indian economy

Indian Economy

Glen Furtado - 25Niffson Gonsalves - 27Anson Andrews - 28Kshitija Jadhav - 29Vishtasp Jokhi - 30Jitesh Karamchandani - 31Kaushik Thakurdwarkar - 32

Contents & Crew

• A Brief Introduction – Vishtasp Jokhi• History – Glen Furtado• Sectors – Jitesh Karamchandani• External Trade and Investment – Kshitija

Jadhav• Currency – Niffson Gonsalves• Income and Consumption – Kaushik

Thakurdwarkar• Economic Trends and Issues – Anson

Andrews

Understanding the Topic

• Indian – is this post 1947?

• Economy –– Thrifty management; frugality in the expenditure or

consumption of money, materials, etc.– The management of the resources of a community,

country, etc., especially with a view to its productivity.– The prosperity or earnings of a place.

Status

• The Indian Economy is termed as a developing economy which is a polite term for an underdeveloped economy

• What are the features of a developing economy

History (Pre 1947)

• The known Economic history of India begins with the Indus Valley civilization

• From 300 B.C. to 1200 A.D. the Maurya Empire united most of the Indian subcontinent. The political unity and military security allowed for a common economic system and enhanced trade and commerce. During this period India is estimated to have had the largest economy of the ancient and medieval world.

• Between the 1st and 17th centuries A.D., controlling between one third and one fourth of the world's wealth.

History (Post 1947)

• India has followed central planning for most of its independent history, which have included extensive public ownership, regulation, red tape, and trade barriers.

• After the 1991 economic crisis, the central government launched economic liberalization. India has turned towards a more capitalist system and has emerged as one of the fastest growing large economies of the world.

Sectors

Basic

• Primary – dependency on natural resources (agriculture, fishing)

• Secondary – dependency on manufacturing

• Tertiary – dependency on serivces etc

Other• 1.Public • 2.Private

• 3.Organised • 4.Unorganised

External Trade & Investment (1)

• Trade

– International (external) trade is the exchange of capital, goods, and services across international borders or territories.

– Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders.

External Trade & Investment (2)

• Investment

– Foreign direct investment (FDI) is direct investment into production in a country by a company located in another country.

– Foreign direct investment is done for many reasons

Currency

• In economics, currency is a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply.

• The Indian rupee is the official currency of the Republic of India. Its issuance is controlled by the Reserve Bank of India.

Income & Consumption

• There is a direct relationship between income and consumption.

• In most cases it is directly proportional and in some special cases it is inversely proportional (This is true in the case of inferior goods)

Economic Trends & Issues (1)

• Agriculture

A classic dilemma - it is the cause of success and the root of all failure.

– Irrigation– Unviable land holdings– Scams– Subsidies


• Corruption

– A 2005 study by Transparency International (TI) found that more than half of those surveyed had firsthand experience of paying bribe or peddling influence to get a job done in a public office in the previous year.

– In 2011, TI ranked India at 95th place amongst 183 countries in perceived levels of public sector corruption.


• Infrastructure– In the past, development of infrastructure was

completely in the hands of the public sector and was plagued by slow progress, poor quality and inefficiency.

– While 80% of Indian villages have at least an electricity line, just 44% of rural households have access to electricity. Around 40 to 50% of the electricity is stolen, compared with 3% in China. The stolen electricity amounts to 1.5% of GDP.


• Education– India has made huge progress in terms of

increasing primary education attendance rate and expanding literacy to approximately three-fourth of the population.

– However, the literacy rate of 74% is still lower than the worldwide average and the country suffers from a high dropout rate.

HISTORY OF INDIAN ECONOMY

STAGES OF INDIAN ECONOMY

• Pre-Colonial period (Medieval India)

• Colonial period (Modern India)

• Post-Independence period

Pre Independent India

Indus Valley Civilization

• Flourished between 2800 BC and 1800 BC

• Agriculture, Animal Husbandary• Used tools and weapons• Import-Export Trade• Perfect Urban planning

Pre-Colonial Period

• In 1600, During Akbar’s reign in the Mughal Empire the revenue reached upto 1500M Rs whereas Britain at that time totaled just £16M

• After the fall of the Mughals, India was administered by Maratha Empire and the revenue of India was just 100M Rs

• After the loss of Panipat, it reduced to 30M Rs

Assessment of India's pre-colonial economy is mostly qualitative, owing to the lack of quantitative information

Colonial Period

• Taxation Environment• Institutional

Environment• Standardized Weights• Capital Markets• Developed system of

Railways and Telegraphs

• Single currency with fixed exchange rates

• Colonial rule brought a major change in the taxation environment from revenue taxes to property taxes

• At the end of colonial rule, India inherited an economy that was one of the poorest in the developing world

SECTORS OF THE INDIAN ECONOMY

Primary SectorSecondary SectorTertiary SectorOther Sectors• Organized Sector• Unorganized Sector:• Public Sector• Private Sector

Primary Sector

• The economic activity depends mainly on exploitation of natural resources .

• Agriculture and agriculture related activities, forestry and fishing, mining, and extraction of oil and gas.

• A larger sector in developing countries

Secondary Sector

• Involves manufacturing • The industrial production of physical

goods .

Tertiary Sector• Involves providing intangible goods like

services,attention, advice, experience, and discussion.

• Financial services, management consultancy, telephony and IT are good examples of service sector.

Interdependency of Sectors• example of a cold drink.

Organized Sector

• Carries out all activity through a system following the laws

• Benefits like provident fund, leave , medical benefits and insurance are provided to workers

Unorganized Sector:

• Evades most of the laws and don’t follow the system

• Small shopkeepers, some small scale manufacturing units keep all their attention on profit making and ignore their workers basic rights.

• Workers don’t get adequate salary and other benefits like leave, health benefits and insurance

Public Sector• Companies which are run and financed by

the Government comprise the public sector.

• Government had to start creating big public sector enterprises like SAIL (Steel Authority of India Limited), ONGC(Oil & Natural Gas Comission).

Private Sector• Companies which are run and financed by

private people comprise the private sector.

• Companies like Hero Honda, Tata are from private sectors.

EXTERNAL TRADE AND INVESTMENT

What is External Trade?

Exchange of capital, goods, and services across international borders or territories.In most countries it represents significant share of gross domestic product (GDP).

Exchange of capital, goods, and services across international borders or territories.In most countries it represents significant share of gross domestic product (GDP).

Importance Of External Trade

• International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP)

• International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP)

• International trade is the backbone of our modern, commercial world, as producers in various nations try to profit from an expanded market, rather than be limited to selling within their own borders.

• International trade is the backbone of our modern, commercial world, as producers in various nations try to profit from an expanded market, rather than be limited to selling within their own borders.

Rise in external trade

India Trade: Imports

• India’s major imports comprise of crude oil machinery, military products, fertilizers, chemicals, gems, antiques and artworks. Imported goods are divided into the following categories: Freely importable items: For these items, no import license is required. They can be freely imported by an individual or a firm. Canalized items: These items can only be imported by public sector firms. For example petroleum products fall under this category. Prohibited items: Items such as unprocessed ivory, animal rennet and tallow fat cannot be exported to India.

India Trade: Exports

• Indian exports comprise mainly of engineering and textile products, precious stones, petroleum products, jewelry, sugar, steel chemicals, zinc and leather products. Most of the exported goods are exempt from export duties. India also exports services to several countries, primarily to the US. In fact, India is among the world’s largest exporters of services related to information and communication technology (ICT). It is also the key destination for business process outsourcing (BPO).

Risks in international trade

• Buyer insolvency; Non-acceptance; Credit risk; Regulatory risk; Intervention; Political risk; and War and other uncontrollable events. In addition, international trade also faces the risk of unfavorable exchange rate movements

HISTORY OF RUPEE

• The first rupee was introduced by Sher Shah Suri (1486-1545) based on a ratio of 40 copper pieces (paisa) per rupee.The name was derived from the Sanskrit word raupya, meaning silver.

• During British rule, and the first decade of independence, 1 damidi(pie)=0.520833paise, 1 kani(pice) =1.5625paise, 1 paraka =3.125paise, 1 anna =6.25paise, 1 beda =12.5paise, 1 pavala =25paise, 1 artharupee =50paise, 1 rupee =100paise

HISTORY OF INDIAN RUPEE

• In 1957, decimalisation occurred and the rupee was divided into 100 naye paise (Hindi for "new paise"). In 1964, the initial "naye" was dropped. Many still refer to 25, 50 and 75 paise as 4, 8 and 12 annas respectively.

BANK NOTES

• In 1861, the Government of India introduced its first paper money, 10 rupee notes. These were followed by 20 rupee notes in 1864, 5 rupees in 1872, 10,000 rupees in 1899, 100 rupees in 1900, 50 rupees in 1905, 500 rupees in 1907 and 1000 rupees in 1909.

• The Reserve Bank of India began note production in 1938, issuing 2, 5, 10, 100, 1000 and 10000 rupee notes.

• After independence, new designs were introduced to remove the portrait of the King.

• The 5000 and 10,000 rupee notes introduced in 1949.

• In the 1970s, 20 and 50 rupee notes were introduced but denominations higher than 100 rupees were demonetized in 1978.

• In 1987, the 500 rupee note was introduced, followed by the 1000 rupees in 2000.

INDIAN RUPEEINDIAN RUPEE

BANK NOTES

• The current series, which began in 1996, is called the Mahatma Gandhi series. Currency notes are printed at the Currency Note Press, Nashik, Bank Note Press, Dewas, Bharatiya Note Mudra Nigam (P) Limited presses at Salboni and Mysore and at the Watermark Paper Manufacturing Mill, Hoshangabad.

<Value Dimensions Main Color

Date of issue

Obverse Reverse

Rs. 5 117 × 63 mm Green

Mahatma Gandhi

Tractor 2002

Rhinoceros, elephant, tiger 1996

Rs. 10 137 × 63 mm Orange-violet

Palm trees 2002

Rs. 20 147 × 63 mm Red-orange

Parliament of India 1997

Rs. 50 147 × 73 mm Violet

Himalaya Mountains 1996Rs. 100 157 × 73 mm Blue-green at centre, brown-purple at 2 sides

Dandi March 1997Rs. 500 167 × 73 mm Olive and yellow

Economy of India 2000Rs. 1000 177 × 73 mm Amber-Red

SPECIFICATIONS OF CURRENT INDIAN CURRENCY NOTESSPECIFICATIONS OF CURRENT INDIAN CURRENCY NOTES

Description

LANGUAGE PANELS

• Each banknote has its amount written in 17 languages (English & Hindi on the front, and 15 others on the back) illustrating the diversity of the country

SECURITY FEATURES IN CURRENCY NOTES

• Watermark — White side panel of notes has Mahatma Gandhi watermark.

• Security thread — All notes have a silver security band with inscriptions visible when held against light.

• Latent image — Higher denominational notes display note's denominational value in numerals when held horizontally at eye level.

• Microlettering — Numeral denominational value is visible under magnifying glass between security thread and watermark.

SECURITY FEATURES IN CURRENCY NOTES

• Fluorescence — Number panels glow under ultra-violet light.

• Optically variable ink — Notes of Rs. 500 and Rs. 1000 have their numerals printed in optically variable ink. Number appears green when note is held flat but changes to blue when viewed at angle.

• Back-to-back registration — Floral design printed on front and back of note coincides when viewed against light.

COINS

• India's first coins after independence were issued in 1950. They were 1 pice, ½, 1 and 2 annas, ¼, ½ and 1 rupee denominations.

• The first decimal issues of India consisted of 1, 2, 5, 10, 25 & 50 naye paise, as well as 1 rupee. The 1 naya paisa was bronze, the 2, 5 & 10 naye paise were cupro-nickel & the 25 & 50 naye paise & 1 rupee were nickel.

• In 1964, the word naya(e) was removed from all the coins. Between 1964 & 1967, aluminum 1, 2, 3, 5 & 10 paise were introduced. In 1968, nickel-brass 20 paise were introduced, replaced by aluminum coins in 1982.

COINS

• Between 1972 & 1975, cupro-nickel replaced nickel in the 25 & 50 paise as well as the 1 rupee. In 1982, cupro-nickel 2 rupees coins were introduced. In 1988, stainless steel 10, 25 & 50 paise were introduced, followed by 1 & 5 rupee coins in 1992.

• Between 2005 & 2008, new, lighter 50 paise, 1, 2 & 5 rupee coins were introduced, all struck in ferritic stainless steel. The move was prompted by the melting down of older coins whose face value was less than their scrap value

• The coins commonly in circulation are 1, 2, 5 & 10 rupees. Although they remain valid, paise coins have become increasingly rare in regular usage.

SPECIFICATIONS OF CURRENT CURRENCY COINS

Value

Technical parameters Description Date of

Diameter Mass Composition Shape Obverse ReverseFirst

mintingLast

minting

5 p22 mm(diagonal)

1.5 g Aluminium Diamond Emblem of India Value 1957 1994

10 p 16 mm 2 gFerritic stainless

steelCircular Emblem of India Value 1961 1998

25 p 19 mm 2.83 gFerritic stainless

steelCircular

Emblem of India, value

Rhinoceros 1988 2002

50 p 22 mm 3.79 gFerritic stainless

steelCircular


Value, Hand showing clenched fist

2008 -

1 ` 25 mm 4.85 gFerritic stainless

steelCircular


Value, Hand showing thumb

2007 -

2 ` 27 mm 5.62 gFerritic stainless

steelCircular Emblem of India

Value, Hand showing 2 fingers

2007 -

5 ` 23 mm 6 gFerritic stainless

steelCircular Emblem of India Value, wavy lines 2007 -

10 ` 28 mm 8 g Bimetallic Circular ? Value, wavy lines 2009 -

MINT MARKS ON COIN

• Coins with a ‘Diamond’ mark below the date is produced in Mumbai mint

• Coins with no marks below the date is produced in Kolkata mint.

• Coins with ‘Split Diamond’ or ‘Dot’ or ‘Star’ below the date is produced in Hyderabad Mint.

• Coins with Round Dot below the date is produced in Noida Mint.

• Coins having other marks is produced in Foreign Mints

INDIAN RUPEE SYMBOL

• The currency is at present denoted simply by “Rs” or “INR” which is short for Indian rupee, but these are not “symbols” but “abbreviations” for the word rupee.

• On 15th of July 2010 cabinet, finalized the design for the Rupee.

• An engineer, IIT post-graduate Uday Kumar has been honored. His design out of five shortlisted ones is selected for the new symbol of the Indian Rupee.

NEW INDIAN RUPEE SYMBOL

• New Rupee Symbol of India - How to use in Computers?• Download the font. -> ”Rupee_Foradia.ttf” • Save it to fonts folder of your PC: Location : • C:/Windows/Fonts and then go to the C:/Windows/Fonts

location and install (double click) • Open your word processor and select the

“Rupee_forindian”.• Just select “Rupee” font from the drop down list of your

fonts in your application and press the key just above your tab button. It will display the new Rupee symbol of India.

Handle the currency carefully And

Be a proud Indian

Income and consumption

What is national income ?• National income measures the total

value of goods and services produced within the economy over a period of time

• National Income can be denoted in different ways with different meaning attached to it.

Gross Domestic Product (GDP) Gross National product (GNP) Net National Product (NNP)

• The GDP of India has grown from a merge 93.7 billion rupees in 1950 to about 410006.4 billion rupees in 2006.

• India's per capita income (nominal) is $ 1219, ranked 142nd in the world, while its per capita purchasing power parity (PPP) of US $3,608 is ranked 129th.

FDI in India

• FDI : Investment by a company in a country other than that in which the company is based.

• Is FDI beneficial for India ?

Strengths of INDIAN ECONOMY

Demographics of India are favorable.India is well placed to benefit from globalization and outsourcing.There is much scope for increases in efficiency.

Problems faced in Indian EconomyInflation.Poor educational standard.Poor Infrastructure.Balance of payment deterioration High level of debtLarge budget deficitRigid labour laws

High Fiscal DeficitWhat is the reason: 200% rise in subsidies since 2007-08

• What can be done: Speed up Aadhar pilots; use study results to shift to direct transfer of subsidies across IndiaScrap diesel & urea subsidies, decontrol diesel

High Current Account Deficit

What is the reason: Likely at 4% of GDP in last fiscal year

• What can be done: Controlling fiscal deficit will curtail current account deficitRestore distribution margins on financial saving products, to curb demand for gold

High InflationWhat is the reason: 7.23% & rising; still above comfort level

• What can be done: Ease supply constraints by removing APMC Act and opening up retail sector to FDI

StatisticsCountry Inflation rate

Brazil 6.3

India 8.8

China 5.4

Indonesia 6.7

Russia 9.4

South Africa 4.1

Rupee DepreciationWhat is the reason: 20% drop in rupee against dollar since early 2011

• What can be done: Overseas bonds are an option Clear FDI decisions quickly

High Interest RatesWhat is the reason: 8% repo rate against 5% in March 2010

• What can be done: Strong commitment to fiscal consolidation will help the Reserve Bank cut rates

Drop in Investments

What is the reason: 29.5% of GDP, gross fixed capital formation, lowest in seven years

• What can be done: Clarity on coal can kickstart power investmentsGet cash-rich PSUs to fast-track plans

Power Sector CrisisWhat is the reason: 30000MW Rs 47,738cr power plant idling or underutilised

• What can be done: Supply coal to plants working at sub-optimal capacityRevamp state electricity boards to ensure power producers can sell to them without payment worries

Poverty due to Population

• Rural population• Urban population

Antipoverty Programmes

• National Rural Employment

• Rural Labour Employment Generation Programme

• Jawahr Rozgar Yojana

Types of Unemployment

• Involuntary unemployment

• Voluntary unemployment

Measures to promote Employment

• Rural works programme

• Marginal farmers and Agricultural Labourers