Current Issues in Indian Economy: Challenges Ahead DR. PATIL.V.D. DEPARTMENT OF ECONOMICS, Rayat Shikshan Sanstha’s S.M.JOSHI COLLEGE HADAPSAR, PUNE

Scheme of Presentation What are the Major Issues? Structure of Economic Indicators Macro-Economic Indicators Monetary and Fiscal Sectoral Economic Indicators Economic Policy Changes –Ideologies and Adjustments Socio=Economic Indicators Demographic – Population-Composition & Urbanisation Rural Commodity and Financial Market Data and Limitations Developing and Institutional Phenomenon

Backdrop We have Phases in Growth: A travelogue in Strategy: 1950 to 1967: Neharuvian Era 1968 to 1976: Leaning Left: The Poverty Issues and inclusiveness 1976 to 1985: Unstable Politics - Undecided Path 1985 to 1999: Creating and solving the Crisis 2000 to 2013: Taking on the World. Turning Right 2014 onwards –Next Five Years At macro level India seem to have done fairly good in some indicators such as balance of payments, resilience to external shocks, service sector growth, Foreign exchange reserves ,Information technology (IT) and Telecom. GDP growth was hovering around 8 to 9% per annum with Investment and savings rates were quite high 32 to 36%. What it has to do with inclusivity? Poverty impact of growth has been muted: poverty declined from 36% in 1993/94 to 28% in 2004/05, a 0.8% point reduction p.a. compared to 1.6% poverty reduction p.a. in Bangladesh and Nepal. This has an indication that India has many ifs and buts in straight jacket understanding of indicators

The Health Indicator Approach Health indicators are like BP, HbA1c, Psa etc The Health Indicator Approach exploits the fact that different time-series do have different cyclical periods. These have political overtones also Time-series can be classified into Coincident, Leading and Lagging Indicators Coincident: Measures of Output, Income, Employment and Sales Leading: Placement of New Orders, Intention to Build and Changes in Profitability Lagging: Installment Credit Outstanding and Interest Rates

List of Major Indicators Trends in Gross Domestic Product (GDP): Contribution of Agriculture, Industry and Services Macro Economic Indicators Fiscal Indicators Inflation Rate Foreign Trade Balance of Payment Foreign Exchange Reserves Foreign Direct Investment (FDI) Trends Sensex Exchange Rate Savings/GDP Ratio Human Development Index

Structure of Economic Indicators Macro-Economic Indicators Monetary and Fiscal Sectoral Economic Indicators

Health of the Economy Growth Rate of GDP at Factor Cost (at 2004-05 prices) (in %) .

Sectoral Share in GDP at Constant (2004-05) Prices (in %)

Growth in GDP at Market Prices (at 2004-05 prices) .

Are we on a Growth Path?

Monetary Indicators (%) . * Base rate is median base rate of SCBs. ** Weighted Average, # As a proportion of GDP, Source: RBI. ^ Changed on 03-05-2013. ^^ Changed on 20-09-2013. ## Changed on 29-10-2013. ≠ Changed on 28-01-2014.

Growth Rates of Core Industries (%) .

Growth Rates of Index of Industrial Production-Use Based Categories (Base: 2004-05=100) (Year on Year %) .

Inflation .

Inflation : Watchdog of Economic Threat

Ratio of Savings and Investment to GDP At current market prices (%)

Trade Deficits

Our Credibility

Pulse of the Corporate Economy

Fiscal Economy Have we managed Revenue Generation Development Expenditure; Capital Expenditure Revenue and Fiscal Deficits

Growth Rates of Index of Industrial Production- Manufacturing Subgroups (Year on year %) .

Contd… .

FDI in India FDI is investment made by a foreign individual or company in productive capacity of another country. It is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset. India is considered a stable country for investing in by corporate overseas. India has displaced US as the second-most favored destination for (FDI) in the world after China according to an AT Kearney's FDI FDI is a tool for jump-starting economic growth through its bolstering of domestic capital, productivity and employment.

FDI in India FDI has an impact on Country's trade balance Increasing labour standards and skills Transfer of new technology and innovative ideas Improving infrastructure, skills and the general business climate. INVESTMENT IN INDIA India is the second largest consumer market. It is also one of the largest factor of production consumer and technology adopter. The production technologies are changing very fast.. The FDI inflows in India re very beneficial to the investors and also boost up the domestic production and consumption sectors.

Top sectors attracting FDI Fuels (Power & Oil Ref.) (35.93%) Telecommunications (radio paging, cellular mobile & basic telephone services) (10.56%) Electrical Equipment (including Computer Software & Electronics) (9.50%) Food Processing Industries (Food products & marine products) (9.43%) Service Sector (Fin. & Non-Fin. Services) (8.28%).

Domestic Capital Formation

Trade as an Engine of Growth

India's English-speaking population is highly valued by American, Canadian and British investors. India received investments from GE Capital, American Express, Citibank, Conseco, British Airways, Dell Computers and Reuters. This FDI resulted in the development of call centres, back office support and facilities to handle knowledge-intensive activities. From software giant Microsoft to telecom biggies Nokia and Samsung to auto majors Honda and Toyota, global players now eye India as the most attractive destination for investment. Although far behind China, India figures among the ten most attractive destinations for foreign investment, according to a new survey.

Economic Policy Changes –Ideologies and Adjustments Command and Control Policy Reaching the Unreached Liberalisation and Globalisation Opening of the Economy to the World and Loosening the Controls Trade as an Engine of Growth Changing Demands – Consumers Choices Changing Suppliers and Dictating the markets

Socio-Economic Indicators Demographic – Population-Composition & Urbanisation Birth rates and Death Rates Composition of Rural Urban Population Composition of Workforce Process of Urbanisation Emergence of Small Towns and their Importance Necessity of fast transit Rural Commodity and Financial Market Market reforms in Rural Areas FDI in retail in a selective manner Rural Industrialization and keeping rural youth engaged Agricultural Mechanization and Using the Rural Demographic Dividend

Human Development Index

Comparing with Neighbours

Data and Limitations: We need to work Developing and Institutional Phenomenon We are a Developing Country with an Enormous Size of Population and Economic Activities. Any data therefore have limitations Ours is an Institutional society and quite often depend on non-market stimuli

Are the Policy Advisors of any Use?