Ravi Presentation

8/8/2019 Ravi Presentation

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Qualitative measure of progress in an economy.

It refers to development and adoption of new

technologies, transition from agriculture based toindustry based economy, and general improvement in

living standards.

Measuring Economic Development

==GDP==the sum total value of goods produced in aparticular year


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The economy of India is the eleventh

largest economy in the world by nominal GDP and

the fourth largest by purchasing power.

By 2008, India had established itself as the

world's second-fastest growing major economy.


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India's large agricultural subsidies are hampering productivity-enhancing

investment. Overregulation of agriculture has increased costs, price risksand uncertainty. Government intervenes in labor, land, and credit markets.India has inadequate infrastructure and services.

World Bank also says that the allocation of water is inefficient,

unsustainable and inequitable. The irrigation infrastructure is deteriorating.

The overuse of water is currently being covered by over pumpingaquifers, but as these are falling by foot of groundwater each year, this is alimited resource.

Illiteracy, general socio-economic backwardness, slow progress inimplementing land reforms and inadequate or inefficient finance andmarketing services for farm produce.

Inconsistent government policy. Agricultural subsidies and taxes oftenchanged without notice for short term political ends.


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The average size of land holdings is very small (less than 20,000 m) andis subject to fragmentation, due to land ceiling acts and in some cases,

family disputes. Such small holdings are often over-manned, resulting indisguised unemployment and low productivity of labour.

Adoption of modern agricultural practices and use of technology isinadequate, hampered by ignorance of such practices, high costs andimpracticality in the case of small land holdings.

Irrigation facilities are inadequate, as revealed by the fact that only52.6% of the land was irrigated in 2003 04,[12] which result in farmers stillbeing dependent on rainfall, specifically the Monsoon season.

A good monsoon results in a robust growth for the economy as a whole,while a poor monsoon leads to a sluggish growth.[13] Farm credit isregulated by NABARD, which is the statutory apex agent for ruraldevelopment in the subcontinent.

At the same time overpumping made possible by subsidized electric

power is leading to an alarming drop in aquifer levels.[14][15][16]


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The government force the industry to reach a level necessary for global

competitiveness. However, they have also exposed some of theinadequacies in the industry today. Its main weakness is anunderdeveloped new molecule discovery program.

Even after the increased investment, market leaders such as Ranbaxy andDr. Reddys Laboratories spent only 5-10% of their revenues on R&D,

lagging behind Western pharmaceuticals like Pfizer, whose researchbudget last year was greater than the combined revenues of the entireIndian pharmaceutical industry.

This disparity is too great to be explained by cost differentials, and it

comes when advances in genomics have made research equipment moreexpensive than ever.

The drug discovery process is further hindered by a dearth of qualifiedmolecular biologists. Due to the disconnect between curriculum andindustry, pharmas in India also lack the academic collaboration that is

crucial to drug development in the West.


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R&D

Both the Indian central and state governments have recognized R&D asan important driver in the growth of their pharma businesses andconferred tax deductions for expenses related to research anddevelopment.

They have granted other concessions as well, such as reduced interestrates for export financing and a cut in the number of drugs under pricecontrol. Government support is not the only thing in Indian pharmas

favor, though; companies also have access to a highly-developed ITindustry that can partner with them in new molecule discovery.

LABOUR FORCE

Indias greatest strengths lie in its people labor force that is the base ofits competitive advantage. Although molecular biologists are in shortsupply, there are a number of talented chemists who are equally asimportant in the discovery process.

In addition, there has been a reverse brain-drain effect in whichscientists are returning from abroad to accept positions at lower salaries at

Indian companies.


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Once there, these foreign-trained scientists can transfer thebenefits of their knowledge and experience to all of those who

work with them. Indias wealth of people extends benefits toanother part of the drug commercialization process as well.

With one of the largest and most genetically diverse populationsin any single country, India can recruit for clinical trials morequickly and perform them more cheaply than countries in theWest. Indian firms have just recently started to leverage.


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INDUSTRIAL SERVICES

-India is the 14thfactoryoutput in world.

-Manufacture sectorwith addition toMining,Quarrying,Electricity& Gas.

- Indian cities have continued to liberalize butexcessive &burdensome business regulations remainproblems in some cities l likekochi & kolkatta.

- Post-liberalisation,the Indian private sector,which run by connectionswasfacedwithforeign competition.

- Ithandledthe change bysquee zing costs,revampingmanagement,focusing on designing new products andrelying labor

costandtechnology.


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Services

India is 15th in services output.

Service industryemploys -23% on workforce with agrowth rate of7.5%

It has the largestsharein the GDP, accountingfor53.8% Thegrowth in IT sector,attributed to increased

specialisation ofa large pooloflow cost, highlyskilled,educated and fluentEnglish-speaking workers on thedemand side.

The number ofprofessionals employedbyITandITESsectors is estimated at around1.3 million as on March2006.


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Banking & Finance

In 2007, Banking in India is generallymature in terms ofsupplyproductrange & reach-even, butIndia stillremains achallengefor theprivate sectorandforeign banks.

In terms ofqualityofassets andcapitaladequacy, Indian

banks are considered to have clean, strong andtransparentbalance sheets relative to otherbanks in comparableeconomies ofAsia.

The ReserveBankofIndia is an autonomous body, with

minimalpressurefrom thegovernment.

The statedpolicyof the Bankon the Indian Rupees is tomanage withoutanyfixedexchangerate.

Currently, India has 88 scheduled commercialbanks (SCBs).


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Banking & Finance

They are -:

28 Public SectorBanks- 75% oftotalassets ofthebanking industry.

29 Private Banks - 18.2%

31 Foreign Banks- 6.5%.

They have a combined networkof over53,000 branchesand17,000 ATMs.


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Indias Resourceconsumption

They are 2.

1) Oil.

2) NaturalGas.


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Oil

India had about5.6 billion barrels ofproven oil

reserves, which is the second-largestamount in theAsia-Pacificregion behindChina.

Most ofIndia's crudeoilreserves are locatedin thewestern coast(Mumbai High),although considerableundevelopedreserves located in the state ofRajasthan.

In 2006, India producedan average of about 8,46,000

barrels perday(bbl/day). of totaloilliquids, of which77% &33% was crudeoil648,000 bbl/day.

During 2006, India consumedan estimated2.63 Mbbl/day(418,000 m3/day) of oil.


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Natural Gas

As per the OilandGas Journal, India had38 trillion cubic

feet(TCF) of confirmednaturalgas reserves.

Ahugemass ofIndias naturalgas production comes

from the western offshoreregions,Mumbai Highcomplex.

The onshorefields are inAssam,AP, and Gujaratstates

are also majorproducers ofnaturalgas.

India imports smallamounts ofnaturalgas and in 2004,India consumedabout1,08910^9 cu ftofnaturalgas.

This is thefirstyearin which the countryshowednet

naturalgas imports.


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The rate at which the general level of prices forgoods and services is rising And subsequently

purchasing power is falling.

Central banks attempt to stop inflation to keep theexcessive growth of prices to a minimum.


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Demand-Pull inflation

Cost-Push inflation

Structural inflation


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Over- Expansion of Money Supply

Increase in Population

Expansion of Bank Credit

Deficit Financing

Poor Performance of Farm Sector

High Administrative Pricing


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The effect of inflation on

Business Community

Fixed Income Groups

Farmers

Investors


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Monetary policy

Fixed exchange rates

Gold standard

Wage and price controls

Cost-of-living allowance


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Definition :

Is a state of disequilibrium inwhich a contraction of purchasing

power tends to cause, or is the effect

of, a declining of the price level.


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Deflation adversely affects the level of

production, investment activity, employment,

and income level in an economy.

During deflation, when .prices are falling

rapidly but the cost of production does not fall

correspondingly, producers incur heavy losses

and curtail employment and output.

This causes aggregate income to fall and

aggregate demand to decrease, with prices

falling further and so on.


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Business pessimism emerges and gradually

is commonly described as poverty in themidst of plenty because economic activity,

income, output, employment diminish

miserably and ample resources remain

unutilised or underemployed.

Much of the poverty during deflation due to

deficiency of demand.

Lack of effective demand causes poverty in

the midst of plenty


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Deflation can be checked by making attempts to raise the level

of aggregate effective demand.

Effective demand can be uplifted partly by inducing the people

to spend more on consumption and partly by stimulating

investment expenditure in the economy.

Marginal propensity to consume in an economy can be raised by

a redistribution of income from the rich to the poor classes.

Thus, anti-deflationary measures involve a progressively highincome-tax and other forms of direct taxation and a subsidies

programme to poor people.

Similarly, measures should be taken to induce investment.


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In this context, a lowering of the rate of interest by increasing

money supply, provision of adequate tax relief to corporations

programme of public investment to provide social overheadcapital, and public projects which do not compete with private

enterprise and rendering all facilities to raise marginal efficiency

of capital in the private sector, are very essential.

As an anti- deflationary measure, a programme of public

investment should be financed by borrowing rather than taxation.

Deficit financing may also be helpful in this context. There

should be proper planning and public works policy and the

programme should be properly implemented. In short, deflation

also should be attacked by various other weapons.

A monetary or fiscal policy alone cannot be very effective. There

should be a well-knit co-ordination of monetary and fiscal policies

with other measures to combat deflation.


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The first Indian Prime Minister, Jawaharlal Nehru presented the first five-

year plan to the Parliament of India on 8 December 1951.

ELEVENTH PLAN (2007-2012)

OBJECTIVES:

Income & Poverty Education Health

Women and Children Infrastructure Environment


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INCOME AND POVERTY

Accelerate GDP growth from 8% to 10% and then maintain at 10% .Increase agricultural GDP growth rate to 4% per year to ensure abroader spread of benefitsCreate 70 million new work opportunities.Reduce educated unemployment to below 5%.Raise real wage rate of unskilled workers by 20 percent.Reduce the headcount ratio of consumption poverty by 10

percentage points.

EDUCATION

Reduce dropout rates of children from elementary school from 52.2%in 2003-04 to 20% by 2011-12Develop minimum standards of educational attainment inelementary school.Increase literacy rate for persons of age 7 years or above to 85%Lower gender gap in literacy to 10 percentage pointIncrease the percentage of each cohort going to higher education

from the present 10% to 15% by the end of the plan


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HEALTH

Reduce infant mortality rate to 28 and maternal mortality ratio to1 per 1000 live birthsReduce Total Fertility Rate to 2.1Provide clean drinking water for all by 2009 and ensure thatthere are no slip-backsReduce malnutrition among children of age group 0-3 to half its

present level

WOMEN AND CHILDREN

Raise the sex ratio for age group 0-6 to 935 by 2011-12Ensure that at least 33 percent of the direct and indirectbeneficiaries of all government schemes are women and girlchildrenEnsure that all children enjoy a safe childhood, without anycompulsion to work


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INFRASTRUCTURE

Ensure electricity connection to all villages and BPL householdsby 2009 and round-the-clock power.Ensure all-weather road connection to all habitation withpopulation 1000 and above (500 in hilly and tribal areas) by 2009,and ensure coverage of all significant habitation by 2015

Connect every village by telephone by November 2007 andprovide broadband connectivity to all villages by 2012Provide homestead sites to all by 2012 and step up the pace ofhouse construction for rural poor to cover all the poor by 2016-17.

ENVIRONMENT

Increase forest and tree cover by 5 percentage points.Attain WHO standards of air quality in all major cities by 2011-12.Treat all urban waste water by 2011-12 to clean river waters.Increase energy efficiency by 20 percentage points by 2016-17.


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Increase in per capita income which increases

the household consumption

Demographical changes and in the standard of

living

Change in patterns of consumption and

availability of low-cost consumer credit

Improvements in infrastructure.

Entry to various sources of financing


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Corruption has been one of the pervasive problems

affecting India.

The economic reforms .

2005 study byTransparency International (TI).

The Right to Information Act.

India at 88th place with 2.9%.


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A bribe rate card applicable in Bangalore.

Birth/Death certificate [genuine cases] - Rs 250/-

Birth/Death certificate [fake cases] - Rs 500+

Burying a dead body:

Rs 100 to shift the body from vanRs 150 for the person who gives a bath

Rs 500-Rs 2500 for post-mortemRs 1000 to bury the body


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Key points that have been suggested

by the India Economy Survey 2009.

Economy can grow around 7 percent in2009/10.

If US economy bottoms out, India caneasily look at 7% upwards growth.

The Economy will get back to its growth

path of around 9% in medium term.

The Fiscal deficit target is suggested to beset at 3 percent of GDP at the earliest.


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Inflation is suggested to be a non-

issue moving forward.

Public to hold greater equity in public sector

banks.

Calibrated monetary policy approach is

suggested for early return to high growth path.

Foreign Direct Investment should be allowed

to seek regulatory reforms in higher education.


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Indicator 2005 2006 2007 2008 2009

Real GDPgrowth

(%growth)

9.21 9.82 9.37 7.35 5.36


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