EIC Framework: Economic Analysis of India |
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EXCERPTS |
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In 2017, India, a South Asian country, was the second most populous country in the world with more than 1.33 billion people. It was the seventh largest country in the world in terms of area (Refer to Exhibit II). India was known for its heritage of thousands of years and its culture which included hundreds of languages and different sub-cultures. Its heritage and culture had persevered even after more than two hundred years of British rule.
After Independence from British rule in 1947, India grew quickly and very soon became self-sufficient in terms of foodgrains and milk production thanks to the Green and White revolution respectively in the 1960s and 1970s. Between 1951 and 1979-80, Indian GDP on an average grew at an annual rate of 3.5%. In the same period, per capita income grew at an average rate of 1.3%.
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| POLITICAL SYSTEM AND GOVERNMENT |
| India became a sovereign democratic republic on January 26, 1950, when its Constitution came into existence and replaced the Government of India Act (1935). India followed a federal structure with elected governments in the states. As of 2017, it had 29 states and 7 union territories... |
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| SOVEREIGN RATING |
| In 2017, two international rating agencies – Fitch Ratings Inc. and Standard & Poor’s – rated the Indian economy ‘BBB–’ (BBB minus), the lowest investment grade rating, with a ‘stable’ outlook. Another rating agency Moody's Investors Service assigned a Baa3 rating with a ‘Positive’ outlook. According to experts, high external debt was one of the primary reasons for the low ratings....
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| DEMOGRAPHY |
| As per the 15th Indian Census report, in March 2011, India’s population was 1.21 billion with the literacy rate at 72.99% . India’s population had grown by 17.41% since the previous census conducted in 2001. The population density per square kilometer had increased from 325 in 2001 to 382 in 2011. There were 943 females per 1,000 males...
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| AGRICULTURE AND MONSOON |
| As per the 2011 census, there were 263 million cultivators and workers in India, which was 31.55% of the total rural population and 21.72% of the entire population of the country. In 2016, a large portion (about 60%) of the Indian population depended on agriculture...
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| EMPLOYMENT |
| Employment conditions are still not good in the country although the unemployment rate has fallen from 4.1% in 2008 to 3.5% in 2018. As per the International Labor Organization’s (ILO) report ..
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| PER CAPITA INCOME AND PURCHASING POWER PARITY |
| The growth of the economy enhanced the per capita income of the country. Per capita income increased from Rs 6,270 in 1991 to Rs 93,293 in 2016, though it had a long way to go to catch up with the levels of per capita income achieved by developed countries...
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| PERSONAL DISPOSABLE INCOME AND NATIONAL SAVINGS |
| In 2016, disposable incomes in India went up to Rs. 154.96 trillion from Rs. 138.19 trillion in 2015 (Refer to Exhibit VIII). It was set to go up further as the Indian government had revised salaries and pensions of government employees as per the recommendations of the Seventh Pay Commission and had implemented the One Rank One Pension scheme for defense personnel...
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| INFLATION RATE |
| The combined (rural and urban) Consumer Price Index (CPI) moved down from 9.4% in 2013-14 to 4.9% in 2015-16. This was mainly due to a decrease in the price of food and beverages and housing. The CPI further declined to 3.4% in December 2016....
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| INTEREST RATE |
| In FY17, the Indian economy benefited from a relatively low interest rate environment. It was further supported by the lower Consumer Price Index (CPI)...
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| EXCHANGE RATE |
| In 2015-16, the rupee had traded with a downside bias due to various external factors such as the Greek crisis..
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| CRUDE OIL PRICES |
| Crude oil prices had recovered from a low of US$30 per barrel (bbl) at the start of 2016 but were still at half of their pre-2015 level....
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| FDI AND FII |
| Foreign long-term investment had significantly increased in India after liberalization. FDI was only US$74 million in 1991. ..
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| FISCAL POLICY |
| Post-independence, accelerating growth was the primary objective of the Indian fiscal policy. During the 1970s, fiscal policy focused on equality and social justice. But, the high marginal tax rates were not able to generate much revenue for the government and revenue lagged behind government expenditure...
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| FOREIGN TRADE POLICY 2015-2020 |
| In April 2015, the Indian government came out with its new Foreign Trade Policy (FTP) or EXIM policy 2015-2020. The FTP had two new schemes – ‘Exports from India Scheme’ (MEIS) and ‘Services Exports from India Scheme’ (SEIS)...
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| GOVERNMENT SPENDING |
| The Indian economy had witnessed an increase in infrastructure activities, which would further increase in the coming years as the government planned to speed up infrastructure projects related to the road, railway sector, aviation industry, and ports sector...
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| CHALLENGES FOR THE ECONOMY |
| Since India was a net importer of oil, any upward movement in the oil price would create inflationary pressure on the economy, increase the import bill, CAD, and the oil related subsidy by the government. In addition to this, corruption, poor infrastructure, a high unemployment rate, terrorist activities, and flagging investment could hurt the future growth of the country....
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| EXHIBITS |
Exhibit I: List of Emerging Market and Developing Economies.
Exhibit II : India at a Glance
Exhibit III : Total Number of Registered Motor Vehicles in India (from 1951 to 2013)
Exhibit IV :Share of Agriculture, Industry and Services in Indian GDP (% share in GPD)
Exhibit V : India’s Current Account to GDP (in %)
Exhibit VI : Debt to GDP Ratio of Indian Government
Exhibit VII : Purchasing Power Parity (Current International US$)
Exhibit VIII : India Total Disposable Personal Income (in Rs. Million)
Exhibit IX : 10-Year Bond Yield (01/04/2007 - 31/03/2017)
Exhibit X : USD/INR Exchange Rate between April 1st, 2014 to March 31st, 2017
Exhibit XI : Foreign Direct Investment in India (in US$ billion)
Exhibit XII : Net Foreign Institutional Investment in India (in US$ million)
Exhibit XIII : Select Fiscal Indicators of the Indian Government (as % of GDP)
Exhibit XIV : Central Government Fiscal Deficit and Expenditure (% of GDP)
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