Indian Economic Environment

BY:-VISHAKHA,SHOUNAK,SIDHANT,SUMIT,

SHIVLEE,SHIVANGI,SWETA,UMESH,VAISHNAV,SHYAM, SUSHMITA,SHUBHAM,AYUSH,AMOL,ABHIJEET

The Four Phases According to Panagariya (2008) identifies four distinct phases in India’s growth and economic reforms since independence.1. Phase I (1951-65): Takeoff under a

liberal regime2. Phase II (1965-81): Socialism Strikes

with a Vengeance3. Phase III (1981-88): Liberalization by

Stealth4. Phase IV (1988-12): Triumph of

Liberalization

Indian Economycurrent scenario

Economic Reforms initiated since 1991

India among top 15 countries in terms of GDP at constant prices

Third largest economy in the world in terms of GDP at Purchasing Power Parity (PPP) (After the US and China) stood at $4.46 trillion in 2011.

The Gross Domestic Product (GDP) in India was worth 1848 billion US dollars in 2011 

The GDP value of India is roughly equivalent to 2.79 percent of the world economy.

Indian economy Attractive destination for business and

investmentsHuge manpower base (1.2 billion people), diversified natural resources and strong macro-economic fundamentals

Second fastest growing economy after China India ranks 51 in World Economic Forum’s

Global Competitiveness Index for 2010-11, ahead of South Africa, Brazil and Russia

India among top four major wealth creating countries in the world in 2010 ( Global Wealth Report- Boston Consulting Group)

IMF cuts world GDP forecast to 3.3% this year; India’s cut to 4.9%

Indian economy (future prospect)

An emerging economic powerhouseGoldman Sachs predicts by 2050 India

would emerge as the second largest economy in the world (After China)

India could be 40 times bigger by 2050Price water house Coopers forecast

Indian economy will register the second fastest growth between now and 2050 and emerge as the second biggest economy in the world by the middle of the Century

India: Changing Composition of GDP

YearAgriculture

& Allied IndustryManufactu

ring Service

1950-51 57 15 9 28

1964-65 49 21 14 31

1980-81 40 24 14 36

1987-88 33 26 16 41

2004-05 21 27 17 52

2011-12 14.6 28.6 - 57.2

Key Progressive features

Consistent economic growth of 8-9% in recent years

GDP growth in 2009- 10 was 8.0% despite global economic slowdown

GDP growth in 2010-11 was 8.5% India’s per capita income was USD 1,527 in 2011

or Rs 53,331 Strong Balance of Payments leading to steady

accumulation of India’s foreign exchange reserves $318.4 billion foreign reserves as on October 21, 2011

Growth likely to stabilize at around 8% in 2011-12

economic reforms in india

Economic reforms during the post independence period.

Economic Reforms during 1960s and 1980s.

Economic Reforms during 1990s to the present times 

Economic reforms during the post independence period

Stress was on development of defense, infrastructure and agricultural sectors.

The economic reforms of India followed the democratic socialist principle with more emphasis on the growth of the public and rural sector.

Economic Reforms during 1960s and 1980s

The government initiated the ‘Green Revolution’ movement.

The first step towards liberalization of the economy was taken up by Rajiv Gandhi.

Economic Reforms during 1990s to the present times 

The economic liberation reform in the year 1991.

During the last few years of economic reforms,India saw some important changes in the liberalization and rationalization of:

– domestic and foreign investment– import and export trade controls– tax structure– public and financial activities

Economic planning in india

India’s leaders adopted the principles of formal economic planning after independence as an effective way to intervene in the economy to foster growth and social justice. The planning commission was established in 1950. Responsible only to the Prime minister, the commission is independent of the cabinet. A staff drafts national plans under the guidance of the commission; draft plans are presented for approval to the National Development Council, which consist of the planning commission and the chief ministers of the states.

Economic planning

Planning Process in India

The planning process in India has both a hierarchic and interactive character since we operate within the framework of a federal democratic political structure. The plan, as it is formulated, has three distinctive components: A long term perspective plan A five year plan Annual plan Perspective Plan: The main purpose is to indicate the desired directions of economic activities to serve as pointers in formulating the operational targets that go into five year plans.

ORGANIZATION OF THE PLANNING COMMISSION : 

The Prime Minister is the chairman of the Planning Commission, which works under the overall guidance of the NDC. The deputy chairman and the full time members of the commission, as a composite body, provide advice and guidance to the subject divisions for the formulation of five year plans, annual plans, state plans, monitoring plan progress.

The planning commission functions through several divisions, each headed by a senior officer as Chairman ,Minister of state Members, Member secretary Senior officials Grievance officers .

FUNCTIONS OF PLANNING

COMMISSION

THE 1950 RESOLUTION SETTING UP THE Planning Commission outlined its functions as under:

Make an assessment of the material, capital and human resources of the country, including technical personnel. Formulate a plan for the most effective and balanced utilization of the country’s resources. On a determination of priorities, define the stages in which the plan should be carried out and propose the allocation of resources for the due completion of each stage. Determine the nature of the machinery which will be necessary for securing the successful implementation of each stage of the plan.

INFRASTRUCTURE IN THE

INDIAN ECONOMY

Sectors under infrastructure

• Electricity

• Non conventional energy

• Water supply and sanitation

• Telecommunication

• Roads & bridges

• Ports

• Airports

• Railways

• Oil and gas pipeline networks

o The Union Budget 2012-13 stated that investment in infrastructure is to go up to Rs 50 lakh crore.o More sectors proposed to be added as eligible sectors for Viability Gap Funding.o Tax free bonds of Rs 60000 crore.o The Union Budget announced harmonised master list of infrastructure sector approved by the Government.o The budget permitted direct import of Aviation Turbine Fuel for Indian carriers.

Budgetary provisions

o The budget also stated that the ECB is to be permitted for working capital requirement of airline industry for one year subject to a total ceiling of US $ 1 billion.

The Union Budget 2012-13 proposed an increase of allocation of the Road Transport and Highways Ministry by 14 per cent to Rs 25360 crore .

ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project

Key developments• Approval of US$ 250 million loan by ADB

to finance the BMRTSP

• Reliance infra. to bid for 5 big projects out of 18 in 2011

• Approval of US$ 975 million loan by the world bank for development of eastern arm

• Soft loan worth US$ 1.6 billion to be given by Japan international corporation agency

Initiatives by govt. to boost participation of private sector

• To carry out all preparatory work.

• Increase FDI limit in different sectors.

• Open new sectors for private sectors.

• To provide duty free import of high capacity equipment for national infrastructure development.

government initiatives

• Opening up a number of infrastructure sectors to private players

• Promoting investment by permitting FDI

• Huge spending on projects like NHDP, NMDP

• Maritime development to bring in sizable private money

• US and India to promote research in clean energy technologies

Road ahead

• 3 major projects – KG-D6, Mundra power project, IGI project

• An investment opportunity of US$ 25 billion in 2011-2012

• Opportunity for other allied sectors

• Opportunity in water and environmental engineering

• Rajiv Awas Yojana programme

Globalization refers to increasing global connectivity and integration in the economic, social, technological, cultural, political, and ecological spheres

Introduction of Globalization

Globalization happened in 1991 in India. Its main intention was to liberalize, privatize and Globalize the industrial sectors.

Industries were facing so much government intervention, so after that industrial sectors became almost free to make their own decision about establishing a new branch, producing the products and marketing etc,.

Drastic change is that now the Indian consumer is free to purchase the product which he likes from anywhere in the world. Foreigners can also buy from India, so the economies off all the nations are interdependent on other.

Globalization could involve all these things!

Globalization’s impact on India

ON AGRICULTURAL SECTOR

New technologies

Increase in agricultural production and productivity

Increase in National Income

Increase in the share in trade

Industrial growth exceeded 10%

Manufacturing growth rate exceeded 12 %

Merchandise exports recorded strong growth

Automotive industry achieved a growth rate of over

20% 

Retail industry is grow over 20% 

ON INDUSTRIAL SECTOR

ON FINANCIAL SECTOR

ON EXPORT AND IMPORT

Technology infusion

Outsourcing

Innovation

Better risk management practices

Free trade between countries increases

The interdependence of the nation-state

increases

IMPACT

India's growth rate in the 1970s was very low at 3% and GDP growth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India.

India's position in the global economy has improved from the 8th position in 1991 to 3rd place in 2011; when GDP is calculated on a purchasing power parity basis

RESERVE BANK OF INDIA

GOVERNMENT SUBSIDIES IN INDIA

TYPES OF SUBSIDIES IN INDIA

AGRICULTURE SUBSIDY

PETROLEUM SUBSIDY

FOOD SUBSIDY

AGRICUTURE SUBSIDY• The Reserve Bank of India, on Friday, said all

public sector banks would get an interest subsidy of 2 per cent annually against short-term production loan up to Rs.3 lakh to farmers.

• “The government will provide interest subvention of 2 per cent per annum to public sector banks (PSBs) in respect of short-term production credit up to Rs.3 lakh during 2012-13,” the RBI said in a notification.

• This subvention will be available to public sector banks on the condition they make available short-term production credit up to Rs.3 lakh at ground level at 7 % p.a

PETROLEUM SUBSIDY• Indians on an average consume around 7.25

million MT of kerosene, 12.88 million MT of LPG, 15 million MT of petrol and 72 million MT of diesel per year. In 2011-12  nearly 76%  petroleum products were imported.

• The subsidy provided by the government is Rs 32 per litre on kerosene, Rs 13 per litre of diesel and Rs 503 per LPG cylinder.(Figures can vary slightly but not significantly).It is estimated that ,at prevailing prices, the oil companies are loosing a whooping Rs 512 crore per day, due to under recoveries on sales of kerosene, diesel and LPG.This shortfall is made up by the central government.

• In 2011-12, the total subsidy on these products was Rs1,38,541 crore Of this the government provided Rs 83,000 crore from its budget and balance Rs 55,000 crore was provided by govt.owned companies like ONGC,GAIL and Oil India. In the fiscal 2012-13, the govt. has estimated the total subsidy to rise to Rs 1,90,000 crore. It has provided for a budgetary subsidy of only Rs 43,580 crore and the balance will have to be provided by itself and the three oil companies, as usual.

FOOD SUBSIDY

62,929 cr (2010-11)

72,370 cr(2011-12)

75,551 cr(budgeted)

• The government’s expenditure on food subsidy for the current fiscal could touch R1 lakh crore, an all-time high, due to significant rise in procurement of grains and huge stocks, food minister KV Thomas has said.

• The government had budgeted R74,551 crore in food subsidy for 2012-13. Last fiscal, the government had to incur a food subsidy bill in excess of R72,000 crore

• In the current rabi marketing season, while the food ministry had set a target of lifting 31.8 million tone (mt) of wheat, the procurement has already crossed 33 mt and is expected to hit 35 mt by end of the procurement season.