Overview of Indian Economy
Give overview of Indian Economy.
The Indian economy is by far the seventh largest in the world as measured by the country’s nominal gross domestic product. The Indian economy is the world’s third largest economy by PPP (purchasing power parity). India is classified as one of the Grand-20 major economies and also a member of BRICS. The country is experiencing an industrial revolution at present and is among the rapidly developing nations with an aggregate growth rate approximating up to 7% in the last twenty years (Agrawal, 2005). The state of Maharashtra in India is by far the wealthiest state in the country with an annual GDP amounting to 220 billion US dollars, which nearly equals the GDP of Portugal and contributes 12% of the total country’s GDP. At the end of 2014 financial year India became the leading economy in terms of growth surpassing China.
The country has been reported to have the fastest growing sectors in services area in the world. The growth rate of its service sectors are estimated to be above 9%, it has not decreased since 2001. Services sectors contributed about 57% of the total GDP in the financial year of 2013-2013. The country has been a major exporter of services relating to IT, BPO and Software. In the financial year of 2013-14 total amount of revenue generated from these export of services had been recorded to be worth 167 billion US dollars (Agrawal, 2012). The Information and technology industry is by far the largest private sector in terms of employment. As a result of this huge endorsement in the information and technology area India is counted to be the world’s fourth largest hub for start-up and has witnessed start-ups of more than 3000 technology industries in the year 2014-15.
Although the country has witnessed a rapid industrialization and technological revolution in the past two decades, the agrarian sector of the country has been witnessing a decline. The GDP generated by the agriculture sector has declined 17% in the financial year 2013-14 from 23% recorded in the year 2010-11. This might be the result of the growing rate of influx of workers from the agricultural sector to the industrial sector and also the unpredictable climatic changes have been a factor in the declining rate of the agricultural output (Chandra & Khanijo, 2009).
The Indian Industry sector has remained constant in its GDP contribution and in the years of 2005-2014 has contributed approximately 26% of the total GDP of the country. The country’s automobile industries have been listed as world’s leading industries in terms of automobile production and have been recorded to have an annual production of 21.48 million units, as per the analysis of financial year 2014-15.
Production output performance analysis
The real GDP of India as per the reports of the financial year 2014-15 is at 7.24%. The real GDP was reported to be highest in the year of 2006-07 reaching an aggregate of 9.2%, showing a 0.8% increase from the previous year’s 8.4%. The real GDP dropped to 3.2% in the year 2012-13 as result of the recession. Through a series of government policies and employment programs like the 100 days employment program the country GDP has significantly increased in the recent years (Dandekar, 2014).
Fluctuation in the country’s real GDP Growth is due to the instability in its employment sectors, lack of labors in the agrarian sectors and few or no employment initiatives by the public sectors. The real GDP growth rate for the present financial year i.e. 2015-16 has been estimated to be 7.56% with quarterly GDP growth rates of 7.5%, 7.6%, 7.2% and 7.9% respectively. This shows that the economy is recovering from the 2012-13 crash in its real GDP shares and shows a promising increase in the future years.
GVA at constant prices of India has been estimated to be at 7.2% and at current prices the GVA is at 7.0%. The gross national Income of the economy at constant prices is at 7.5% and 8.7% in regards to current prices (Datt & Sundharam, 2006). The Net national income has been estimated to be around 7.6% at constant prices and 8.7% in regards to current prices.
The per capita GDP of India was last estimated to have been at 1805.58 US dollars in the financial year 2015. This per capita GDP of the nation contributes to 14% of the World’s average annual GDP. The aggregate GDP per capita of India was at 675.38 US dollars from the year 1960 to 2014, till it reached its highest recorded mark in 2015 up to 1805.58 US dollars. The GDP per capita of India at current prices has shown a 9.2% rise in the year 2014-15 from its 2013-14 5.9% increase.
Although the country has witnessed heavy industrialization in the past two decades but the industry sector has been seen to be at a constant stage. The reason for this is probably that most of the heavy industries are under public ordinances (Ghate, 2012). The contribution of the Industrial sector towards the GDP should have increased significantly if the governed had decentralized these industries. Another reason for the fall that the country witnessed is due to the stagnant state of the countries agriculture sector. Regions like Punjab and Haryana, which had been the centre of the green revolution initiative in the 1950s to 1970s are on the decline. Another reason for this decline in the agrarian sector is of course the influx of labors from the agricultural sector to the small industries (Ghosh, 2008). With the lack of experienced labors in both the sectors and government imposing a lot many stipulations in the recruitment procedures of the public sectors a large amount of the population depends upon employment opportunities in the private sectors. In turn the gap in the income among the individuals engaged in private and public sectors is one of the prime reasons of the fluctuating and instable growth in the real GDP and real GDP per capita.
Labor market analysis
India is the country with the world’s second largest human resources. Despite of being the second largest country in regards to population a large proportion of the population remains unemployed till date. The country witnesses an acute case of unemployment as reports have estimated that the country is chiefly populated by the youth and does not have the exact number of sectors to reduce the unemployment ratio. In addition, unlike the western countries the employment sectors of India are primarily focused on full time employments thus, rendering the students who have attained majority unemployed (Gupta, 2009).
The country’s employment sector is an example of disguised unemployment. As a vast number of its people are still engaged in agriculture, it breeds this trend of unemployment. Analyses on the Indian farmers have reported that the farmers prefer that they and their kin would rather tile a piece of land and struggle for survival rather work separately and live comfortably. Disguised unemployment is also prevailing in the country’s services sector as well. There are several orthodox designations assigned with people who have no significance in that particular sector (Jangir, 2013). This is seen mostly in the public sectors where the government and its delegated legislations are still practicing the orthodox British methods of structuring a particular sector. Another important aspect in this regard is that unprofessional approach towards employing people. The public sectors hire people based on their quantitative approach and should rather qualitatively hire people based not merely on the educational prospect but on the set of skills the professional brings along with them. The types of unemployment the country is at present witnessing are:
Structural unemployment: this type of unemployment is common in the country. As a result of the shifting economic structure it is often seen that demand for labor always falls short as a result of the rapid growth in the population (Jha, 2013).
Under Employment: this type of employment is common in the private sectors. Most of the people engaged in this sector are not only paid less in comparison to similar work profile in the public sectors but also are required to work harder in comparison to their public sector counterparts.
Disguised unemployment: as already discussed this type of unemployment in India is commonly seen in the agrarian sector.
Open unemployment: this category consists of those who are educated and qualified yet are unable to find work in terms of their prospect.
These are the types of unemployment trends currently trending in the Indian economy. The political change in the year 2014 brought about number of reforms among which one of the significant reforms is the 100 days employment initiative adopted by the government. In this initiative the government launched various projects that would have otherwise been launched under a delegated legislation, with the focus to cull the growing rate of unemployment among the youths. This initiative would employ unemployed people as concerned to their prospects and they would be hired for a span of 100 days (Jha, 2008). The 100 days span was set as per the estimated completion of each project set by the government as per its growth and development initiative. This initiative was rather successful in the rural areas of the country as the regions require significant development in comparison to the urban regions of the country. Furthermore, as there is less employment opportunities for the youth of the rural region this initiative have been remarkable in culminating the rate of unemployment in the rural areas.
Price level analysis
The annual rate of inflation in India is reported to be 3.78% as per the analysis of the Indian Ministry of Statistics and Program Implementation. This has been the estimate of the August 2015 and consists of the inflation estimate of the financial year 2014-15. This current rate of inflation is way modest than that of the inflation rate 2011 which was estimated to be 9.6%. Inflation in Indian Economy is fundamentally the result of the increase or decrease in the wholesale price index of all the commodities available in the economy (Khan, 2014).
Like many developing countries India uses changes in its consumer price index as the standard measure for estimating the rate of inflation. Previously the country had been reported to be using wholesale price index as the standard for measuring rate of inflation but has implemented consumer price index in the recent years.
Interim yearly inflation rate as published on all India general CPI for the month November 2013 on point to point basis has been estimated to be around 11.24% in comparison to its 10.17% rate for the preceding month of October 2013 (Narain, 2013). The corresponding interim inflation rates for urban and rural areas for the month of November 2013 are 10.53% and 11.74% respectively. Inflation rates for urban and rural areas for the month of October 2013 are 10.20% and 10.19% respectively.
Main causes of inflation in India are considered to be
- Increase in public expenditure: the expenditure in public sectors like Law and order, defense has increased from 18.6% in the year 1861 to 28% in the year 2014.
- Erratic agricultural growth: the agriculture sectors dependency on the nature has taken the sector to a stage where there is unpredictable productivity from this sector (Ray, 2007).
Indian economy is considered to be among the leading economies among the developing countries. However, there are several factors that are required to be considered before concluding this analysis. Therefore, this paper focused on the essential aspects of macroeconomics and how it illustrated the Indian economy as a leading economy among the developing countries. The focus was drawn upon the significant economic aspects like GDP growth rate, Labor predicaments and issue of inflation (Sinha, 2007). As per the analysis it might be concluded that the Indian economy might be on the rise but the rise it has gained in the recent years have made it overlooked some of its primary economic sectors such as the agrarian sector.
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