Indian Economy

The economy of India is a developing mixed economy. It is the world's seventh-

largest economy by nominal GDP and the third-largest by purchasing power parity (PPP).

Market size
India’s GDP is estimated to have increased 7.2 per cent in 2017-18 and 7 per cent in 2018-19.
India has retained its position as the third largest startup base in the world with over 4,750
technology start-ups.
India's labour force is expected to touch 160-170 million by 2020, based on rate of population
growth, increased labour force participation, and higher education enrolment, among other
factors, according to a study by ASSOCHAM and Thought Arbitrage Research Institute.
India's foreign exchange reserves were US$ 405.64 billion in the week up to March 15, 2019,
according to data from the RBI.
Recent Developments
 During 2018-19 (up to February 2019), merchandise exports from India have increased
8.85 per cent year-on-year to US$ 298.47 billion, while services exports have grown 8.54
per cent year-on-year to US$ 185.51 billion.
 Nikkei India Manufacturing Purchasing Managers’ Index (PMI) reached a 14-month high
in February 2019 and stood at 54.3.
 Net direct tax collection for 2018-19 had crossed Rs 10 trillion (US$ 144.57 billion) by
March 16, 2019, while goods and services tax (GST) collection stood at Rs 10.70 trillion
(US$ 154.69 billion) as of February 2019.
 Proceeds through Initial Public Offers (IPO) in India reached US$ 5.5 billion in 2018 and
US$ 0.9 billion in Q1 2018-19.
 India's Foreign Direct Investment (FDI) equity inflows reached US$ 409.15 billion
between April 2000 and December 2018, with maximum contribution from services,
computer software and hardware, telecommunications, construction, trading and
automobiles.
 India's Index of Industrial Production (IIP) rose 4.4 per cent year-on-year in 2018-19 (up
to January 2019).
 Consumer Price Index (CPI) inflation stood at 2.57 per cent in February 2019.
 Net employment generation in the country reached a 17-month high in January 2019.

Government Initiatives
 In February 2019, the Government of India approved the National Policy on Software
Products – 2019, to develop the country as a software hub.
 The National Mineral Policy 2019, National Electronics Policy 2019 and Faster Adoption
and Manufacturing of (Hybrid) and Electric Vehicles (FAME II) have also been approved
by the Government of India in 2019.
  Village electrification in India was completed in April 2018. Universal household
electrification is expected to be achieved by March 2019 end.
 The Government of India released the maiden Agriculture Export Policy, 2018 which
seeks to double agricultural exports from the country to US$ 60 billion by 2022.
 Around 1.29 million houses have been constructed up to December 24, 2018, under
Government of India’s housing scheme named Pradhan Mantri Awas Yojana (Urban).
 Prime Minister's Employment Generation Programme (PMEGP) will be continued with
an outlay of Rs 5,500 crore (US$ 755.36 million) for three years from 2017-18 to 2019-
20, according to the Cabinet Committee on Economic Affairs (CCEA).

Future look
India's gross domestic product (GDP) is expected to reach US$ 6 trillion by FY27 and achieve
upper-middle income status on the back of digitisation, globalisation, favourable demographics,
and reforms.
India's revenue receipts are estimated to touch Rs 28-30 trillion (US$ 385-412 billion) by 2019,
owing to Government of India's measures to strengthen infrastructure and reforms like
demonetisation and Goods and Services Tax (GST).
India is also focusing on renewable sources to generate energy. It is planning to achieve 40 per
cent of its energy from non-fossil sources by 2030 which is currently 30 per cent and also have
plans to increase its renewable energy capacity from to 175 GW by 2022.
India is expected to be the third largest consumer economy as its consumption may triple to US$
4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to
Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second
largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a
report by PricewaterhouseCoopers.
Exchange Rate Used: INR 1 = US$ 0.0145 as on March 29, 2018.

Economic analysis
The study of forces that determine the distribution of scarce resources. Economic analysis
provides insight into how markets operate, and offers methods for attempting to
predict future market behavior in response to events, trends, and cycles. Economic analysis is
also used by governments to determine tax rates and evaluate the financial health of the nation or
state.
Importance of economic analysis
Factors affecting growth of economy
Economic growth
Economic growth can be defined as a positive change in the level of goods
and services produced by a country over a certain period of time.

Factors affecting growth of economy

(a) Human Resource:

Refers to one of the most important determinant of economic
growth of a country. The quality and quantity of available human resource
can directly affect the growth of an economy. The quality of human
resource is dependent on its skills, creative abilities, training, and
education. If the human resource of a country is well skilled and trained
then the output would also be of high quality. On the other hand, a
shortage of skilled labor hampers the growth of an economy, whereas
surplus of labor is of lesser significance to economic growth. Therefore,
the human resources of a country should be adequate in number with
required skills and abilities, so that economic growth can be achieved.

(b) Natural Resources:

Affect the economic growth of a country to a large extent. Natural
resources involve resources that are produced by nature either on the land
or beneath the land. The resources on land include plants, water resources
and landscape. The resources beneath the land or underground resources
include oil, natural gas, metals, non-metals, and minerals. The natural
resources of a country depend on the climatic and environmental
conditions. Countries having plenty of natural resources enjoy good
growth than countries with small amount of natural resources. The
efficient utilization or exploitation of natural resources depends on the
skills and abilities of human resource, technology used and availability of
funds. A country having skilled and educated workforce with rich natural
resources takes the economy on the growth path.

(c) Capital Formation:

Involves land, building, machinery, power, transportation, and
medium of communication. Producing and acquiring all these manmade
 products is termed as capital formation. Capital formation increases the
availability of capital per worker, which further increases capital/labor
ratio. Consequently, the productivity of labor increases, which ultimately
results in the increase in output and growth of the economy.

(d) Technological Development:

Technological development helps in increasing productivity with
the limited amount of resources. Countries that have worked in the field of
technological development grow rapidly as compared to countries that
have less focus on technological development. The selection of right
technology also plays an role for the growth of an economy. On the
contrary, an inappropriate technology- results in high cost of production.

(e) Social and Political Factors:

Play a crucial role in economic growth of a country. Social factors
involve customs, traditions, values and beliefs, which contribute to the
growth of an economy to a considerable extent. For example, a society
with conventional beliefs and superstitions resists the adoption of modern
ways of living. In such a case, achieving becomes difficult. Apart from
this, political factors, such as participation of government in formulating
and implementing various policies, have a major part in economic growth.
Gross Domestic Product (GDP)
Gross domestic product (GDP) is a monetary measure of the market value of all
the final goods and services produced in a period of time, often annually. GDP (nominal) per
capita does not, however, reflect differences in the cost of living and the inflation rates of the
countries; therefore using a basis of GDP per capita at purchasing power parity (PPP) is arguably
more useful when comparing differences in living standards between nations.

GDP of India
Real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in the year
2018-19 is likely to attain a level of ₹ 139.52 lakh crore, with growth rate of 7.23 percent over
the GDP for the year 2017-18 of 130.11 lakh crore INR. Nominal GDP or GDP at current prices
in the year 2018-19 is projected at Rs. 188.41 lakh crore, with growth rate of 12.33 percent
against 167.73 lakh crore for 2017-18 in Indian rupee.

At constant prices GVA (Gross Value Added), GNI (Gross National Income) and NNI (Net
National Income) of India are projected at ₹ 128.09 lakh crore, ₹ 138.04 lakh crore, and ₹ 122.44
lakh crore, respectively. At current prices, these figures are ₹ 169.61 lakh crore, 186.45 lakh
crore, and ₹ 167.03 lakh crore.

In new series, figures are available since 2004-05. GDP of India has expanded by 2.55 times
from 2004-05 to 2018-19.

According to International Monetary Fund World Economic Outlook (October-2018), GDP

(nominal) of India in 2018 at current prices is $2,690 billion. India contributes 3.17% of total
world's GDP in exchange rate basis. India shares 17.5 percent of the total world population and
2.4 percent of the world surface area. India is now 7th largest economy of the world. India is
behind by only $105 and $119 bn from 6th and 5th ranked France and United Kingdom,
respectively.

India is at 3rd position after China and Japan among Asian Countries. India shares around of 9%
of total Asia's GDP (nominal).

On the basis of PPP, economy of India stands at 10,401 billion international dollar, 3rd largest
economy of the world after United States and China. India contributes 7.7% of total world's GDP
(ppp). India shares over 16 percent of total Asia's GDP (PPP). Gross domestic product (GDP) of
India at purchasing power parity (PPP) is 3.87 times more than GDP at nominal.

Indian economy has crossed $1 billion mark in 2007 and $2 billion mark in 2014 in nominal
terms. In PPP methods, India has crossed one billion mark in 1991. Estimates by World Bank is
available since 1960 when country's GDP was 36 mn USD.
 Years GDP GVA GNI NNI

2018-2019 1,39,51,849 1,28,08,778 1,38,03,895 1,22,43,820

2017-2018 1,30,10,843 1,19,76,155 1,28,64,227 1,14,05,563

2016-2017 1,21,96,006 1,12,47,629 1,20,51,525 1,06,81,594

2015-2016 1,13,86,145 1,05,03,348 1,12,51,420 99,85,060
2014-2015 1,05,27,674 97,12,133 1,04,02,987 92,24,343
2013-2014 98,01,370 90,63,649 96,79,027 85,78,417
2012-2013 92,13,017 85,46,275 91,04,662 80,94,001
2011-2012 87,36,331 81,06,947 86,59,507 77,42,332
2010-2011 83,01,235 77,04,514 82,11,816 73,73,384
2009-2010 76,51,078 71,31,836 76,06,319 68,37,719
2008-2009 70,93,403 66,74,215 70,52,191 63,58,644
2007-2008 68,81,007 63,98,295 68,52,740 62,19,065
2006-2007 63,91,375 59,58,367 63,42,389 57,70,565
2005-2006 59,14,614 55,14,228 58,72,936 53,51,624
2004-2005 54,80,380 50,92,503 54,42,938 49,67,090

Inflation
Inflation is a quantitative measure of the rate at which the average price level of a basket
of selected goods and services in an economy increases over a period of time. It is the constant
rise in the general level of prices where a unit of currency buys less than it did in prior periods.
Often expressed as a percentage, inflation indicates a decrease in the purchasing power of a
nation’s currency.

Inflation rate in India

Inflation rate in India was 3.78% as of August 2015, as per the Indian Ministry of
Statistics and Programme Implementation. This represents a modest reduction from the previous
annual figure of 9.6% for June 2011. Inflation rates in India are usually quoted as changes in the
Wholesale Price Index (WPI), for all commodities
Many developing countries use changes in the consumer price index (CPI) as their central
measure of inflation. In India CPI (combined) is declared as the new standard for measuring
inflation (April 2014) CPI numbers are typically measured monthly, and with a significant lag,
making them unsuitable for policy use. India uses changes in the CPI to measure its rate of
inflation.
The WPI measures the price of a representative basket of wholesale goods. In India, this basket
is composed of three groups: Primary Articles (22.62% of total weight), Fuel and Power
(13.15%) and Manufactured Products (64.23%). Food Articles from the Primary Articles Group
account for 15.26% of the total weight. The most important components of the Manufactured
Products (Food products 19.12%) Group are Chemicals and Chemical products (12%); Basic
Metals, Alloys and Metal Products (10.8%); Machinery and Machine Tools (8.9%); Textiles
(7.3%) and Transport, Equipment and Parts (5.2%).
WPI numbers were typically measured weekly by the Ministry of Commerce and Industry. This
makes it more timely than lagging and infrequent CPI statistic. However, since 2009 it has been
measured monthly instead of weekly.
 Indian Economy
 Importance of economy analysis
 Factors affecting the growth of economy
 GDP
 Inflation
 IIP
 PMI
 Balance of Payments
 Fiscal Deficit
 Current Account Deficit
 Monetary policy
 Unemployment
 Government policies
 Elections
 Seasonal changes
 GST
 Geo political tensions
 Crude oil price
 BREXIT
 Trade war