27-01-2016, 12:10 PM
Introduction
Story of India
India’s position on the global stage as a vibrant democracy and an economic powerhouse is now a well-established fact. The role of Asian economies over the past few years has only reinforced the strength and importance of India on the global center stage. China and India pushed demand even as large economies continued to shrink (read European nations) or just about find its feet like the US economy. Indian markets held on even as the economy battled against the global pressures of recession and showdown. Exports fell sharply in the first half and the rupee remained volatile as it fought hard to find its new level. The tide has turned and India is on a bounce back thanks to its resilient business houses, industrious entrepreneurs and innovative workforce who have fought hard showing their capacity to treat every challenge as a new opportunity.
Indian growth that had dipped to 5% is likely to be arrested to this level in this financial year even as green shoots are appearing to take the growth story on the recovery path in 2014. The government has shown conviction in its policies and has worked towards opening up the economy with greater liberalization in several areas that have now attracted investments from foreign investors across the globe. While opening up foreign direct investments in multibrand retail has already seen some action with majors like Tesco and Wal-Mart planning to set up stores in India. Further India’s decision to open up the aviation sector, a key infrastructure sector, has already seen three big investment proposals over a few months.
As India moved on in search of energy security, companies like government owned ONGC and private majors like Reliance Industries and the Essar group to name a few invested in new oil fields and gas discoveries. Steel majors like Jindals and Essar too made their mark.India’s journey on the global stage is a story of emerging economies that are set to change the rules of the game in this century. The changing dynamics of the economic order that has made the world flat today will give an opportunity to show India’s strength as an economic and knowledge power even as it basks in its rich historical heritage.
Economy of India
The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20 major economies, a member of BRICS and a developing economy that is among the top 20 global traders according to the WTO. India was the 19th-largest merchandise and the 6th largest services exporter in the world in 2013; it imported a total of $616.7 billion worth of merchandise and services in 2013, as the 12th-largest merchandise and 7th largest services importer. India's economic growth slowed to 4.7% for the 2013–14 fiscal year, in contrast to higher economic growth rates in 2000s. IMF projects India's GDP to grow at 5.4% over 2014-15. Agriculture sector is the largest employer in India's economy but contributes a declining share of its GDP (13.7% in 2012-13). Its manufacturing industry has held a constant share of its economic contribution, while the fastest-growing part of the economy has been its services sector - which includes construction, telecom, software and information technologies, infrastructure, tourism, education, health care, travel, trade, banking and others components of its economy.
The post independence-era Indian economy (from 1947 to 1991) was a mixed economy with an inward-looking, centrally planned, interventionist policies and import-substituting economic model that failed to take advantage of the post-war expansion of trade and that nationalized many sectors of its economy. India's share of global trade fell from 1.3% in 1953 to 0.5% in 1983.[33] This model contributed to widespread inefficiencies and corruption, and it was poorly implemented.
After a fiscal crisis in 1991, India has increasingly adopted free-market principles and liberalized its economy to international trade. These reforms were started by former Finance minister Manmohan Singh under the Prime Minister ship of P.V.Narasimha Rao. They eliminated much of License Raj, a pre- and post-British era mechanism of strict government controls on setting up new industry. Following these economic reforms, and a strong focus on developing national infrastructure such as the Golden Quadrilateral project by former Prime Minister Atal Bihari Vajpayee, the country's economic growth progressed at a rapid pace, with relatively large increases in per-capita incomes. The south western state of Maharashtra contributes the highest towards India's GDP among all states, while Bihar is among its poorest states in terms of GNI per capita. Mumbai is known as the trade and financial capital of India.
SWOT Analysis on India as a Power house:
This comprehensive study of SWOT Analysis profile of Indian energy Limited provides you with an in-depth strategic analysis and operation. This will give you a clear and unbiased view of the India’s key strength and weaknesess and also the potential opportunities and the threats to the Indian economy.
India is the 10th largest economy in world in terms of GDP 3rd largest by PPP.
Population: 1.22 billion
Yearly increase: 18 million
Major group: 50% - 0 – 25 years
More than 1.53 billion people by the end of 2030.
Average life expectancy: 68.6 years
Economic growth rate slowed to around 5.3% for the 2012–13 fiscal year.
The Strengths are:
Agriculture
High percentage of cultivable land 56.78%
Huge English speaking population
Availability of skilled manpower
Extensive Higher Education
Diversified nature of the economy System
Third largest reservoir of engineers
High growth rate of economy
Rapid growth of IT and BPO sector brining valuable foreign exchange
Abundance of natural resources.
A large pool of skilled workers (go to 'labor' link)
A rapidly growing middle class with a strong desire to consume.
A rich natural resource base, especially coal, iron ore, water, limestone and granite.
The weaknesses are:
Very High percentage of workforce involved in agriculture which involves only 17.2% of GDP.
Rural poverty leads horrible wave of suicides by indebted farmers.
In rural India, about 34 percent of the population lives on less than $1.25 a day.
Coal Mines Corruption – Illegal allotment and Kick Backs.
Inequality in prevailing socio economic conditions.
Poor infrastructural facilities.
Huge population leading to scarcity of resources.
Low literacy rate.
Unequal distribution of wealth.
Rural urban divide, leading to inequality of high standards.
Lack of Capital
Lack of adequate infrastructure
Bureaucracy and corruption
Opportunities
Scope for entry of private firms in various sectors for business.
Inflow of Foreign Direct Investment.
Huge foreign exchange earnings.
Area of biotechnology.
Area of Infrastructure.
Huge Domestic Market.
Huge natural gas deposits found in India.
Huge agricultural resources, fishing, plantation crops, livestock.
Investment in R & D, engineering design.
Huge population of India in foreign countries.
Vast forest area and diverse wildlife.
Threats
Global economy recession/slowdown
High fiscal deficit
Volatility in crude oil prices across the world
Growing Import bill -$461.4 billion
Population explosion, rate of growth of population still high
Inflation: 6.87 per cent in July of 2012
Agriculture excessively dependent on monsoons.
With this I can conclude that Indian economy is robust in nature. Its Banking & credit system have been able to survive the down turn. We have a strong and dynamic Youth of INDIA. Therefore Economists predict that India economy will be the third largest by 2025 after USA & China.
Problems Facing by Indian Economy
Since 1991, the Indian economy has pursued free market liberalisation, greater openness in trade and increase investment in infrastructure. This helped the Indian economy to achieve a rapid rate of economic growth and economic development. However, the economy still faces various problems and challenges.
1. Inflation:
Fuelled by rising wages, property prices and food prices inflation in India is an increasing problem. Inflation is currently between 8-10%. This inflation has been a problem despite periods of economic slowdown. For example in late 2013, Indian inflation reached 11%, despite growth falling to 4.8%. This suggests that inflation is not just due to excess demand, but is also related to cost push inflationary factors. For example, supply constraints in agriculture have caused rising food prices. This causes inflation and is also a major factor reducing living standards of the poor who are sensitive to food prices. The Central Bank of India have made reducing inflation a top priority and have been willing to raise interest rates, but cost push inflation is more difficult to solve and it may cause a fall in growth as they try to reduce inflation.
2. Poor educational standards
Although India has benefited from a high % of English speakers. (Important for call centre industry) there are still high levels of illiteracy amongst the population. It is worse in rural areas and amongst women. Over 50% of Indian women are illiterate. This limits economic development and a more skilled workforce.
3. Poor Infrastructure
Many Indians lack basic amenities lack access to running water. Indian public services are creaking under the strain of bureaucracy and inefficiency. Over 40% of Indian fruit rots before it reaches the market; this is one example of the supply constraints and inefficiency’s facing the Indian economy.
4. Balance of Payments deterioration.
Although India has built up large amounts of foreign currency reserves the high rates of economic growth have been at the cost of a persistent current account deficit. In late 2012, the current account reached a peak of 6% of GDP. Since then there has been an improvement in the current account. But, the Indian economy has seen imports growth faster than exports. This means India needs to attract capital flows to finance the deficit. Also, the large deficit caused the depreciation in the Rupee between 2012 and 2014. Whilst the deficit remains, there is always the fear of a further devaluation in the Rupee. There is a need to rebalance the economy and improve competitiveness of exports.
5. High levels of private debt
Buoyed by a property boom the amount of lending in India has grown by 30% in the past year. However there are concerns about the risk of such loans. If they are dependent on rising property prices it could be problematic. Furthermore if inflation increases further it may force the RBI to increase interest rates. If interest rates rise substantially it will leave those indebted facing rising interest payments and potentially reducing consumer spending in the future.
6. Inequality has risen rather than decreased.
It is hoped that economic growth would help drag the Indian poor above the poverty line. However so far economic growth has been highly uneven benefiting the skilled and wealthy disproportionately. Many of India’s rural poor are yet to receive any tangible benefit from the India’s economic growth. More than 78 million homes do not have electricity. 33% (268million) of the population live on less than $1 per day. Furthermore with the spread of television in Indian villages the poor are increasingly aware of the disparity between rich and poor.
7. Large Budget Deficit
India has one of the largest budget deficits in the developing world. Excluding subsidies it amounts to nearly 8% of GDP. Although it is fallen a little in the past year. It still allows little scope for increasing investment in public services like health and education.
8. Rigid labour Laws
As an example Firms employing more than 100 people cannot fire workers without government permission. The effect of this is to discourage firms from expanding to over 100 people. It also discourages foreign investment. Trades Unions have an important political power base and governments often shy away from tackling potentially politically sensitive labour laws.
9. Inefficient agriculture
Agriculture produces 17.4% of economic output but, over 51% of the work force are employed in agriculture. This is the most inefficient sector of the economy and reform has proved slow.
10. Slowdown in growth
2013/14 has seen a slowdown in the rate of economic growth to 4-5%. Real GDP per capita growth is even lower. This is a cause for concern as India needs a high growth rate to see rising living standards, lower unemployment and encouraging investment. India has fallen behind China, which is a comparable developing economy