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Indian Economy

Presented by

Mallela Hemchand

Mansoor Ahmed Siddiqui

Meghana Reddy

Nabanisha Mahanta

Naina Gupta


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Consumption led rather than export led, growth with democracy,

growth in services rather than manufacturing, entrepreneurial

rather than Government led

The Explosive Story of Indian Economy


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Contents

Introduction

History

Features

Sectors

Positive Aspects of Indian Economy

Developmental Issues

Approach to Economic Development

Effect of Recession on India

Conclusion


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Introduction

GDP Growth Forex FII Flow FDI PerCapita

Inflation

1990 4.9 percent < USD 1 billion USD 1 million(1993)

USD 97 million USD 390 9 percent

2008* 8.7 percent USD 309 billion ason Mar 28, 2008

USD 16.1 billion in2007-08

USD 12.7 billion in2007-08 tillDecember

USD 740 7.4 percent ason March 29,

2008


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History of Independent

Indian Economy Steel, mining, machine tools, water, telecommunications,

insurance, and electrical plants, among other industries,were effectively nationalized in the mid-1950s.

Economy transformed from primarily agriculture, forestry,fishing, and textile manufacturing in 1947 to major heavy

industry, transportation, and telecommunicationsindustries by late 1970s

According to economic historian Angus Maddison in hisbook The World Economy: A Millennial Perspective, Indiahad the world's largest economy from the 1st century to11th century, with a 32.9% share of world GDP in the 1stcentury to 28.9% in 1000 CE

TheArthasastra is one of the most important ancient textson economics, politics and administration


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India: Economic Growth from 1985 to 2005(annual growth rate, in %)

-6

-1

4

9

14

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005*

GDP Agriculture Industry Services


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Features of Indian Economy

Low Per Capita Income

Low Standard of Living

High Poverty

Inequal Income Distribution

Dominance of Agriculture Existence of Rich Resources

Inadequate Capital Formation

Unemployment and Underemployment

Technological Backwardness

Infrastructural Inadequacies Dualistic Economy


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Sectors

Agriculture Industries

Finance

Services

Natural Resources


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Agriculture

Agriculture is the mainstay of the Indian economy It is the means of livelihood of almost two thirds of the

work force in the country

Agriculture accounts for approx 18% of India's GDP

Largest producer in the world of milk, cashew

nuts, coconuts, tea, ginger, turmeric and black pepper

World's largest cattle population

Second largest producer of

wheat, rice, sugar, groundnut and inland fish

Third largest producer of tobacco

India accounts for 10% of the world fruit production with

first rank in the production of banana and sapota


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Industries

o Industry accounts for 27.6% of the GDP and employ 17%of the total workforce

o one-third of the industrial labour force is engaged insimple household manufacturing

o India is 16th in the world in terms of nominal factory

outputo Textile manufacturing is the second largest source for

employment after agriculture and accounts for 26% ofmanufacturing output

o Tirupur has gained universal recognition as the leading

source of hosiery, knitted garments, casual wear andsportswear

o Dharavi slum in Mumbai has gained fame for leatherproducts


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Finance

Prime Minister Indira Gandhi nationalised 14 banks in1969, followed by six others in 1980

Since then, the number of bank branches has increasedfrom 10,120 in 1969 to 1,15,910 in 2008

Currently, India has 88 scheduled commercial banks (SCBs)

28 public sector banks, 29 private banks and 31 foreignbank

They have a combined network of over 53,000 branchesand 17,000 ATMs

The public sector banks hold over 75% of total assets of

the banking industry, with the private and foreign banksholding 18.2% and 6.5% respectively

The BSE Sensex is generally regarded as the most popularand precise barometer of the Indian stock markets


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Services

India is fifteenth in services output

The contribution of IT to GDP increased to 4.8 %

in 2005-06 and is projected to increase to 7% of

GDP in 2008

Organized retail such supermarkets accounts for

just 4% of the market as of 2008

Tourism in India is relatively undeveloped, but

growing at double digits. Some hospitals

woo medical tourism.


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Natural Resources

India's total cultivable area is 1,269,219 km (56.78% of

total land area), which is decreasing due to constant

pressure from an ever growing population and increased

urbanisation

India has a total water surface area of 314,400 km and

receives an average annual rainfall of

1,100 mm. Irrigation accounts for 92% of the water

utilisation, and comprised 380 km in 1974, and is

expected to rise to 1,050 km by 2025

In 2008, India had the world's third largest fishing industry

India's oil reserves, found in Bombay High off the coast

of Maharashtra, Gujarat, Rajasthan and in

eastern Assam meet 25% of the country's demand


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105 105 135 145176103

125204 231

270

561

191237

398453

0

200

400

600

800

1,000

1,200

1999-00 2002-03 2005-06 2006-07 2007-08

USDB

illion

Agriculture Industry Services

Growth in sectors at Current Prices (2007-08):

Industry: 10.7%Services: 8.9%

Agriculture: 2.6%


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15

BRIC Report,Goldman

Sachs

I have never seen

India so dynamic,

vibrant and full ofbusiness

opportunities.

-Dan Scheinman, CiscoSystem Inc. as told to

Business Week, August2005

We came to India for the

costs, stayed for the

quality and are now

investing for innovation.

John RedwoodEconomic

CompetitivenessPolicy Group, UK

India is now truly a

land of opportunity.

Jack WelchGeneralElectric

India is a

developed country

as far as intellectual

capital is

concerned.

Peter Loescher

President and

Chief Executive

Siemens

By 2032, India will be

among the three

largest economies in

the world.

Why India? Quote Unquote

TravynRhall,

ACNielsen

The Indian market has two

core advantages - an

increasing presence of

multinationals and an upswing

in the IT exports.

Craig Barrett

Intel

Corporation

India has evolved into

one of the world's

leading technology

centers.

Mr Paul de Voijs

Managing DirectorVolvo Car India

India is a very exciting

market and the luxury

car segment is growing

exponentially here.


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Some Corporate Achievements in India

The Tata Nano,the worlds

cheapest

production car

Kingfisher

Airways, voted

the best airline ofsouth-east Asia

The HCLlaptop, the

cheapest

production

laptop

The Infosys

IT training

campus

the largest inthe world


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Some Encouraging Statistics..

India is the second fastest growing major economy with a 9.2% increase in GDPper year

India is already the third largest economy in the world at PPP

India has seen a huge amount of foreign direct investment in the country,totaling 67.72 billion dollarsand is said to be one of the preferred options forFDI

Indias poverty level is decreasing by 10% annually Indian companies have gone on a buying rampage, with Tata Steel acquiringCorus, Mittal buying Arcelor and Tata looking set to buy Jaguar and Land Roverfrom Ford.

Every year Indias middle class is increased by 40,000,000 new members whichshows that the wealth is truly entering society

The Bombay Stock Exchanges value has been consistently rising, currently worth

1.61 trillion dollars, the largest in South East Asia.

Unemployment has dropped by 2% annually, and illiteracy and mortality rateshave also been falling, indicating that India is not only growing but developingtoo.


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Bet You Didnt Know India is one of only three countries that makes

supercomputers (the US and Japan are the other two). India is one of six countries that launches satellites.

The Bombay stock exchange lists more than 6,000companies. Only the NYSE has more.

Eight Indian companies are listed on the NYSE; three on theNASDAQ.

By volume of pills produced, the Indian pharmaceuticalindustry is the world's second largest after China.

India has the second largest community of softwaredevelopers, after the U.S.

India has the second largest network of paved highways,after the U.S.

India is the world's largest producer of milk, and among thetop five producers of sugar, cotton, tea, coffee, spices,rubber, silk, and fish.

100 of the Fortune 500 companies have R&D facilities inIndia.


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Two million people of Indian origin live in the U.S.

Indian-born Americans are among the most affluent and besteducated of the recent immigrant groups in the U.S.

Thirty percent of the R&D researchers in Americanpharmaceutical companies are Indian Americans.

Nearly 49% of the high-tech startups in silicon Valley andWashington, D.C. are owned by Indians or Indian-Americans.

There are over 700 companies in Silicon Valley owned by Indian-Americans.

India sends more students to U.S. colleges than any country in

the world. In 2004-2005, over 80,000 Indian students enteredthe U.S. China sent only 65,000 students during the same time.

In a case decided by the U.S. Supreme Court, an Indian-American woman scientist, Dr. Ananda Chakrabaty, won theargument that persons may be granted patents for usefulmanufacture of living organisms. She defeated the U.S. PatentOffice, that argued that living things may not be patented, thus

establishing the legal foundation for the biotech industry,(Diamond vs. Chakrabaty, 1980). Dr. Chakrabaty invented amicrobe that eats oil spills.


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20

India: Pacing Ahead to Emerge as a MajorEconomy in the World

Projected GDP Growth Rates for Select Upcoming Economies

0

2

4

6

8

2005-10 2010-15 2015-20 2020-25 2025-30 2030-35 2035-40 2040-45 2045-50

GDPGro

wthRate(%)

Brazil China India Russia

0

20

40

60

80

100

India Russia VietnamUkraine China Chile Latvia

GRDIScore

2007 Global Retail Development Index (GRDI)2007 Global Services Location Index

3.3

2.6

3.2

2.8

2.9

3.2

1.5

1.8

1.2

1.3

2.3

2.3

1.1

1.5

1.6

2

1.4

1.4

Indonesia

Brazil

Thailand

Malaysia

China

India

Financial structure People and ski ll availabli ty

Business environment

AT Kearney hasplaced India as themost preferabledestination forServices sector(2007)

Services sectorattracted interest ofmajor global playersand largeinvestments are

pumped in it

India is expected tooutperform its rivalsin the BRIC, in termsof GDP growth rate,from 2015onwards

Source:AT Kearney, BRIC Report

India is the top

destination in the AT

Kearney GlobalRetail DevelopmentIndex (2007)
http://www.atkearney.com/main.taf?p=5,3http://www2.goldmansachs.com/insight/research/reports/report6.htmlhttp://www2.goldmansachs.com/insight/research/reports/report6.htmlhttp://www.atkearney.com/main.taf?p=5,3


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Is India Really Shining?


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Agriculture is still the biggest employer in India, with 54% of the Population

engaged in Farming.

43 % of all Indian land is used in agriculture, but it only contributes 18% of thenations GDP

Many farmers are subsistence farmers. According to the WHO, 61% of all

farmers cultivate less than 0.4 hectares only enough to feed their own

family, with little left over to sell.


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Agricultural Prices fluctuate

wildly and often farmers are

forced into debt, produced by

extortionist interest rates

which are unregulated by thegovernment. They enter

cycles of debt so the money

they earn is never their own.

Pressed by either famine and

no crops, or a bumper crop

and collapsing prices, farmersare often driven to suicide.

Since 1997 when the statistics

were first recorded 25,000

farmers have taken their livesin India.

In the Vidarbha District of

Maharashtra 1920 farmers

killed themselves between

January and August of 2007.

This woman is looking for her brother

who left a suicide note at her house,

they cannot find his body.

In one district of Maharashtra alone, a

farmer kills himself every eight hours.


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Healthcare: Our Fundamental Right

Our life expectancy is 68 years, making

our life expectancy the 139nth out of 172

countries.

A growing threat: 5.7 million Indians have

AIDS or HIV out of which 40 % are

women

We only one hospital bed for every 74

patients who need one.

We have only one doctor for every 1,230

people.

Despite these statistics, the Indian

Government still spends more on defence

than it does on health.


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Education

Our literacy rate is 61% making usthe 145th in the World, just abovewar-torn Sudan and just belowgenocidal Rwanda.

Literacy is defined as The abilityto sign ones name so completeliteracy is likely to be even less.

Guns are moreimportant than books:2.9% of GDP is spend

on defence comparedto 2.6% on education.Is it guns oreducation that willreally make Indiashine?


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Poverty and Inequality

345 Million Indians live under the poverty line. Thismeans that one in three Indians live on less than

twenty rupees per day.

7.2% of all Indians are unemployed India comes in at

94th in terms of employment.

Using the GINI coefficient which is the only reliable

method of calculating inequality India scores 0.368

were 0 is perfect equality and 1 is perfect inequality,putting India in the bottom 50 of all ranked nations in

the world.


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Other Problems Facing the

Indian Economy

a) Poor Infrastructure

b) Balance of Payments deterioration

c) High Levels of Debt

d) Large Budget Deficit

e) Rigid Labour Laws


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Approaches to Economic

Development The Gradual Approach It is based on the belief that the

growth of industry is going to begin by expansion of othersectors rather deliberate expansion of the Industrial Sectorby the Government.

The Big Push ApproachIt is based on the game race;where certain minimum Investment, Purchasing Power orMarket Size (push) is necessary.


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So the question still remains, is India really shining? Or is it mere

propaganda?

There statistics that weve mentioned paint two pictures, some showing how

far India has come and others showing how far we have to go, how do we

reconcile these two Indias? Which one is the real India?

The answer probably lies in the middle, India is definitely growing, and

assuming a larger role on the world stage, more people are becoming richer,

the number of poor are decreasing and society as a whole is slowly

improving. The fact still remains, however, that a vast proportion of the

population live in the worst kind of poverty seen in the world and are deniedaccess to basic standards of living that is theirs by right.

There is hope for the future, as India grows and develops, more and more

people are able to afford a better lifestyle and more get access to essential

services but in our boundless optimism for Indias future we should not

forget the vast sections of society for whom the phrase India Shining is

utterly meaningless.


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Challenges for Indian Economy

due to Global Recession

1) Spreading the benefits of growth more

equitably.

2) Completing investment projects which

are essential for long term development

of economy.

3) Dealing with global financial

uncertainty,which will make capital

inflows and exports more difficult.


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