Well here it is, it didn't copy right but I am sure nobody is going to waste their time reading 6, yes 6 pages on India's economy! It is the most boring paper I have ever wrote! I emailed it to the prof. and now I am just waiting to hear back from him with any changes that need to be made! Oh yeah, I have never had to write an abstract before, pretty sure I didn't know what to write!Growing Economy of India
Christa Wadekamper
April 23, 2007
Abstract
Over the next decade India is going to become one of the largest economies in the world. Their economy is already underway on growing with an increase of GDP growth rate averaging out to be 5.7% each year. Their exports are increasing and job variety is getting greater as time goes on.
Located in Southern Asia and slightly more than one-third the size of the United States, Asia is the second most populous nation in the world and is the becoming one of the largest economies in the world. According to the World Factbook, 64.3% of India’s population is between the ages of 15-64 years old, while only 4.9% are 65 or older.
With a population growth rate of 1.38%, India is predicted to be the most populous nation in the world by 2015. 80.5% of the people in India are Hindu, making it the largest religion there. Hindi is the national language and English is the most important language when it comes to national, political, and commercial communication. There are nearly 650,000 villages which are home to more than two-thirds of the population of India. Home to droughts, flash floods, monsoonal rains, and earthquakes, India has the fourth-largest reserves of coal in the world. Other natural resources include; iron ore, manganese, mica, bauxite, titanium ore, chromite, natural gas, diamonds, petroleum, limestone, and arable land which all contribute to the growing economy.
GDP Facts
With an economy consisting of agriculture, handicrafts, textile, manufacturing, and a massive amount of services, India has become the fourth largest economy in the world when measured by purchasing power parity. The Indian economy, by 2025, is expected to be about 60% of the size of the United States economy, according to Economy Watch.com. Not only is India the fourth largest economy in the world, it has also become the second fastest growing major economy in the world. The economy of India has been growing and is predicted to continue to grow, since 1979 the average GDP growth rate has been 5.7%, during the 23-year growth record. During the second quarter of 2006-2007, India had a GDP growth rate of 9.2%. By 2035, the share in world GDP India has is expected to rise from 6% to 11%, making the US and China economies the only ones larger than India. By 2020, India’s GDP at current prices is expected to overtake France and Italy, by 2025 it’s predicted to overtake Russia, and by 2035 Japan. The rupee has steadily appreciated vis-à-vis US dollar. As of April 13, 2007 the Rupee exchange rate is about 42 to a US dollar. India’s reserve money has doubled to 18.3% in 2003-04, compared to 9.2% in 2002-03. This was driven entirely by the increase in the net foreign exchange assets of the Reserve Bank of India; however, from 2005 to the current year, it has declined to 6.4%. During 2004-05 the broad money stock increased by 7.4%. Gross fixed income investment consisted of 29.2% of 2006’s GDP. A 2006 estimate of India’s federal and state debt combined was 52.8% of the GDP. India’s inflation rate for consumer prices in 2006 was 5.3%. Agriculture, industry, and services all make up India’s GDP, the composition by sector is; 60%, 12%, and 28% respectively. A 2007 estimate of the real growth rate GDP was 9.2% compared to 4% in 2000. The GDP purchasing power parity during a 2006 estimate was $4.042 trillion, the GDP official exchange rate was $796.1 billion. Compared to other third-world countries India is by far the leader in GDP purchasing power parity. (See Fig. 1)
GDP (Purchasing Power Parity) 2006 est.
India
$4,042,000,000,000
Angola
$51,950,000,000
Madagascar
$17,270,000,000
Chad
$15,260,000,000
Niger
$51,950,000,000
Fig. 1 - It is shown in this figure how India compares to other third world countries when GDP purchasing power parity is being compared.
Population
With a population of about 1,095,351,995 (see Fig. 2 and 3) and GDP per capita of $3,700, compared to Chinas of $6,800, the World Bank still classifies India as a low income economy.
Population (July 2007 est.)
China
1,321,851,888
India
1,129,866,154
Madagascar
19,448,815
Niger
12,894,865
Angola
12,263,596
Chad
9,885,661
Fig. 2 – China currently is the highest populated country in the world. When India is compared to other third world countries, the populations are not even close to what India currently is holding and it is predicted that with its current population growth, India will surpass China.
Birth and Death Rate/1,000 Population (2007 est.)
Country
Birth Rate
Death Rate
India
22.69
6.58
Madagascar
38.6
8.51
Niger
50.16
20.59
Angola
44.51
24.81
Chad
42.35
16.69
Fig. 3 – When looking at the birth and death rate of India compared to other countries it can be seen that India has the lowest birth and death rate and Niger has the highest birth rate and Angola has the largest death rate.
Employment
The unemployment rate of India during a 2006 estimate was 7.8% and 25% of the population is was below the poverty line in 2002. (See Fig. 4)
Population below poverty line
India
25%
Madagascar
50%
Niger
63%
Angola
70%
Chad
80%
Fig. 4 - Although India has a large portion of its population below the poverty line, when compared to other third world countries it is low. Chad has the largest amount of its population below the poverty line.
About two-thirds of the people working in India still earn the living directly or indirectly through agriculture. Rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes; cattle, water buffalo, sheep, goats, poultry, and fish are all of the things that encompass India’s agriculture. The percentage of value add to GDP from agriculture in 2000 was 23.7% and in 2005 this decreased to 18.6%. Accounting for more than half of India’s output is services, which is a major source of India’s economic growth; however, this only uses less than one quarter of its labor force. The percentage of value added to GDP from services in 2000 was 50% compared to 53.8% in 2005. India is fifteenth worldwide when it comes to service output. The major industries in India are; textiles, chemicals, food processing, steel, transportation, equipment, cement, mining, petroleum, machinery, and software. In 2006, industrial production growth rate was 7.5%. Percentage of value added to GDP from industries in 2000 was 26.3% and in 2005 it was 27.6%. Some employment opportunities that are having growth rates are; manufacturing, pharmaceutical, biotechnology, nanotechnology, telecommunication shipbuilding, and aviation. With more of the people living in India becoming more educated and fluent in English, India is becoming a major exporter of workers in software, financial services, and software engineering.
Exports and Imports
Textile goods, gems and jewelry, engineering goods, chemicals, and leather manufactures are some of the things India exports. During 2000, exports of goods and services accounted for 13.2% of India’s GDP. This number rose to 19% by 2004 and is still increasing. India exported $112 billion during 2006. (See Fig. 5) The United States is India’s largest export partner, taking 16.7% of India’s exports. Other export partners are; UAE, China, Singapore, UK, and Hong Kong. Also rising was India’s imports of goods and services; in 2000, imports accounted for 14.1% of GDP and in 2004 they accounted for 21%. According to the World Factbook, some of the things India imports are; crude oil, machinery, gems, fertilizer, and chemicals. In 2006 India imported $187.9 billion from China, United States, and Switzerland. During the year 2005, oil produced was 785,000 bbl/day and 2,450,000 bbl/day was consumed. Proved oil reserves in 2006 were 5.6 billion bbl. In 2005, India exported an estimated 350,000 bbl/day in oil, and imported 2.09 million bbl/day. During 2004, India exported an approximate 60 million kWh and imported 1.5 billion kWh. During 2004, natural gas production was 28.2 billion cu m and consumption was 30.83 billion cu m, meaning they used more than they produced. They didn’t export any natural gas but imported 2.63 billion cu m during 2004. Proved natural gas reserves are at 853.4 billion cu m, as of 2005.
Exports (2006 est.)
India
$112,000,000,000
Madagascar
$993,500,000
Niger
$222,000,000
Angola
$34,430,000,000
Chad
$4,342,000,000
Fig. 5 – When comparing India to other third world countries it can be seen that their exports are much greater than any others, resulting in a better economy.
Life in India
Life is also slowly getting better in India. In 2004 the time it took to start a business was 89 days, in 2005 this decreased to 71 days. Market capitalization of listed companies in percentage of GDP was 32.1 in 2000 and by 2005 it was 70.4. School enrollment has also gone up. In 2000, 98.9 (% gross) were enrolled in primary schools and in 2004 the number shot up to 116.2. This number has also gone up for secondary and tertiary school enrollment. Only 59.5% of the people are literate, and 70.2% of that is male. (See Fig. 6) Compared to other countries this number is still low. Per 1,000 fixed line and mobile phone subscribers in 2000 were 35.4, in 2004 it was 84.5. Internet users per 1,000, has also been increasing, in 2000 it was 5.4, which increased to 32.4 by 2004.
Literacy Rate
India
59.50%
Madagascar
68.90%
Niger
17.60%
Angola
85.80%
Chad
47.50%
Fig. 6 – India still has a low literacy rate when compared to other third world countries with only 59.5% of the population literate.
Why the economy woke up
Once India gained its independence it started the journey of getting a better economy, but not at first. According the Wikipedia, in 1947 Jawaharlal Nehru, the first prime minister, and statistician Prasanta Chandra Mahalanobis carried on the economic policy by Indira Gandhi they did not help India’s economy. In fact Milton Friedman said that he thought it was a waste of capital and labor. The policy they carried out was the economic policy of protectionism. With this policy there were high tariffs on imported goods and the government put regulations that were designed to discourage imports. They also used centrally planned economy, which meant the government controlled the factors of production and made all of the decisions on how they would be used, the government also made the decisions on how the income would be distributed. Some critics of central planning say that it is less likely to promote innovation than a free market economy and with it inventors can not reap benefits by patenting new technology so there is no incentive to innovate, according to Wikipedia. During the 1980’s price controls were removed and corporate taxes were reduced. These were initiated by Rajiv Gandhi and were the pro-business measures that were made. Many public monopolies were ended and so was the License Raj.[1] Foreign investment was opened; reforming capital markets was done as was the trade regime. In 1992 the Controller of Capital Issues; which decided prices and number of shares a firm could issue, was destroyed. By 2005, India’s economy was $3,815.6 billion, which was 5% of the world income, according to Wikipedia. Without all of these changes the economy of India could not grow, which is why it took until the 1980’s for it to begin. With a change in the way the economy was handled India has been able to grow as a strong economy.
Within the next 10 to 20 years the economy of India is going to continue to grow and probably become a major player in the world economy. India’s GDP is growing along with their services, exports, and technology; however, they still have to deal with problems of poverty, massive overpopulation, environmental degradation, and disputes with Pakistan. More of the younger generations are being enrolled in school making India more educated and ready for the future. With a population growth rate of 1.38% India will continue to grow, but not only in population.
Reference
http://en.wikipedia.org/wiki/Economy_of_IndiaApril 13, 2007
https://www.cia.gov/cia/publications/factbook/print/in.htmlApril 13, 2007
http://www.time.com/time/magazine/article/0,9171,1205374,00.htmlApril 13, 2007
http://devdata.worldbank.org/external/CPProfile.asp?PTYPE=CP&CCODE=INDApril 13. 2007
http://www.economywatch.com/indianeconomy/indian-economy-overview.htmlApril 13, 2007
[1] License Raj put licenses and regulations on setting up a business during 1947-1990
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