An overview of Indian Economy
Indian Economy
Introduction
India is often referred as a developing economy. It is fifth largest economy by Nominal GDP. It is third largest economy by Purchasing Power Parity. Advantages to Indian Economy are its young population (low dependency ratio), healthy savings and increasing integration into a global economy. India is sixth largest consumer market. India's largest trading partners include China, USA, UAE, Saudi Arabia and etc.
Hindu rate of growth
Annual growth rate of economy of India stagnated around 3.5% from 1950s to 1980s, while per capita income growth averaged 1.3%. This 3.5% growth was termed as Hindu rate of growth. The use of word Hindu was used to imply that Hindu outlook of fatalism and contentedness was responsible for slow growth.
New Economic Policy of 1991
In 1991, government introduced diverse economic reforms to pull India out of economic crisis and to accelerate rate of growth. These reforms are often described as policy of LPG where L refers to Liberalization, P refers to Privatization and G refers to Globalisation. For 1990-99, average GDP growth rate was 5.76%. This decade witnessed GDP growth rate of 6.65%, 7.57% and 7.55% in 1994, 1995 and 1996 respectively.
Growth of 2000-2018
From 2000-09, Average GDP growth rate was 6.28%. GDP growth rate of 2004, 2005 and 2006 was 7.92%, 7.92% and 8.06% respectively. From 2010-18, average GDP growth rate was 6.31%. GDP growth rate of 2016, 2017 and 2018 was 8.17%, 7.16% and 6.81% respectively.
Black headlines of 2019
Few headlines that pointed to an economic crises were fall in car sales; longer than usual debt in banking, property and power distribution companies; and long-term declines in consumer spending, household savings and industrial investment.
Negative growth in Manufacturing
Eighteen out of 23 industry groups in manufacturing sector have shown a negative growth during October 2019 as compared to that month in 2018. Manufacture of computer, electronic and optical products has shown highest negative growth of -31%. Manufacture of motor vehicles, trailers and semitrailers has shown negative growth of -27%. Other Manufacturing has shown negative growth of -26%. Several manufacturing sectors that have double digit negative growth are paper products, recorded media, rubbers and plastics, and fabricated metal products.
Reduction in other estimates
There is report that reduces real GDP from Rs 147 lakhs crore to Rs 140 lakhs crore. This means our economy will be poorer by Rs 7 lakhs crore. Agriculture, forestry and fishing will grow by only 2.8%. Manufacturing sector is estimated to grow by 2%, which had growth rate of 6.9% in previous year. The construction sector is expected to grow by 3.2%, which had growth rate of 8.7% in previous year.
Future of Indian Economy
The IMF Chief Economist Gita Gopinath said India's much lower than expected GDP numbers was single biggest drag on global growth forecast for two years. Most agencies have cut growth estimates for India during FY2020. The World Bank lowered its forecast from 7.5% to 6%. The Asian Development Bank has lowered India's growth forecast from 7.2% to 6.5%. RBI reduced India's growth forecast from 6.9% to 6.1%. Global rating agency Moody's also lowered India's growth forecast from 6.2% to 5.8%.
About the author
I would like to introduce our author for this blog as Priyank Khetwani. He has worked as an Analyst with Moody's. Prior to that, he has pursued Economics (Hons) from Hansraj College University of Delhi.
