India will be the next economic superpower

GROUP MEMBERS

1. Epsa (MBA/10057/2016)2. Jitesh Kumar Rout

(MBA/10092/2016)3. G. Rittika (MBA/10063/2016)4. Pranay Manji (MBA/10058/2016)5. Abhinav Jaiswal (MBA/10051/2016)6. Gopal Sharma (MBA/10061/2016)

INTRODUCTION

The state of a country or region in terms of the production and consumption of goods and services and the supply of money.

The economy of India is the seventh-largest economy in the world measured by nominal GDP and the third-largest by purchasing power parity (PPP)The country is classified as a newly industrialised country, one of the G-20 major economies, a member of BRICS and a developing economy with an average growth rate of approximately 7% over the last two decades.

Some news headlines :1. Indian economy can have 25% share of

manufacturing by 2025: Arun Singh, Lead Economist, Dun & Bradstreet India.

2. Indians more confident about country's economy than Chinese: Survey 

3. Indian economy to grow at 7.8% in 2016-17:  FICCI

4. GST to boost Indian economy in long run, says World Bank chief economist Kaushik Basu.

5. Indian employees far more confident of their economy as compared to Chinese: Michael Page India Study.

6. RBI rate cut positive for economy, banks to follow suit: Shaktikanta Das.

FACTORS AFFECTING INDIAN ECONOMY

ENTREPRENEURSHIP

ENERGY SECTOR

NATURAL RESOURCES

BANKING

ECONOMIC FACTORS NON-ECONOMIC FACTORS

DEMOGRAHIC FACTORS

POLITICAL FACTORS

ENTREPRENEURSHIP• India currently has more than 48 million small

businesses, double the number of the small companies here in the US (23 million).

Retail (expected motor vehicles) : 40%Clothing manufacturing : 8.72%Food & beverage : 7%Services : 6.2%Auto ( sales, maintenance, repairs) : 3.6%Furniture : 3.2%

According to Indian government data, Micro, Small and Medium Enterprises (MSME) contribute nearly 8% of the country’s GDP, 45% of the manufacturing output and 40% of the country’s total exports. Small businesses in India create 1.3 million jobs every year and provide the largest share of employment after agriculture.

Entrepreneurship is the willingness to take risks and develop, organize and manage a business venture in a competitive global marketplace that is constantly evolving. Entrepreneurs are pioneers, innovators, leaders and inventors.

Examples of entrepreneurs:• Bill Gates, founder of Microsoft. • Steve Jobs, co-founder of Apple computers,

which produces Macs, iPods and iPhones, as well as Apple TV.

• Mark Zuckerberg, the founder of Facebook.• Pierre Omidyar, founder of eBay.• Arianna Huffington, founder of the

Huffington Post, a well-known online news site.

• Caterina Fake, co-founder of Flikr, which hosts images and videos on the Internet.

ECONOMIC FACTORS

Recent initiatives to boost start-ups and entrepreneurship in India

• MUDRA Bank- Allocation of 20,000 cr for MUDRA Bank for the SME.• Ministry of Skill Development and Entrepreneurship- It is the first time

Ministry of State has been given the responsibility of developing entrepreneurship in the country.

• SETU (Self-Employment and Talent Utilization)- It will strengthen all prospects of start-ups, and other self-employment initiatives, especially in technology driven areas.

• AIM Platform: ATAL Innovation Mission (AIM)• Corporate Tax to be Reduced to 25%- Reduction of corporate tax from 30% to

25% over the next years.• eBiz Portal for Starting a Business Easy.• Central Excise and Service Tax Registration in 2 Days.

BANKING

Indicator Current rate

Inflation 6.00%

Bank rate 6.75%

CRR 4.00%

SLR 20.75%

Repo rate 6.25%

Reverse repo rate

5.75%

Marginal standing facility rate

6.75%

Why are interest rates are important for an economy ?

• It is the Repo rate which influences most the given money supply in the economy. Repo rate is the rate at which the banks borrow short-term funds from the RBI.

• RBI raises repo rate to increase the overall cost of funds in the banking system. Higher costs will keep in check the demand for funds.

• Interest rates have high influence on both growth and inflation.• Higher the interest rate, higher is the cost of capital and

contributes to slowdown investment in the economy. • High interest rates also impact FDI due to the uncertainty in

the exchange rate as the market expects interest rates to eventually fall.

• Lower the interest rate, higher is the supply of money in the economy and greater purchasing power of individuals. This will result in increase in the price of Goods, since there is more demand and less supply of the goods.

Effect of CRR: If it increase, the liquidity in the economy decreases and hence cost to borrowers also increases and ultimately it affects the growth.

Effect of Reverse Repo rate: It is set 1 percentage point lower than repo. Increasing repo will squeeze the liquidity out of the system and increase the interest rates, which will then reduce the demand for funds and reduce inflation.

Effect of inflation rate: Rising prices, known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages, corporate and government bond yields, and every other facet of the economy.

ROLE OF NATURAL RESOURCES•“ Gifts of nature ”• Countries that have a lot of natural resources are able to use them to produce

goods and services cheaper than a country that has to import natural resources.•If a country has many natural resources, it can also trade them with other countries and make money for the economy.

What are some of India’s natural resources ?India is rich in natural resources. The country produces as many as 87 minerals including fuel, metallic, non-metallic, and atomic minerals. Among the minerals, reserves of coal, iron ore and bauxite are vast and will last decades.Which states have oil fields in India ?India's oil reserves, found in Bombay High off the coast of Maharashtra, Gujarat, Rajasthan and in eastern Assam meet 25% of the country's demand. A national level agency National Natural Resources Management System (NNRMS) was established in 1983 for integrated natural resources management in the country.Which state is rich in minerals in India ?Jharkhand carved out of Bihar in November, 2000 is one of the leading mineral producing States. It is one of the leading producers of coal, kyanite, gold, silver, bauxite and felspar. Uranium ore is being mined and processed by Uranium Corporation of India Ltd.

ENERGY SECTOR

• “Electricity can transform people’s lives, not just economically but also socially” said by Piyush Goyal (minister for power, coal and new and renewable energy & mines in the Govt. of India), adding that he expects $100bn (£62bn) to be invested in renewable energy in India in the next five years.

• India and Russia sign 16 agreements across civil nuclear energy, defense, hydrocarbon, space, investments including setting up of 12 Russian built reactors for two sites as Moscow endorsed.

---- from Economics Times (25/12/2015)• Gurgaon is all set to become a hub for solar energy with the

establishment of the Interim Secretarial of the International Solar Alliance(ISA) which was inaugurated jointly by Prime Minister and President of France, Francois Hollande, on January 26, 2016

• “ India will be a green energy superpower by 2035, ” says Narendra Taneja, a leading Indian energy expert.

• Total solar power generation capacity will be 15 GW by 2017 dictated by P S Goyal (Power Minister)

• Installed Grid Interactive Renewable Power Capacity in India 31/07/16 & Expected Target on 2022SOURCES TOTAL

INSTALLED CAPACITY (MW)

2022 TARGET (MW)

WIND POWER 27,441.15 60,000.00

SOLAR POWER 8,062.00 1,00,000.00

BIOMASS POWER 4,860.83 10,000.00

WASTE TO POWER

115.08

SMALL HYDRO POWER

4,304.27 5,000.00

TOTAL 44,783.33 1,75,000.00

NON-ECONOMIC FACTORS

DEMOGRAPHIC FACTORS

High populatio

nYoung

population

Global diaspora

Foreign language skills

HIGH POPULATION• India has the world's second largest population.

• The Population Growth Rate of the country is 1.25.

• A very large number of India's population, about 50% , is below the age group of 24.

• The government is training a 400 million-workforce.

YOUNG POPULATION• It has approximately 65% of its population below the

age of 35.

• In the coming decades, while some of the powerful nations will witness a decrease in workforce numbers, India is expected to have an increase.

GLOBAL DIASPORA• More than 35 million Indians live across the globe. Under

fair opportunities, they have become socio-economically successful.

FOREIGN LANGUAGE SKILLS• India has the world’s largest English speaking/ understanding

population.

• It claims one of the largest workforce of engineers, doctors and other key professionals.

• It has the 2nd largest population of "fluent English" speakers, second only to the United States.

• Indians are also learning : Dutch, Italian, Japanese, Korean,  Mandarin Chinese, Russian, and Spanish.

Democratic factors

Foreign Relation

Role in International

Politics

POLITICAL FACTORS

DEMOCRATIC FACTORS India is the world’s largest democratic republic

which is demographically more than three times bigger than the next largest which is The United States.

It has been politically very successful despite its diverse ethnic composition.

Positive impact Negative impact

Provides checks and balances on the use and abuse of government.

Drives wealth redistribution including land reform.

Increases accountability to align actions with citizens’ broader welfare.

Enhances power of special interest groups.

Reduces economically harmful corruption.

Focuses on the short term consumption over long term investments.

FOREIGN RELATIONS• Keeping in view the importance of relationship

India has developed good relationship with the world powers like the Japan, European Union and United States

• It has also tried to develop a good relationship with China by making a group of four countries comprising Brazil, Russia, India, China and South Africa called BRICS

• Thus, in order to make the global environment favorable for economic growth and investment, India is giving due importance to its foreign policy.

ROLES IN INTERNATIONAL

POLITICS• The political environment of a country includes all laws, government agencies, and lobbying groups that influence or restrict individuals or organizations in the society.

• The head of government in any kind of political system is motivated by two similar goals: retain political power and build and maintain policy coalitions. 

• India is a newly industrialised country, has a history of collaboration with several countries, is a component of the BRICS and a major part of developing world.

• India was one of the founding members of several international organisations - the United Nations, the Asian Development Bank, New Development BRICS Bank, G-20and the founder of the Non-Aligned Movement.

• India is also a member of the Asian Infrastructure Investment Bank and the Shanghai Cooperation Organisation.

CONCLUSION• Alice Lyman Miller defines a superpower as "a country that has the

capacity to project dominating power and influence anywhere in the world, and sometimes, in more than one region of the globe at a time, and so may plausibly attain the status of global hegemony.”

Steps have been taken in making India an economically stronger country:

1. Jan Dhan scheme and opened more than 14 crore bank accounts for financial inclusion.

2. PAHEL- a scheme which used technology to ensure that LPG subsidy reaches the targeted person directly.

3. Launching of MUDRA Bank for financing 6 crore small vendors and businesses 61% of whom are SCs, STs, OBCs and Minorities.

4. Swachh Bharat Mission has been started to see that health and hygiene issues of the poor do not affect the working capacity and output of the poor and labourers.

5. Setting up the Skill Development Ministry to enhance employability of the youth to whom we are committed to provide jobs through initiatives like ‘Make in India’.  

6. Online coal auction. A step towards less corrupted India.

RESOURCES• www.google.com

• www.economictimes.indiatimes.com• www.thehindu.com• www.franchiseindia.com• www.timesofindia.indiatimes.com• http//:en.wikipedia.org• www.ideasmakemarket.com• www.tradingeconomics.com

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