HS 700: Applied Economics Course Project Presentation Leading Indicators of the Indian Economy Group 12: Lt Col D G Naik Grenville Savio Noronha Gnanasundaram.

Slides:



Advertisements
Similar presentations
WHY INDIA? September Quantum Advisors 2 Summary Overall, economic policy is geared towards growth India is a party to various global trade and tariff.
Advertisements

ECONOMIC INDICATORS. Real GDP Growth Gross Domestic Product (GDP) measures the dollar value of all goods and services produced in the U.S. economy in.
Economic Outlook for Consumers William Strauss Senior Economist and Economic Advisor Federal Reserve Bank of Chicago University of Illinois Center for.
MACROECONOMIC POLICY IN THE ASIA-PACIFIC GECO6400 ECONOMIC GROWTH MACROECONOMIC POLICY CHALLENGES COURSE REVISION.
 The United States continues to remain the world’s largest economy, according to the World Bank ranking that measures 214 economies based on their.
Key Policies Improving Business and Investment Climate Presenter: Governor CBBH: Kemal Kozarić, MA.
Measuring a Nation’s Income
Economic Indicators. Concepts  Variables that provide information about the state of the economy.  Every economic indicator has a story to tell.  Need.
Understanding the Causes and Effects of Foreign Direct Investment in Developing Countries Justin Bird.
Understanding Fluctuation: A Demand and Supply Side Perspectives Nilanjan Banik, PhD Associate Professor Center for Advanced Financial Studies Institute.
The Indian Economy A brief analysis by John Birchall.
State of the World 2006 Chapter One China, India, and the New World Order.
Macroeconomics: output, employment and income in the Australian Economy Chapter 2.
1 Understanding Economics Chapter 10 Inflation and Unemployment Copyright © 2005 by McGraw-Hill Ryerson Limited. All rights reserved. 3 rd edition by Mark.
Measuring GDP and Economic Growth
Economic Growth Chapter 17. Introduction Two definitions of economic growth (from Chapter 8) – The increase in real GDP, which occurs over a period of.
CHARACTERISTICS OF INDIAN ECONOMY SINCE INDEPENDENCE.
The 8-7 National Poverty Reduction Program in China: the National Strategy and its Impact Wang Sangui, Li Zhou, Ren Yanshun.
Brazilian Trade and Investment Promotion Agency Apex-Brasil Brazil Economic Scenario and Investment Opportunities Alessandro Teixeira President.
Industrials Sector Jason Kraynak and Wade Guzdanski.
10 Measuring GDP and Economic Growth CHAPTER
Introduction Stock market indices are the barometers of the stock market. They mirror the stock market behavior. With some 7000 companies listed on BSE,
Indian retailing scenario.  According to the report ‘Strong and Steady 2011’ released by global consultancy and research firm PricewaterhouseCoopers.
Growth of the Economy And Cyclical Instability
1 Chapter 1: Outline 1. Three Vignettes (3 contrasting stories about livelihood change in …. A. Malaysia B. Ethiopia C. Ukraine D. Development & Globalization.
Chapter Measuring a Nation’s Income 15. Microeconomics vs. Macroeconomics Microeconomics – Study of how households and firms Make decisions Interact in.
HISTORY OF GLOBALIZATION---BRIC
 The United States has one of the most diversified and most technologically advanced economies in the world. Finance, insurance, real estate, rental,
Changing Engines of Growth in China: From FDI and Privatization to Innovation and Knowledge Furong Jin, Keun Lee, and Yee-Kyoung Kim Dep’t of Economics,
The sceptical optimist: – Mike Schussler Economists.co.za 1.
Factors that Influence Economic Growth
Reflections on Chapter 3 on the National Development Plan 1.
Measuring National Output Chapter 5. Economic goals  Economic growth  Full employment  Low inflation  An economy grows because of increases in available.
6.02 Understand economic indicators to recognize economic trends and conditions Understand economics trends and communication.
PPR 2008: Figure 1. Repo rate with uncertainty bonds Per cent, quarterly averages Source: The Riksbank.
The Setting: Economic. Mythbusters Trivia China’s currency is the…? a) Yen b) Renminbi c) Yuan d) Both b and c.
The Setting: Economic. Mythbusters Trivia China’s currency is the…? a) Yen b) Renminbi c) Yuan d) Both b and c.
HUBS 1 Source: World Competitiveness Year Book 1997.
Pre and Post Reform Period in India: An Analysis
FUNDAMENTAL ANALYSIS P.SARAVANAPANDI AP – HBS TRICHY.
DEFINITION  An economic indicator is a statistic about an economy.  It is a piece of data of macroeconomic scale that is used to interpret the overall.
Objectives and Instruments of Macroeconomics Introduction to Macroeconomics.
When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Provide a technical definition of recession and.
 A piece of economic data (statistic)  indicates the direction of an economy.
AS - AD and the Business Cycle CHAPTER 13 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Provide.
Say “Oui” To France Nicole Outen Lameka Fields /20/12.
The Impacts of Government Borrowing 1. Government Borrowing Affects Investment and the Trade Balance.
IGCSE®/O Level Economics
GLOBAL SCENARIO AND ECONOMIC OUTLOOK FOR INDIA Dr. SK LAROIYA DEPARTMENT OF ECONOMICS HANSRAJ COLLEGE UNIVERSITY OF DELHI.
PowerPoint Presentation by Charlie Cook Copyright © 2004 South-Western. All rights reserved. Chapter 21 The Macroeconomic Environment.
WHAT’S IN GDP? ) How Can We Measure Economic Growth?  Gross Domestic Product (GDP) – dollar value of all goods and services produced in the country.
Introduction to the UK Economy. What are the key objectives of macroeconomic policy? Price Stability (CPI Inflation of 2%) Growth of Real GDP (National.
Ch 12 Economics Gross Domestic Product And Growth.
McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved The U.S. Economy: A Global View Chapter 2.
COUNTRY RISK ASSESSMENT China & Japan Eliza Bogucka Magdalena Mirek Dominika Dunin - Szpotańska.
Gross Domestic Product Chapter 12 Section 2 Business Cycles.
COUNTRY RISK ASSESSMENT China & Japan Eliza Bogucka Magdalena Mirek Dominika Dunin - Szpotańska.
Essential Standard 1.00 Understand the role of business in the global economy. 1.
NEXT WEEK: Analyzing demographic and economic data of first, second and third world countries Today: Gross Domestic Product and Population Growth (Chapter.
THE INDIA OPPORTUNITY A BALANCED PERSPECTIVE JOSE JACOB K, CEO – Integro Infotech & Consulting.
Profile of the Mexican Economy Key Macro Data Latest annual GDP Growth (%) 2.6% GDP or GNI per capita (US $, PPP) $18k Inflation (%)2.7% Unemployment rate.
Economic Trends.
Measuring a Nation’s Income
Lecture 2. THE WORLD ECONOMY SINCE 1990
How do we compare different countries??
WHY INDIA? September 2004.
Retail Scenario – India
Introduction to the UK Economy
Measuring a Nation’s Income
Current Issues in Indian Economy: Challenges Ahead
Presentation transcript:

HS 700: Applied Economics Course Project Presentation Leading Indicators of the Indian Economy Group 12: Lt Col D G Naik Grenville Savio Noronha Gnanasundaram C Kaushik K

Introduction History of the Indian Economy The Liberalization Process: The 80s and the 90s Beneficial Effects of the Reform Process We are the Fourth Largest Growing Economy in terms of PPP with a GDP of US $3.36 trillion In Exchange terms, we are the Tenth Largest in the world with a GDP of US $ billion (2004) Second Fastest Growing Major Economy of the World with a growth rate of 8.1% for the 1 st Q of

Introduction The increasing importance of the Indian Economy has led to a need to Forecast the Performance of the of the Indian Economy Monitoring of the Indian Economic Cycle has become an increasingly attractive option for this Dua et. al. initially propounded an index based on concurrent indicators but using an index based on leading indicators is seen to be more appropriate.

The Indicator Approach The Indicator Approach exploits the fact that different time-series do have different cyclical periods 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

The Ideal Indicator It would cover half a century or longer, thus showing its relation to the economic cycles over a variety of conditions It would lead the month, around which cyclical revival centers, by an invariable interval of say, three months or even better, six months. It would also lead the central month of every cyclical recession by an invariable time interval, which might differ from the lead at revival.

The Ideal Indicator It would show no erratic movements, that is, it would sweep smoothly up from each cyclical trough to cyclical peak and then sweep smoothly down to the next trough, so that every change in its direction would herald the coming or recession in the general economy or business. The cyclical movements would be pronounced enough to be readily recognized, and give some indication of the coming change It would be so related to the general economic activity as to establish as much confidence as the nature of such things allows that its future behavior in regard to economic cycles will be like its past behavior

Illustration of a Leading Indicator

List of Leading Indicators Trends in Gross Domestic Product (GDP): Contribution of Agriculture, Industry and Services Purchasing Power Parity (PPP) Index Fiscal Deficit Trends in Inflation Rate Interest Rates Credit Off-take Balance of Payment Foreign Exchange Reserves Crude Oil Rates Foreign Direct Investment (FDI) Trends Rain fall Index Sensex Exchange Rate Savings/GDP Ratio Human Development Index Electric Power Generation

Gross Domestic Product GDP = consumption + investment + government spending + (exports − imports) Consumption, Investment: Final Expenditure on Goods and Services Export-Import: Balance of Trade Consumption: Private and Public Significance of GDP

GDP: Indian Scenario

The GDP growth trend for the last three years appears to indicate the beginning of a new phase of cyclical upswing in the economy from The initial momentum to this new phase of expansion, in , was provided by agriculture Industry and services have acted as the twin engines propelling overall growth of the economy

Grenville Savio Noronha

Human Development Index HDI is a measure of poverty, literacy, education, life expectancy, childbirth, and other factors. It is a standard means of measuring well being, especially child welfare. HDI stresses the importance of the quality of life.

Human Development Index The three basic dimensions of HDI : 1) Life expectancy at birth 2) Knowledge (as measured from adult literacy rate) 3) Standard of living

Human Development Index EMPLOYMENT: India’s labour force has reached 375 million approximately in 2002, and it will continue to expand over the next two decades. The actual rate of that expansion will depend on several factors including population growth, growth of the working age population, labour force participation rates, educational enrolment at higher levels and school drop-out rates. Approximately three-fourth of the unemployed are in rural areas and three-fifth among them are educated.

Human Development Index EDUCATION : Literacy rates in India have arisen dramatically from 18% in 1951 to 65% in 2001, but these rates are still far from the UMI reference level of 95%. Literacy among males is nearly 50% higher than females, and it is about 50% higher in urban areas as compared to the rural areas. Literacy rates range from as high as 96% in some districts of Kerala to below 30% in some parts of Madhya Pradesh.

Human Development Index In terms of total investment in R&D, India’s expenditure is 1/60th of that of Korea, 1/250th of that of the USA, and 1/340th of that of Japan. More significantly, atomic energy, space and defense research account for 71% of all central spending on science and technology, which means that relatively little is left for investment in agriculture, energy, telecommunications and other crucial sectors within the sphere of science and technology.

Human Development Index R&D expenditure even in India’s fast-growing IT sector has been averaging around 3% of sales turnover (STO), which is much lower as compared to the 14-19% expended by internationally reputed software firms. These low figures reflect on our R&D performance. India’s share of global scientific output in 1998 was only 1.58 per cent of the world’s total. Out of 500,000 new patent applications filed globally each year, China accounts for 96,000 and Korea accounts for 72,000, while India accounts for only 8,000.

Human Development Index HEALTH : Like population growth and economic growth, the health of a nation is a product of many factors and forces that combine and interact with each other. Economic growth, per capita income, employment, levels of literacy and education—especially among females—age of marriage, birth rates, availability of information regarding health care and nutrition, access to safe drinking water, public and private health care infrastructure, access to preventive health care and medical care, health insurance, public hygiene, road safety, and environmental pollution are among the factors that contribute directly to the health of the nation.

Human Development Index

Gnanasundaram C

58% of country's population depends on agriculture 27% of India ’s GDP comes from its agricultural production % of India ’s total annual exports are agricultural products. Good monsoon always means a good harvest Bad monsoon results in a big loss in the country GDP levels. MONSOON AND ITS IMPACT ON AGRICULTURE

IMD predicts the onset date and rainfall potential of the monsoon Output growth severely affected by rainfall, especially in earlier years when share of agriculture was 40 – 50 % data crucial for proper estimates of production function, tfpg etc. Monsoon facilitated an impressive growth rate of 9.6% in Fell steeply to 1.1% in the current fiscal year

MONSOON AND ITS IMPACT ON AGRICULTURE Construction of Rainfall Index For each year, only rainfall for four months, June through September, are considered. Area of each state =As (Mean) Rainfall for each rainfall station, : μs Standard deviation for each rainfall station, : ss (4 months mean) Rainfall for each station and year: Rs Define: Js = (Rs - μs)/ss; for each rainfall station and year Yearly Rainfall Index = S (As* Js)/SAs

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 1. Country's trade balance 2. Increasing labour standards and skills 3. Transfer of new technology and innovative ideas 4. Improving infrastructure, skills and the general business climate. US INVESTMENT IN INDIA U.S. is one of the largest foreign direct investors in India. The stock of actual FDI Inflow increased from U.S. $11.3 million in 1991 to US $ million as on August 2004 recording an increase at a compound rate of 57.5 percent per annum. The FDI inflows from the US constitute about 11 percent of the total actual FDI inflows into India.

Top sectors attracting FDI from USA are 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%).

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.

Lt Col D G Naik

SENSEX Definition Significance Calculation Methodology Selection Free Float Market Capitalization (from September 1, 2003 ) Calculation, closure Maintenance

Definition Sensitivity Index Base Year 1978 – 79, Base = 100 Basket of 30 constituent stocks representing a sample of large, liquid and representative companies from diverse sectors.

Significance Barometer of Business climate. Facilitates capital formation. Domestic Market/ Institutions. FIIs. FDIs. Likely to lead to boom in other asset classes as the profits get ploughed.

Choice of constituents, Calculation Methodology and Maintenance for SENSEX

Journey Of SENSEX

CONCLUSION Leading Indicators relative to the objective. Choice. Standardization. Construction of Ideal Leading Indicators – not easy. Forecast based on Leading Indicators – a useful planning tool.

References 1. Pami Dua and Anirvan Banerji, “A leading index for the Indian economy,” Working paper no. 90, Centre for Development Economics, March, J –D Lindlbauer, “Business Cycle Indicators From Qualitative Data,” In Searh of Economic Indicators Essays on Business Surveys (Lecture Notes in Economics and Mathematical Systems, Werner H. Stringel, Ed. Berlin: Springer-Verlag, Raj Kapila and Uma Kapila, Understanding India’s Economy Reforms: The Past, The Present and The Future, New Delhi: Academic Foundation, Uma Kapila, Indian Economy since Independence, New Delhi: Academic Foundation, [Online], Available: en.wikipedia.org/wiki/Economy_of_India 6. [Online], Available: 7. [Online], Available: 8. [Online], Available: 9. [Online], Available: [Online], Available: [Online], Available: [Online], Available: