical plants, among other industries, ere e""ecti!ely nationali-ed in the mid. /*0+s'1 $conomy trans"ormed "rom primarily agriculture, "orestry, "ishing, and textile manu"acturing in /*(& to ma2or hea!y industry, transportation, and telecommunications industries by late /*&+s According to economic historian 3Angus Maddison4 in his boo5 The World Economy: A Millennial Perspective, %ndia had the orld6s largest economy "rom the /st century to //th century, ith a 7)'*8 share o" orld G9P in the /st century to ),'*8 in /+++ C$

In,ia- .conomic Growth from 19%/ to $00/

ann0al 1rowth rate) in 2"

GDP 14

31ric0lt0re

In,0'tr4

Ser5ice'

-1

-6

2005*

1987

1988

1991

1993

1994

1996

1997

1998

1999

2002

1985

1986

1989

1990

1992

1995

2000

2001

2003

2004

Features of Indian Economy

:o Per Capita %ncome :o Standard o" :i!ing High Po!erty %nequal %ncome 9istribution 9ominance o" Agriculture $xistence o" Rich Resources %nadequate Capital ;ormation <nemployment and <nderemployment #echnological =ac5 ardness %n"rastructural %nadequacies 9ualistic $conomy

Sectors
Agriculture %ndustries ;inance Ser!ices Natural Resources

Agriculture
Agriculture is the mainstay o" the %ndian economy %t is the means o" li!elihood o" almost t o thirds o" the or5 "orce in the country Agriculture accounts "or approx /,8 o" %ndia6s G9P :argest producer in the orld o"1mil5,1cashe nuts,1coconuts,1tea,1ginger,1turmeric1and1b lac5 pepper >orld6s largest1cattle1population Second largest producer o" heat,1rice,1sugar,1groundnut1and inland1"ish #hird largest producer o"1tobacco %ndia accounts "or /+8 o" the orld "ruit

Industries
o o o o %ndustry accounts "or )&'?8 o" the G9P and employ /&8 o" the total or5"orce one.third o" the industrial labour "orce is engaged in simple1household manu"acturing %ndia1is /?th1in the orld in terms o" nominal "actory output #extile1manu"acturing is the second largest source "or employment a"ter agriculture and accounts "or )?8 o" manu"acturing output 1#irupur1has gained uni!ersal recognition as the leading source o" hosiery, 5nitted garments, casual ear and sports ear 19hara!i1slum in Mumbai has gained "ame "or leather products

o o

Finance
Prime Minister1%ndira Gandhi1nationalised1/( ban5s in /*?*, "ollo ed by six others in /*,+ Since then, the number o" ban5 branches has increased "rom /+,/)+ in /*?* to /,/0,*/+ in )++, Currently, %ndia has ,, scheduled commercial ban5s @SC=sA B ), public sector ban5s, )* pri!ate ban5s and 7/ "oreign ban5 #hey ha!e a combined net or5 o" o!er 07,+++ branches and /&,+++1A#Ms #he public sector ban5s hold o!er &08 o" total assets o" the ban5ing industry, ith the pri!ate and "oreign ban5s holding /,')8 and ?'08 respecti!ely #he =S$ Sensex is generally regarded as the most popular and precise1barometer1o"

Services
%ndia1is "i"teenth1in ser!ices output #he contribution o" %# to G9P increased to (',18 in )++0.+? and is pro2ected to increase to &8 o" G9P in )++, Crgani-ed retail such supermar5ets accounts "or 2ust (8 o" the mar5et as o" )++, #ourism in %ndia1is relati!ely unde!eloped, but gro ing at double digits' Some hospitals oo1medical tourism'

Natural Resources
%ndia6s total culti!able area is /,)?*,)/*15mD @0?'&,8 o" total land areaA, hich is decreasing due to constant pressure "rom an e!er gro ing population and increased urbanisation %ndia has a total ater sur"ace area o" 7/(,(++15mD and recei!es an a!erage annual rain"all o" /,/++1mm'1%rrigation1accounts "or *)8 o" the ater utilisation, and comprised 7,+15mD in /*&(, and is expected to rise to /,+0+15mD by )+)0 %n )++,, %ndia had the orld6s third largest "ishing industry %ndia6s1oil reser!es, "ound in1=ombay High1o"" the coast

Growth Growthin in'ector' 'ector'at atC0rrent C0rrentPrice' Price' $00#+0%"$00#+0%"In,0'tr4In,0'tr4-10.#2 10.#2 Ser5ice'Ser5ice'-%.92 %.92 31ric0lt0re31ric0lt0re-$.*2 $.*2
1,200 1,000 USD Billion 800 600 400 191 200 0 103 105 237 125 105 204 135 2005-06 In u!tr" 231 145 2006-07 Ser#ice! 453

561 398

270 176 2007-08

1999-00 2002-03 Agriculture

Why India? Quote Unquote

$In i& %&! e#ol#e into one o) t%e /orl 3! le& ing tec%nolog" center!$,
Craig CraigBarrett Barrett Intel Intel Corporation Corporation

$In i& i! no/ trul" & l&n o) o**ortunit"+,

$I %&#e ne#er !een In i& !o "n&'ic, #i(r&nt &n )ull o) (u!ine!! o**ortunitie!+,
'eter 'eter*oescher *oescher 'resident 'residentand and Chie+ Chie+%,ecuti&e %,ecuti&e Siemens Siemens

#ohn #ohnRed$ood Red$ood %conomic %conomic Competiti&eness Competiti&eness 'olicy 'olicy Group, Group,() ()

B" 2032, In i& /ill (e &'ong t%e t%ree l&rge!t econo'ie! in t%e /orl ,

$-e c&'e to In i& )or t%e co!t!, !t&"e )or t%e .u&lit" &n &re no/ in#e!ting )or inno#&tion+,

BRIC BRICReport, Report, Goldman Goldman Sachs Sachs

$0%e In i&n '&r1et %&! t/o core & #&nt&ge! - &n incre&!ing *re!ence o) 'ultin&tion&l! &n &n u*!/ing in t%e I0 e2*ort!+,
-ra&yn -ra&yn Rhall, Rhall, AC.ielse AC.ielse n n

--Dan Dan Scheinman, Scheinman, Cisco Cisco

System SystemInc. Inc.as as told told to to Business Week, Business Week, August August !!" !!"

$In i& i! & e#elo*e countr" &! )&r &! intellectu&l c&*it&l i! concerne +,
#ack #ack Welch Welch General General %lectric %lectric

$In i& i! & #er" e2citing '&r1et &n t%e lu2ur" c&r !eg'ent i! gro/ing e2*onenti&ll" %ere+,
/r /r'aul 'aulde de 0oi1s 0oi1s /anaging /anagingDirector Director 0ol&o 0ol&o Car CarIndia India

Some Corporate Achievements in India

0%e 0&t& 4&no, t%e /orl 5! c%e&*e!t *ro uction c&r 0%e 789 l&*to*, t%e c%e&*e!t *ro uction l&*to*

0%e In)o!"! I0 tr&ining c&'*u! : t%e l&rge!t in t%e /orl 6ing)i!%er Air/&"!, #ote t%e (e!t &irline o) !out%-e&!t A!i&

India is the second fastest gro#ing ma$or economy #ith a %"&' increase in (DP per year India is already the third largest economy in the #orld at PPP India has seen a huge amount of foreign direct investment in the country) totaling *+"+& ,illion dollars and is said to ,e one of the -preferred options. for FDI India/s poverty level is decreasing ,y 0' annually Indian companies have gone on a ,uying rampage) #ith 1ata Steel ac2uiring Corus) 3ittal ,uying Arcelor and 1ata loo4ing set to ,uy 5aguar and 6and Rover from Ford" Every year India/s middle class is increased ,y 70)000)000 ne# mem,ers #hich sho#s that the #ealth is truly entering society 1he 8om,ay Stoc4 E9change/s value has ,een consistently rising) currently #orth "* trillion dollars) the largest in South East Asia" :nemployment has dropped ,y &' annually) and illiteracy and mortality rates have also ,een falling) indicating that India is not only gro#ing ,ut developing too"

Some Encouraging Statistics""

8et ;ou Didn/t <no#

%ndia is one o" only three countries that ma5es supercomputers @the <S and Eapan are the other t oA' %ndia is one o" six countries that launches satellites' #he =ombay stoc5 exchange lists more than ?,+++ companies' Cnly the NFS$ has more' $ight %ndian companies are listed on the NFS$G three on the NAS9AH' =y !olume o" pills produced, the %ndian pharmaceutical industry is the orld6s second largest a"ter China' %ndia has the second largest community o" so"t are de!elopers, a"ter the <'S' %ndia has the second largest net or5 o" pa!ed high ays, a"ter the <'S' %ndia is the orld6s largest producer o" mil5, and among the top "i!e producers o" sugar, cotton, tea, co""ee, spices, rubber, sil5, and "ish'

# o million people o" %ndian origin li!e in the <'S' %ndian.born Americans are among the most a""luent and best educated o" the recent immigrant groups in the <'S' #hirty percent o" the RI9 researchers in American pharmaceutical companies are %ndian Americans' Nearly (*8 o" the high.tech startups in silicon Jalley and >ashington, 9'C' are o ned by %ndians or %ndian.Americans' #here are o!er &++ companies in Silicon Jalley o ned by %ndian.Americans' %ndia sends more students to <'S' colleges than any country in the orld' %n )++(.)++0, o!er ,+,+++ %ndian students entered the <'S' China sent only ?0,+++ students during the same time' %n a case decided by the <'S' Supreme Court, an %ndian.American oman scientist, 9r' Ananda Cha5rabaty, on the argument that persons may be granted patents "or use"ul manu"acture o" li!ing organisms' She de"eated the <'S' Patent C""ice, that argued that li!ing things may not be patented, thus establishing

India: Pacing Ahead to Emerge as a Major Economy in the World

$00# Global 7etail De5elopment In,ex G7DI" $00# Global Ser5ice' 8ocation In,ex In i&
80 ;=DI Score 60 40 20 0 In i& =u!!i& Bietn&' U1r&ine 8%in& 8%ile 9&t#i&

; In,ia i' the top ,e'tination in the 39 :earne4 Global 7etail De5elopment In,ex $00#"

100

3,2 2,9 2,8 3,2 2,6 3,3 1,3 1,2 1,8

2,3 2,3 2 1,6 1,5 1,5 1,1

1,4 1,4

8%in& C&l&"!i& 0%&il&n Br&Ail In one!i&

Ser5ice' 'ector attracte, intere't of ma6or 1lobal pla4er' an, lar1e in5e'tment' are p0mpe, in it

Din&nci&l !tructure Bu!ine!! en#iron'ent

<eo*le &n !1ill &#&il&(lit"

;D< ;ro/t% =&te >?@

39 :earne4 ha' place, In,ia a' the mo't preferable ,e'tination for Ser5ice' 'ector $00#";

Pro6ecte, GDP Growth 7ate' for Select Upcomin1 .conomie'

In,ia i' expecte, to o0tperform it' ri5al' in the <7IC) in term' of GDP 1rowth rate) from $01/ onwar,';

0 2005-10 2010-15 2015-20 Br&Ail 2020-25 2025-30 8%in& 2030-35 In i& 2035-40 =u!!i& 2040-45 2045-50

Source2 A- )earney, BRIC Report

&0

Is India Really Shining=

Agriculture i! !till t%e (igge!t e'*lo"er in In i&, /it% 54? o) t%e <o*ul&tion eng&ge in D&r'ing, 43 ? o) &ll In i&n l&n i! u!e in &griculture, (ut it onl" contri(ute! 18? o) t%e n&tion5! ;D< C&n" )&r'er! &re !u(!i!tence )&r'er!, Accor ing to t%e -7E, 61? o) &ll )&r'er! culti#&te le!! t%&n 0,4 %ect&re! : onl" enoug% to )ee t%eir o/n )&'il", /it% little le)t o#er to !ell,

Agricultur&l <rice! )luctu&te /il l" &n o)ten )&r'er! &re )orce into e(t, *ro uce (" e2tortioni!t intere!t r&te! /%ic% &re unregul&te (" t%e go#ern'ent, 0%e" enter $c"cle! o) e(t+ !o t%e 'one" t%e" e&rn i! ne#er t%eir o/n, <re!!e (" eit%er )&'ine &n no cro*!, or & (u'*er cro* &n coll&*!ing *rice!, )&r'er! &re o)ten ri#en to !uici e, Since 1997 /%en t%e !t&ti!tic! /ere )ir!t recor e 25,000 )&r'er! %&#e t&1en t%eir li#e! in In i&, In t%e Bi &r(%& Di!trict o) C&%&r&!%tr& 1920 )&r'er! 1ille t%e'!el#e! (et/een F&nu&r" &n Augu!t o) 2007,

0%i! /o'&n i! loo1ing )or %er (rot%er /%o le)t & !uici e note &t %er %ou!e, t%e" c&nnot )in %i! (o ", In one i!trict o) C&%&r&!%tr& &lone, & )&r'er 1ill! %i'!el) e#er" eig%t %our!,

=ealthcare- >0r F0n,amental 7i1ht Eur li)e e2*ect&nc" i! 68 "e&r!, '&1ing our li)e e2*ect&nc" t%e 139nt% out o) 172 countrie!, A gro/ing t%re&tG 5,7 'illion In i&n! %&#e AIDS or 7IB out o) /%ic% 40 ? &re /o'en -e onl" one %o!*it&l (e )or e#er" 74 *&tient! /%o nee one, -e %&#e onl" one octor )or e#er" 1,230 *eo*le, De!*ite t%e!e !t&ti!tic!, t%e In i&n ;o#ern'ent !till !*en ! 'ore on e)ence t%&n it oe! on %e&lt%,

>ur literacy rate is * ' ma4ing us the 7!th in the ?orld) $ust a,ove #ar@torn Sudan and $ust ,elo# genocidal R#anda" 6iteracy is defined as -1he a,ility to sign one/s name. so complete literacy is li4ely to ,e even less"

G0n' are more important than boo?'$.92 of GDP i' 'pen, on ,efence compare, to $.*2 on e,0cation. I' it 10n' or e,0cation that will reall4 ma?e In,ia 'hine@

Educatio n

Poverty and Ine2uality

A7! 3illion Indians live under the poverty line" 1his means that one in three Indians live on less than t#enty rupees per day" +"&' of all Indians are unemployed B India comes in at %7th in terms of employment" :sing the (ICI coefficient B #hich is the only relia,le method of calculating ine2uality India scores 0"A*D #ere 0 is perfect e2uality and is perfect ine2uality) putting India in the ,ottom !0 of all ran4ed nations in the #orld"

>ther Pro,lems Facing the Indian Economy

aE Poor Infrastructure ,E 8alance of Payments deterioration cE High 6evels of De,t dE 6arge 8udget Deficit eE Rigid 6a,our 6a#s

Approaches to Economic Development

#he Gradual Approach K %t is based on the belie" that the gro th o" industry is going to begin by expansion o" other sectors rather deliberate expansion o" the %ndustrial Sector by the Go!ernment' #he =ig Push Approach K %t is based on the game 3race4G here certain minimum %n!estment, Purchasing Po er or Mar5et Si-e @pushA is necessary'

So t%e .ue!tion !till re'&in!, i! In i& re&ll" !%iningH Er i! it 'ere *ro*&g&n &H 0%ere !t&ti!tic! t%&t /e5#e 'entione *&int t/o *icture!, !o'e !%o/ing %o/ )&r In i& %&! co'e &n ot%er5! !%o/ing %o/ )&r /e %&#e to go, %o/ o /e reconcile t%e!e t/o In i&!H -%ic% one i! t%e re&l In i&H 0%e &n!/er *ro(&(l" lie! in t%e 'i le, In i& i! e)initel" gro/ing, &n &!!u'ing & l&rger role on t%e /orl !t&ge, 'ore *eo*le &re (eco'ing ric%er, t%e nu'(er o) *oor &re ecre&!ing &n !ociet" &! & /%ole i! !lo/l" i'*ro#ing, 0%e )&ct !till re'&in!, %o/e#er, t%&t & #&!t *ro*ortion o) t%e *o*ul&tion li#e in t%e /or!t 1in o) *o#ert" !een in t%e /orl &n &re enie &cce!! to (&!ic !t&n &r ! o) li#ing t%&t i! t%eir! (" rig%t, 0%ere i! %o*e )or t%e )uture, &! In i& gro/! &n e#elo*!, 'ore &n 'ore *eo*le &re &(le to &))or & (etter li)e!t"le &n 'ore get &cce!! to e!!enti&l !er#ice! (ut in our (oun le!! o*ti'i!' )or In i&5! )uture /e !%oul not )orget t%e #&!t !ection! o) !ociet" )or /%o' t%e *%r&!e $In i& S%ining+ i! utterl" 'e&ningle!!,

E Spreading the ,enefits of gro#th more e2uita,ly" &E Completing investment pro$ects #hich are essential for long term development of economy" AE Dealing #ith glo,al financial uncertainty)#hich #ill ma4e capital inflo#s and e9ports more difficult"

Challenges for Indian Economy due to (lo,al Recession