...India’s Economy Vs China’s Economy College of Business Administration Macroeconomics Table of content History of the Indian Economy 3 India GDP Growth Rate 3 History of the Chinese Economy 4 China GDP Growth Rate 4 Economy of India 5 GDP 5 Unemployment 6 Inflation 7 Economy of China 8 GDP 8 Unemployment 9 Inflation 10 India's Export and Import 11 China's Export and Import ...
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...INFLATION Inflation In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. It is, often, one of the most unwanted and misunderstood of economic phenomena. We tend to believe that the prices of commodities will, over time, rise and fall, responding to the pulls and pushes of demand and supply. An unexpected decrease in the production of a commodity will lead to increase in the price of that commodity, just as an unexpected increase in the production will cause the prices to fall (cost push). Another reason for the price fluctuations can be attributed to an unexpected increase/decrease in the demand of commodities (demand pull). These price movements are a way of signaling to consumers that they should consume less of the commodity facing shortage and more of the good in abundance and to producers to produce more of what is in short supply and less of what is available in plenty. Inflation, has little to do with these changes in relative prices of goods and services though the price fluctuations of the general price level may be accompanied by relative changes in prices as well. Government policies are often directed to smoothen these price fluctuations. For the common person, Inflation is unwanted, especially on those occasions when the rise in prices of goods is not matched by an equivalent increase in the price of labour as the prices of commodities required increases. Inflation has been with humankind ever...
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...Background Information of India India is a country located in South Asia with a total area of 3,287,263 square km. It has a total population of 1.241 billion. Hindi is the official language of the country with 14 other official regional languages. However, English has become the second language and often used in business. New Delhi is the capital city of the country. The Gross Domestic Product (GDP) per capita for India is $1,592. Population growth in India is decreasing, however, it is predicted that its population will reach 1.4 billion by 2025. Life expectancy in India has also increased from 66 years old for men and 71 years old for women. However, the population is still living in rural area with almost 60% of the population living in slumps and villages. However, the shift from rural to urban is also increasing. Literacy rates in India have surged to 74.04%. With a GDP per capita (PPP) of $3,649.53, the economy of India is made up of agriculture, mining, industry, construction and services. Services are the major economic driver for India and the best-performing. The biggest and most crucial market for India is U.S for IT. PESTE Factors 1. Political Factors * Stability of Government India is a federal republic with 28 states and seven union territories with Mr Pranab Mukherjee being the president of India since he was elected in July 2012. As of today, there are 13 political organizations with Indian National Congress and Bharatiya Janata Party (BJP). In...
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...country's per capita GDP (PPP) was $3,408 (IMF, 129th in the world) in 2010, making it a lower-middle income economy[2]. As a result of the financial crisis of 2007–2010, coupled with a poor monsoon, India's gross domestic product (GDP) growth rate significantly slowed to 6.7% in 2008–09, but subsequently recovered to 7.4% in 2009–10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period[3]. India’s current account deficit surged to 4.1% of GDP during Q2 FY11 against 3.2% the previous quarter. The unemployment rate for 2009–2010, according to the state Labour Bureau, was 9.4% nationwide[4]. As of 2010, India's public debt stood at 71.84% of GDP which is highest among BRIC nations. The latest GDP growth figure slipped to 6.9% and industrial production numbers just released, on December 12th, showed a decline of 5.1% compared with the previous period[5]. Inflation and capital flight are two clear factors that have hurt the Indian economy. First, inflation has stayed over 9% since December 2010, and wage inflation is also on the rise. The Reserve Bank of India (RBI), the country's central bank has been hiking interest rates since March 2010 to curb inflation[6]. Family owned groups constitute the backbone of the Indian economy. Sixty-six of Business India’s Super 100 companies are family-run. According to Business Today, family-run businesses account for 25% of India ink's sales, 32% of profits after tax (PAT), almost 18% of assets and over 37% of reserves...
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...APPENDIX Article 1: INDIA'S finance minister is smiling. He is also not hiding his worries. Advance growth estimates released by the Central Statistical Organisation (CSO) show that the Indian economy is likely to expand at its fastest pace in three years at 8.6 per cent in 2010-11. The economy grew at a rate of 8 per cent in 2009-10 and 6.8 per cent in 2008-09. The growth rate of 8.6 per cent in GDP during 2010-11 has been due to the growth rates of over 8 per cent in the sectors of manufacturing (export), construction (govt) trade (export), hotels, transport and communication, financing, insurance, real estate and business services (consumption), said an official release of the CSO on Feb7. "All along I was maintaining it should be around 8.5 per cent plus; 8.6 per cent is accepted," MrMukherjee told the Press Trust of India adding, "Now the other issue is inflation, (demand-pull, AD SHIFT RIGHT) trade balance... these are to be addressed." The gross domestic product (GDP) estimates are higher than the predictions made by the Reserve Bank of India and the finance ministry but are also an indication that the economy had slowed down somewhat in the second half of the current financial year. The latest GDP growth estimate of 8.6 per cent for the entire fiscal year implies that the pace of economic expansion slowed in the second half of 2010-11, given that GDP growth in the April-September 2010 period stood at 8.9 per cent. ING Vysya Bank economist Deepali Bhargava...
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...of its citizens dwell in the rural hinterland.Hindustan Lever in India (the Indian subsidiary of Unilever, now known as Hindustan Unilever)were the pioneers to practice the Bottom of the Pyramid.The concept by C.K.Prahallad emphasised on leveraging profit from rural India.Its mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life.HUL reached its heights as it worked making tap the untapped in the rural India.Be it Nirma,Lifebuoy or sachets of sunsilk or name the product it was sold in kiosk in rural India and entailed high volume of profit.The wheel of economy is rotating and now the situation is other way round where in a weak monsoon is largely to blame for sluggish demand in rural India, which accounts for nearly half of HUL’s domestic sales.The current economic and political environment depicts that India’s central bank lowered interest rates last week for the first time in close to two years in an attempt to spur growth. If India’s inflation remains in check and the central bank continues to lower interest rates as expected, then the country could see its gross domestic product growth climb toward 7% again. The World Bank said last week that with the help of economic revamping started by...
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...Economic growth is primarily driven by improvements in productivity, which involves producing more goods and services with the same inputs of labor, capital, energy and materials (1). Pretty much everything you can imagine contributes to a countries economy and ultimately economic growth; from raw materials to availability of energy, from geography to political governance. The strength of a countries economy tends to speak to its place in the general importance of the world. Being economically weak a country tends to be poor and normally overlooked, while economically strong countries are able to effect other countries financially and thus tend to have much more sway in world dealings. I will discuss the two countries of China and India and look at their current economic situation and keys to their future growth. India and China India and China have much in common and also many differences that make their economies and economic growth very different. India and China are neighbors in south East Asia, sharing about 2100 miles of boarder between each other that runs along the Himalayas. Both countries are ancient in origin and birth places of civilization outside of the Middle East. They both have very large work forces available and 100 years ago both countries were considered to be fairly useless in the global economy except for tea production and some raw materials like silk or dyes. Both countries were at least partially colonized by the English. Both countries are potentially...
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...Best Buy enters India by Francisco Polo Professor Hamid Assar International Finance – FIN535 May 22, 2012 Summary Best Buy Co., Inc. is an American specialty retailer of consumer electronics in the United States, accounting for 19% of the market. It also operates in Puerto Rico, Mexico, Canada and China. The company's subsidiaries include Geek Squad, CinemaNow, Magnolia Audio Video, Pacific Sales, and, in Canada operates under both the Best Buy and Future Shop label. Together these operate more than 1,150 stores domestically and internationally. In addition, the company operates over 100 Best Buy Express Automated Retail stores or "ZoomShops", operated by Zoom Systems, in airports and malls around the U.S. The company is headquartered in Richfield, Minnesota, United States. On March 9, 2009, Best Buy became the largest electronics retail store (online and bricks and mortar) in the eastern United States, after smaller rival Circuit City went out of business. Fry's Electronics remains a major competitor in the western United States, while Hhgregg remains competitive in the eastern United States. Many locations feature in-store pickup, which can be arranged through the company's website. As of December 28, 2008, the company operated 1,010 Best Buy Stores, 13 Magnolia Audio Video Stores (specializing in high-end electronics), 7 stand-alone Geek Squad stores, 3 Audio Visions Stores, 13 Best Buy Mobile Stores (standalone) and...
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...consumption of cigarettes in the same proportion. Cigarette smokers in India increased from 25 million to 46.4 million over 14 years (1996 to 2010), and per capita annual consumption of cigarettes declined marginally, from 101 to 96 cigarettes over the same period. With some assumptions, it can be shown that the tax on bidis can be increased to Rs. 100 per 1000 sticks compared with the current Rs. 14 and the tax on an average cigarette can be increased to Rs. 3.5 per stick without any fear of losing revenue. The government though has been taking rigorous initiatives to try and reduce the consumption of tobacco products it has not been able to achieve the results which it wanted to have. There have been many reasons for this to happen and we will look into it in this report. Introduction:- In India, tobacco consumption is responsible for half of all the cancers in men and a quarter of all cancers in women,1 in addition to being a risk factor for cardiovascular diseases and chronic obstructive pulmonary diseases.2,3 India also has one of the highest rates of oral cancer in the world, partly attributed to high prevalence of tobacco chewing.4–7 Forms of tobacco chewing include pan (piper betel leaf...
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...Impact on India | | Impact of FDI in India | | Snapshot of impact on India | | Conclusion | | References | | Impact on India Though India is primarily a domestic economy, India’s exports are positively linked to the global economic growth. This is likely to adversely impact India’s export growth in the coming months. However, growth will be only marginally affected by the slowdown in the euro region debt stricken countries as our exposure is low. Software services and other export oriented sectors would benefit from the rupee depreciation. FDI has not been significantly affected by the crisis while the FIIs are showing outflow in the last couple of months. International commodity price moderation is not being translated in domestic prices. Inflationary Concerns: Further, exchange rate depreciation would worsen the inflationary conditions in the economy. Therefore, the RBI would have to continue with its anti-inflationary stance in the near term if domestic conditions do not improve Source: World Bank, Ministry of Commerce, Government of India Interpretation of Graph - Graph 1 show that the share of the euro zone exports to their GDP was around 40% in 2010 and has been around 39% on an average since 2005. This was followed by China at 30% and UK at 29%. India’s exposure to the global markets through foreign trade was restricted to 10% in 2010. Caution: However, the impact of the rising global uncertainty and volatility in the exchange rate movement...
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..."dependent population". A nation's "dependency ratio" is the ratio of the dependent population to the working-age population. In the case of India this turns out to be 0.6. On this score India does not look too different from many other developing countries. Bangladesh's dependency ratio is 0.7, Pakistan's 0.8, Brazil's 0.5. | Your views on this article | What is different about India is the prediction that it will see a sharp decline in this ratio over the next 30 years or so. This is what constitutes the demographic dividend for India. India's fertility rate - that is, the average number of children a woman expects to have in her life time - used to be 3.8 in 1990. This has fallen to 2.9 and is expected to fall further. Since women had high fertility earlier we now have a sizeable number of people in the age-group 0-15 years. Benefits of demography But since fertility is falling, some 10 or 15 years down the road, this bulge of young people would have moved into the working-age category. And, since, at that time, the relative number of children will be small (thanks to the lowered fertility), India's dependency ratio would be lower. It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan; and, by 2030, India's dependency ratio should be just over 0.4. This can confer many benefits. First is the direct benefit of there being a rise in the relative number of bread-winners. Moreover, with fewer children being born...
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...Rupee Depreciation: Probable Causes and Outlook The Indian Rupee has depreciated significantly against the US Dollar marking a new risk for Indian economy. Till the beginning of the financial year (Apr 11-Mar 12) very few had expected Rupee to depreciate with most hinting towards either appreciation or status quo in the rupee levels. Those few who had even anticipated may not have imagined the scale of depreciation with rupee touching a new low of around Rs 54 to the US Dollar. What is even more interesting to note is that when other countries are trying to play currency wars and trying to keep their currencies devalued, India is trying to prevent depreciation of the currency. (Read our previous report for a review of the situation- Saying No To Currency Wars (20-Sep-11)) This paper reviews the probable reasons for this depreciation of the rupee and the outlook for the same. It also reflects on the policy options to help prevent the depreciation of the Rupee I. Economics of Currency Predicting currency movements is perhaps one of the hardest exercises in economics as it has many variables affecting the market movement. However, over a longer term currency movement is determined by following factors: Balance of Payments: It is the sum of current account and capital account of a country and is an external account of a country with other countries. Both current account and capital account play a role in determining the movement of the currency: o Current Account Surplus/Deficit:...
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...1. Explain why exchange rates have been so volatile in recent years/ What are the implications of this volatility for companies like Billabong? There are a large number of influences at work in the foreign exchange markets. The most obvious are shifts in fundamental demand for a currency that reflects the outlook for the economy. For example, if Australia is exporting more goods and services, foreign buyers will need to buy Australian dollars to pay for them. That will put upward pressure on the value of the currency. All else being equal, countries that run large trade surpluses – meaning that they export more than they import – should see their currencies rise over time. However, the value of the dollar is also driven by speculation as traders seek to profit from the underlying trends of the movement of one currency against another. A significant amount of activity in foreign exchange markets consists of borrowing in currencies where interest rates are low and investing in ones with higher rates. In periods of low volatility, such as from 2002 to 2006, this method can be very profitable. However, in recent years a higher-yielding currency is potentially seen as a sign that problems are building up in the economy. In periods of high volatility such as now, speculating directly on currency movements is usually considered too risky for private investors as it can easily lead to large losses. Buying overseas-listed shares or investing in funds that hold foreign assets is the...
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...Team Members Economic times article and reflective note Should RBI check rupee's rise? Posted on October 20, 2010 | View 124 We expect the Reserve Bank of India (RBI) to intervene in the foreign exchange market to mop up surplus capital flows. This means that the RBI will buy dollars and inject rupee liquidity into the economy. This, of course, is different from imposing controls to turn capital flows away, which we do not expect. Why? Well, the RBI must generate more money to fund growth at reasonable interest rates. Its 100-basis-point hike in cash reserve ratio has pulled money growth down to a tight 15% level. This is clearly insufficient to fund loan demand growing at 20%. Won’t this fuel inflation? Not really. Some monetary expansion is necessary for growth; it is only excessive money supply that is inflationary — the difference between eating and overeating. Second, the RBI needs to inject liquidity to fund government borrowing. Although the Centre and states plan to borrow around Rs 2,000 billion (net) in October-March 2011, it is difficult to see how banks and insurers can put in more than Rs 1,400 billion. This means that the RBI will have to plug the gap either by directly buying government bonds through open market purchase or indirectly by injecting rupees through forex intervention. Third, the RBI needs to recoup the $35 billion of forex reserves sold during the 2008 credit crisis to arrest the deterioration in vulnerability indicators. Short-term external...
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...has very limited off-balance sheet activities or securitized assets. In fact, our banks continue to remain safe and healthy. So, the enigma is how can India be caught up in a crisis when it has nothing much to do with any of the maladies that are at the core of the crisis. The second reason for dismay is that India's recent growth has been driven predominantly by domestic consumption and domestic investment. External demand, as measured by merchandize exports, accounts for less than 15 per cent of our GDP. The question then is, even if there is a global downturn, why should India be affected when its dependence on external demand is so limited? The answer to both the above frequently-asked questions lies in globalization. First, India's integration into the world economy over the last decade has been remarkably rapid. Integration into the world implies more than just exports. Going by the common measure of globalization, India's two-way trade (merchandize exports plus imports), as a proportion of GDP, grew from 21.2 per cent in 1997-98, the year of the Asian crisis, to 34.7 per cent in 2007-08. Second, India's financial integration with the world has been as deep as India's trade globalization, if not deeper. If we take an expanded measure...
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