Macroeconomics-Analysis

India

Subject: EC301 Macroeconomics

Tutor: Dominique Jordan

Prepared by:
Kristy Hu ID 30875
Rogachova Oleksandra ID 27197
Iancu Francesca Cristina ID 30905
Minky Panichpraparach ID 28705
Word Count: 2133
Table of Content

Introduction and Background of India.................................................3

SWOT Analysis:.........................................................................4
Strength:............................................................................................................. 4
Weakness:........................................................................................................... 4
Opportunities:....................................................................................................... 4
Threats:.............................................................................................................. 4

PESTLE Analysis........................................................................ 5
Politics............................................................................................................... 5
Economics........................................................................................................... 5
Social................................................................................................................. 6
Technology.......................................................................................................... 6
Legal matters........................................................................................................ 6
Environment........................................................................................................ 6

GDP (Gross Domestic Product).........................................................7

Inflation:................................................................................. 8
Trade balance:........................................................................... 9
Government intervention:............................................................10
Imports and Exports:.................................................................11
Unemployment rate...................................................................11
Monetary and Fiscal Policies..........................................................12
Sustainability:.........................................................................12
Conclusion:............................................................................14
References:.............................................................................15

Introduction and Background of India

Indian is a country with huge population that is over 1.2 billion people in South Asia,
bounded by the Indian Ocean, Arabian Sea and the Bay of Benghal. Indian rupee is the
official currency of the Republic of India. On the other hand, Indian became worlds

eleventh largest by nominal GDP (Gross domestic product) and third largest by the PPP
(Purchasing power parity) after India became an independent nation in 1947. The first 45
years after the independence and the last twenty years as a free market economy. At the
same time, India is a country considered newly industrialized country, in Indian you can
see unequal standard of living, same as China, Thailand and other Asian countries. In
India, forty percent of the population lives below the international poverty line of 1.25
dollar per day.
Moreover, India has a mixed economy structure which means that the country has
both private and government operations within the market system. The tourism industry
is an important part of the Indian economy, from the year 2005-06 and 2006-07, it
contribution to the GDP and to the employment in the country around six present to nigh
present. Therefore, hospitality plays a very important roll. For example, Taj hotel is a
great example of economic impact in Indian hospitality industry, because of the terrorist
attacks the tourism business was gone from India. People were afraid to go to India, so
than hospitality industry was went down at that time and it was a huge change for India
hospitality industry.

SWOT Analysis:
Strength:

Agriculture, Indian has a huge area of land to produces a large variety of crops

and processed other food items like rice and vegetables.

Huge pool of labor force

Huge English speaking population, create an international market environment

and opportunities.
Huge a mount of natural resources

Weakness:

Very high percentage of work force involved in agriculture which involves only

17.2% of GDP
Poor basic social facilities
Huge population increase the pollution
Unequal stander of living
Huge unemployment rate

Opportunities:

Area of biotechnology
Huge agriculture resources

Threats:

The population rate, the population in Indian is still growing now, but the resource

is limited.
Agriculture excessively dependent on monsoons and weather, it effect a lot for

farmer.
High fiscal deficit

PESTLE Analysis
Politics
India is a federation of states with a democratically elected government; there are six
national parties and many regional parties.
The bureaucratic order is largely that left by the British colonial rule before, and English
is the common language of the civil service.
For a long period (1951-1989), Indian politics was marked by the dominance of the
Nehru/Gandhi family and the Indian National Congress party until a five-year reign by
the National Democratic Alliance. The Congress party later returned to power within a
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coalition government in 2004 and was returned in 2009.

The Prime Minister, Manmohan Singh, became the first prime minister to be re-elected to
a five-year term since the Nehru/Gandhi dynasty. The UPA is considered a left wing
alliance and the protectionist policies of India have been hard to reverse although India
recognizes it needs foreign investment.
Corruption in politics is rife; about one quarter of Indias MPs have criminal cases
waiting against them, for crimes ranging from embezzlement to human trafficking
Economics
The balance-of-payments crisis of 1991 inspired reforms known as liberalization.
Reforms were largely conditions placed by the IMF on terms of the $2.2 billion bailout to
India
The reforms dismantled many of the protectionist policies, which had protected Indias
local producers but stifled competition. State monopolies were broken and real
competition introduced.
Since 1991, the economy has grown; the decade 2000-2010 saw growth rates rise to
9.3%. The largest contributor to the GDP, at 57%, is services: such as software and
business process. The service sector provides employment to 27% of the workforce and
has been the fastest growing sector.
Other major sectors contributing to GDP are: Industry (26%; textiles account for one fifth
of this) and agriculture (17%, and the largest employer: 51% of the population are
employed in agriculture)
Social
India will become the worlds most populous country in the mid 2020s, but its population
is diverse; India is the birthplace of four major religions and there are over 1 500
languages in India. The official central government languages are Hindi and English.
A caste system is widely observed. This loosely corresponds to a class system in other
cultures; people of different castes (traditionally) may not intermarry and the caste is
inherited and not changeable. A persons caste largely determines his quality of life. The
caste system has no legal basis in India and discrimination is officially not permitted but
remains widespread.

Technology
Indian agriculture has benefitted from biotechnology, but the biggest transformations
have taken place in the IT and telecommunications industry. India has the worlds third
largest internet user base; apart from providing employment, the growth of
telecommunications has driven social development, although this sector has also been
touched by large scale corruption as seen in the auction of telephone spectrum in 2010.
Legal matters
The Indian judicial system is largely that left by the British and is in principle
independent, but is notoriously slow; courts may take decades to hear cases, and
corruption has permeated even the Supreme Court. The cost of litigation is also extremely
high.
Environment
Like many developing countries seeking to industrialize, there are environmental
problems in India, especially air pollution and degradation of land, often through
deforestation. However, there is hope; reforms introduced in the 1990s have lowered air
pollution in every five-year period since then, and forest coverage has increased. Water
pollution remains a major concern, as Indias cities dump raw sewage into its rivers (the
Ganges alone receives untreated sewage from over 100 cities)

GDP (Gross Domestic Product)

GDP growth

9.6% (2006/07)

GDP per capita

$978 (nominal); $2,659 (PPP) [7]

GDP by sector

agriculture: 19.9%, industry: 19.3%, services: 60.7% (2006 est.)

Inflation:
In January of 2014, Indian consumer price inflation decelerated to 8.79 percent, the
lowest annual rate since January of 2012, due to lower food prices. Inflation Rate in India
averaged 9.83 Percent from 2012 until 2014, reaching an all time high of 11.16 Percent in
November of 2013 and a record low of 7.55 Percent in January of 2012

Trade balance:
Trade surplus is the difference between exports and imports. Positive balance occurs
when exports exceed imports, and the deficit of it occurs when imports exceed exports
(the "minus" sign is used to show that).
In April -February 2013/14 FY. , Indias trade with foreign countries has increased in
comparison with the same period in 2011/12 FY. by 1.9 % and amounted to 714.1 billion
U.S. dollars, while exports declined by 4.0 % (to 266.0 billion U.S. dollars), in the same
time imports increased by 0.3 % ( up to 448 , U.S. $ 1 billion ). In general, over the last
five years of India's foreign trade has increased almost twice. Reduce of exports of the
country to the 2012/13 FY. was associated with the second wave of the financial crisis in
the Eurozone and the unfavorable world market conditions on its core products .
In April-February of 2013/14 FY. India 's trade deficit increased by 9.2 % and reached a
record its peak of 182.1 billion dollars.
Over the past 12 months the deficit of balance of payments reached its peak. This caused
a collapse of the Indian rupee in the summer of 2013.

Government intervention:
A wide range of measures is in place to stabilize economy and reduce the gap between
rich and poor. These measures are:

Fiscal measures: To reduce the fiscal and revenue deficit the government
of India has a strong control over its own expenditure. In 1984, the
government announced a package program to curtail public expenditure

and to postpone fresh recruitments to government jobs.

Monetary measures: The monetary policy of RBI consists of extensive use
of general and selective control credit. The CRR was raised from 6% to
15% to have control over liquidity and expansion and contraction of

credit.
Supply Management: Supply Management is related to the volume of
supply and its distribution system. The government has focused its
attention in having greater control over the prices of wheat, rice, sugar,
oils and other commodities of mass consumption. Some important
measures are:
Fixation of maximum prices: For the elimination of incentives for
hoarding and speculative activity of food grains the government fixes the
maximum wholesale and retail prices of food grains. It also fixes
minimum procurement price for major crops to protect the interests of
farmers.

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Imports and Exports:

This chart shows exactly the main exports and imports and on which parts of the world is
India focusing more.
Imports: $187.9 billion
Exports: $125 billion

Unemployment rate
The unemployment rate for youngsters aged
between 15 and 29 has increased marginally in India
between 2009-10 and 2011-12 fiscals while the
overall unemployment rate has remained almost
unchanged during the period. In urban areas the
unemployment for both male and female is the
same, two percent. But in rural areas the female
population has a higher unemployment rate than
male, 5 percent of unemployment for female and 3
percent of unemployment for male.

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Monetary and Fiscal Policies

The fiscal policies in India help achieve economic growth and development.
And they are using following policies in order to mobilize the resources.
1.

Taxation: the tax is higher for wealthier people and luxury goods that are imported in
order to reduce the allocation between rich and poor people.

2.

Public Savings: they try to reduce government expenditure and to increase the surpluses
of public sector enterprises.
The scope of the Indian policy is to allocate fair all the resources in areas like
infrastructure, superstructure, railways and others, and it also tries to increase
employment.
These fiscal policies also help to control the inflation rate and to keep stable pricing by
introducing tax schemes. It also aims at increasing the income of the country, which
increases the GDP and produces economic growth.

Sustainability:
As talking about a country like India we can say that its market remains perspective, but
with many opportunities which could bring long-term sustainability.
Especially, the Capital,- New Delhi, which is considered a major historic city attracting
lots of tourist every year.
As it`s facing big problems with the environment and the economy, Indias vast potential
of natural and human resources makes the country still a good place for investment with
promising development opportunities in sectors like energy, infrastructure, food industry,
healthcare, communications, financial services, real estate construction and domestic
tourism.
Nevertheless the importance should be focused on hospitality and tourism industry,
because of all the landscape and the beautiful history that it has. The cultural heritage of
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the capital New Delhi is one of the most interesting places for the tourism market. The
wide population of educated and hospitable people and all the sports and other events
happened around makes this industry as one that could bring India in an economical
balance for a long term.
The demand for this Industry is growing very fast and this could bring other economical
benefits like employment, education, development, and innovation to the market and
other aspects that are poor developed in India and could bring growth and prosperity.
First of all it is necessary to achieve a balance this principles that refer to the
environment, economic and socio-cultural in order to achieve long-term sustainability in
a city like New Delhi.
It is very important to conserve the natural resources and preserve and increase local
cultures and traditions, but also to develop better industrial sectors.
A sustainable tourism industry is referred to the development of an improved service
environment. This requires the support and involvement of all the host community
government; the private sector; road, rail and air network operators; training institutions
and others.
-It is necessary to control the pollution, environment and the ecological hazards and
cultural degradation.
-Introduce more green programs so that the goods and services are produced with a lower
environmental impact.
. Ease bureaucratic hurdles.
. Exploit the huge human resource potential in the country.
-Provide more education and training institutions in order to train people how to
accelerate the development of long-term sustainability.
But above all, the following chart is an example of which areas should be improved for
better development of long-term sustainability.

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Conclusion:
To sum up we can say that our goal was to analyze a country like India from its different
economic aspects including the future potential development and also its problems that
she is, and has been facing. Our main focus was as well the Capital, New Delhi, which
has a lot of prospects, but they still need to be developed and better maintained to keep a
normal economic balance.

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References:
Retrieved from:
http://www.worldbank.org
http://en.wikipedia.org/wiki/Delhi
http://delhigovt.nic.in/newdelhi/dept/economic/empweb/uemp.htm
http://articles.economictimes.indiatimes.com/keyword/fiscal-policy
http://independentindian.com/category/indias-monetary-fiscal-policy/
http://www.heritage.org/index/country/india
http://www.mapsofindia.com/history/economic.html
http://www.internationalpolicydigest.org/2013/04/24/history-ofeconomic-growth-in-india/
http://www.slideshare.net/anushatuke1/swot-analysis-of-indianeconomy-25909639
http://www.slideshare.net/aaronkarthik/swot-analysis-of-indianeconomy
http://www.studymode.com/essays/Swot-Analysis-Of-Indian-Economy897988.html
http://ranjanavashistha.wordpress.com/2011/10/15/economic-impactin-indian-hospitaliy-industry-after-taj-hotel-attack/

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