2. Indian Economy

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Himalaya Publishing HouseEconomic Environment of Business

S.K. Misra & V.K. Puri

Chapter 20

Broad Profile of the Indian

Economy and the

Macroeconomic Scenario

Low per capita income -In 2008 Indiasper capita income was aslow as $ 1,070 as against $ 47,580 in USA.

Inequitable distribution of income and poverty Poverty ratiowas 27.5 per cent at the national level in 2004-05 if uniform recall

period (URP) is used and 21.8 per cent if mixed recall period(MRP) is used.

The ratio of expenditure of top 10 per cent to the poorest 10 percent in 2004-05 was as high as 8.6.

Predominance of agriculture - Indian economy is essentiallyagrarian. In the agricultural sector productivity is low and, as aresult, a large number of farmers have virtually little purchasing

power to buy industrial goods. Rapid population growth The requirement of feeding

additional numbers restricts the use of resources in low returnagriculture rather than higher return manufacturing.

INDIAAN UNDERDEVELOPED

ECONOMY

(Contd)


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Chapter 20


Economy and the


Unemployment

Scarcity of Capital -Low capital formation proportions means low

rates of growth of national product, unless capital-output ratio

declines. High rates of saving and investment allow business to

grow at a fast rate, introduce latest technologies and becomeinternationally competitive.

Technological Backwardness

Lack of entrepreneurs


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Chapter 20


Economy and the


INDIAA DEVELOPING

ECONOMY

Quantitative : National Income Trends

During the first three decades of economic planning, the netnational product increased at a modest rate of 3.4 per cent

per annum.

Net national product increased at the high rate of 7.8 per centannum during the Tenth Plan period (2002-03 to 2006-07)

Structural Changes

Significant changes in sectoral distribution of domesticproduct

Growth of basic capital goods industries

Development of infrastructure

Progress in the banking and financial sector


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Chapter 20


Economy and the

Macroeconomic ScenarioINDIAA MIXED ECONOMY

Private ownership of the means of production Predominance of the market. Market holds a predominant

position in the Indian economy

Growth of private sector monopolies. Since Independence,

monopoly houses have grown rapidly and with it the concentration

of economic power in the country has increased.

Public sector. In India, a large public sector co-exists with the

private sector and this fact alone is enough to determine the

character of the economy as mixed

Economic planning.Economic planning has been an integral partof the Indian economy since 1951.


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Chapter 20


Economy and the


MACROECONOMIC SCENARIO

Fluctuations in Economic Growth

Erratic Industrial Growth

Savings and Investment Growth in Recent Years

Prices and Inflation Fiscal Imbalance

Capital Market Developments

External Sector External Trade Position and Foreign CapitalFlows


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Chapter 20


Economy and the


ECONOMIC SLOWDOWN IN

2008-2009 AND SUBSEQUENT

RECOVERY Rate of growth declined from 9.0 per cent in 2007-08 to 6.7 per cent

in 2008-09

Rate of growth picked up to 8.0 per cent in 2009-10. It is estimated

at 8.6 per cent in 2010-11. The impact of global recession on Indian economy has been via

three channels

Trade Channel

Financial Channel Confidence channel

2. Indian Economy

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