Indian Economy -3

  1. THE CURRENT STATE OF INDIAN ECONOMY
  • According to The World Fact Book, India is among the world’s youngest nations with a median age of 25 years as compared to 43 in Japan and 36 in USA. Of the BRIC-BRAZIL, Russia, India and China-countries, India is projected to stay the youngest with its working-age population estimated to rise to 70 per cent of the total demographic by 2030 – the largest in the world. India will see 70 million new entrants to its workforce over the next 5 years.
  • India has the second largest area of arable land in the world, making it one of the world’s largest food producers – over 200 million tonnes of foodgrains are produced annually. India is the world’s largest producer of milk (100 million tonnes per annum), sugarcane (315 million tonnes per annum) and tea (930 million kg per annum) and the second largest producer of rice, fruit and vegetables.
  • With the largest number of Listed companies – 10,000 across 23 stock exchanges, India has the third largest investor base in the world.
  • India’s healthy banking system with a network of 70,000 branches is among the largest in the world. In June 2007, the aggregate deposits of commercial banks were about US$ 445 billion (50 per cent of GDP). NPA (non-performing assets) levels of banks in India are under 3 per cent, one of the lowest among emerging nations.
  • According to a study, India’s consumer market will be the world’s fifth largest (from twelfth) in the world by 2025 and India’s middle class will swell by over ten times from its current size of 50 million to 583 million people by 2025.
  • Special Economic Zones (SEZs) are set to see major investments after the straightening out of certain regulatory tangles. India has approved 513 SEZs till August 2008, of which 250 have been notified. Investments are expected to cross US$ 45.73 billion by December 2009, providing incremental employment to 800,000 people.
  • India’s telecom services industry revenues are projected to reach US$ 54 billion in 2012, up from US$ 31 billion in 2008. India saw a 23 per cent increases in IP (Internet Protocol) address with 2.6 million connections in the third-quarter ended September 2008.
  • The government is planning to set up a special corpus of around US$ 10.48 billion for infrastructure projects.
  • The retail business in India is expected to grow at 13 per cent annually from US$ 322 billion in 2006-07 to US$ 590 billion in 2011-12. The unorganized Indian retail sector is expected to grow at about 10 per cent annum to reach US$ 496 billion in 2011-12.
  • India is likely to emerge as the next global hub for innovation and join the club of developed nations, with the country aiming to increase its research and development (R & D) expenditure in the coming years. India is hoping to increase its R&D spending to two per cent of the GDP by 2012 under the 11th Five-Year-Plan, from less than one per cent earlier.
  • Corporate India registered US$ 3.4 billion as mergers and acquisitions (M&As) during November 2008, as against US$ 850 million in November 2007. The figure stood at US$ 2.13 billion in October 2008.
  • The planning Commission has ruled out any changes in the average 9 per cent gross domestic product growth target of the 11th Five-Year-Plan, although there might be ‘some significant reduction in growth’ in 2009 as a result of the global financial crisis.
  • India offers huge investment opportunities in various sectors and investments are likely to pour into these sunshine sectors:

The realty sector is likely to increase at the rate of 30 per cent annually during the next ten years, drawing US$ 30 billion as foreign investment.

The Indian IT market is projected to see 18 per cent growth in 2008, touching US$ 38 billion.

The market size for the food consumption category in India is expected to grow from US$ 155 billion in 2005 to US$ 344 billion in 2025 at a compound annual growth rate of 4.1 percent.

The Indian retail Industry is likely to touch US$ 390.68 billion by 2010.

The Indian pharmaceutical industry is projected to grow to US$ 25 billion by 2010 whereas the domestic market is likely to more than triple to US$ 20 billion by 2015 from the current US$ 6 billion to become one of the leading pharmaceutical markets in the next decade.

Agricultural production is likely to increase significantly during fiscal year 2009. Centre for Monitoring Indian Economy (CMIE) has projected a growth of 3.2 per cent during fiscal year 2009, for the GDP of agriculture and allied sectors.

  1. IMPORTANT GLOSSARY
  • Arbitration: A method for solving disputes, generally of an industrial nature, between the employer and his employees.
  • Annuity: A fixed amount paid once a year or at interval of a stipulated period.
  • Ante date: To give a date prior to that on which it is written, to any cheque, bill or any other document.
  • Appreciation of Money: It is a rise in the value of money caused by a fall in the general price fall.
  • Assets: Property of any kind.
  • Balances of Trade (or Payment): The difference between the visible exports and visible imports of two countries in trade with each other is called balance of payment. If the difference is positive the balance of payment (BOP) is called favorable ad if negative it is called unfavorable.
  • Balance Sheet: It is a statement of accounts, generally of a business concern, prepared at the end of a year, showing debits and credits under broad heads, to find out the profit and loss position.
  • Banker’s cheque: A cheque by one bank on another.
  • Bank Rate: It is the rate of interest charged by the Reserve Bank of India for lending money to commercial banks.
  • Black Money: It means unaccounted money, concealed income and undisclosed wealth. In order to evade taxes some people falsify their account and do not record all transactions in their books. The money which thus remains unaccounted for is called Black Money.
  • Barter: To trade by exchanging one commodity for another.
  • Bear: A speculator in the stock market who believes that prices will go down.
  • Bearer: This term on cheques and bills denotes that any person holding the same has the same right in respect of it, as the person who issued it.
  • Bond: A legal agreement to pay a certain sum of money (called principal) at some future date and carrying a fixed rate of interest.
  • Bonus: It is in addition to normal payment of dividend to shareholders by a company, or an extra gratuity paid to workers by the employer.
  • Budget: An estimate of expected revenues and expenditure for a given period, usually a ear, item by item.
  • Budget deficit: When the expenditure of the government exceeds the revenue, the balance between the two is the budget deficit.
  • Bulls: Speculators in the stock markets who buy goods, in some cases without money to pay with, anticipating that prices will go up.
  • Buyer’s Market: An area in which the supply of certain goods exceeds the demands so that purchases an drive hard bargains.
  • Carat: Measure or weight of precious Stones. 24 carat gold is the purest gold, thus 22 carat gold means a piece of gold in which 22 parts are pure gold and 2 parts of an alloy, usually copper.
  • Credit, Letter of: A letter from a bank or a firm authorizing payment to a third person of a specific sum for which the sender assumes full responsibility.
  • Commercial Banks: Financial institutions that create credit accept deposits, give loans and perform other financial functions. They create credit by creating deposits on the basis of their cash reserve ratio.
  • Deflation: It is a state in monetary market when money in circulation has decreased and is characterized by low prices, unemployment, etc.
  • Depreciation: Reduction in the value of fixed assets due to wear and tear.
  • Depression: A phase of the business cycle in which economic activity is at a low ebb and there is mass scale unemployment and underemployment of sources. Prices, profits, consumption, etc are also at a low level.
  • Devaluation: Official reduction in the foreign value of domestic currency. It is done to encourage the country’s exports and discourage imports.
  • Direct Tax: Taxes that are directly borne by the person on whom it was initially fixed. e.g. : Personal income tax.
  • Divident: Earning of stock paid to share holders.
  • Dumping: Sale of a commodity at different prices in different markets, lower price being charged in a market where demand is relatively elastic.
  • Exchange Rate: The rate at which central banks will exchange one country’s currency for another.
  • Excise Duty: Tax imposed on the manufacture, sale and consumption of various commodities, such as taxes on textiles, cloth, liquor, etc.
  • Fiscal Rate: Government’s expenditure and tax policy.
  • Foreign Exchange: Claims on a country by another, held in the form of currency of that country. Foreign exchange system enables one currency to be exchanged for another, thus facilitating trade between countries.
  • Gross Domestic Product (GDP): A measure of the total flow of goods and services produced by the economy over a specific time period, normally a year. It is  obtained by valuing output of goods and services at market prices and then aggregating.
  • Indirect Taxes: Taxes levied on goods purchased by the consumer for which the tax payer’s liabilities varies in proportion to the quantity of particular goods purchased or sold.
  • Inflation: A sustained and appreciable increase in the price level over a considerable period of time.
  • Laissez-faire: The principle of non-intervention of government in economic affairs.
  • Mixed Economy: The economy in which there is a unique blend of public sector and private sector co-exist. The perfect example is India.
  • National Income: Total of all incomes earned or inputed to factors of productions, used in economic literature to represent the output or income of an economy in a simple fashion.
  • Per Capita Income: Total GNP of a country divided by the total population. It is often used as an economic indicator of the levels of living and development. However, it is a biased index because it takes no account of income distribution.
  • Patents: It is an exclusive right granted under the Patents Act to the inventor for a new invention.
  • Preference Shares: These are the shares entitled to a fixed dividend before any distribution of profits can be made amongst the holders of ordinary shares or stock.
  • Public Sector: A term which is generally applied to state enterprises, ie, those companies which are nationalized and run by the government.
  • Recession: It happens when there is excess of production over demand.
  • Statutory Liquidity Ratio (SLR): It is the ratio of cash in hand, exclusive of cash balances maintained by banks to meet required CRR.
  • Tariff (ad valorem): A fixed percentage tax on the value of an imported commodity, levied at the point of entry into the importing country.
  • Value Added Tax (VAT): A tax levied on the values that are added to goods and services turned out by the producers during stages of production and distribution.
  1. VARIOUS DEVELOPMENT AND EMPLOYMENT PROGRAMMES

S.N.

Programme/Plan/Institu-tion

Year of Beginning

Objective/Description

1.

Green Revolution

1966-67

To increase the foodgrains, specially wheat production.

2.

Nationalisation of 14 Banks

July 1969

To provide loans for agriculture, rural development and other priority sectors.

3.

Accelerated Rural Water Supply Programme (ARWSP)

1972-73

For providing drinking water in the villages.

4.

Drought Prone Area Programme (DPAP)

1973

To try an expedient for protection from drought by achieving environmental balance and by developing the ground water.

5.

Crash Scheme for Rural Employment (CSRE).

1972-73

For rural employment.

6.

Twenty Point Programme (TPP)

1975

Poverty eradication and raising the standard of living.

7.

Desert Development Programme (DDP)

1977-78

For controlling the desert expansion and maintaining environmental balance.

8.

Food for Work Programme

1977-78

Labour for the works of development

9.

Antyodaya Yojana

1977-78

To make the poorest families of the village economically independent (only in Rajasthan State).

10.

Training Rural Youth for Self-Employment

(TRYSEM)

Aug 15, 1979

Programme of training rural youth for self employment.

11.

Integrated Rural Development Programme (IRDP)

Oct. 2, 1980

All round development of the rural poor through a programme of asset endowment for self-employment.

12.

National Rural Employment Programme (NREP)

1990

To provide profitable employment opportunities to the rural poor.

13.

Development of Women and Children in Rural Areas (DWCRA)

Sept. 1982

To provide suitable opportunities of self-employment to the women belonging to the rural families who are living below the poverty line.

14.

Rural landless Employment Guarantee Programme (RLEGP)

Aug 15, 1973

For providing employment to landless farmers and labourers.

15.

Self-Employment to the educated Unemployed Youth (SEEUY)

1983-84

To provide financial and technical assistance for self-employment.

16.

Comprehensive Crop insurance Scheme

April 1, 1985

For insurance of agricultural crops.

17.

Self-Employment Programme for the Urban Poor (SEPUP)

Sept. 1986

To provide self-employment to urban poor through provision of subsidy and bank credit.

18.

Jawahar Rozgar Yojana

April 1989

For providing employment to rural unemployed.

19.

Nehru Rozgar Yojana

Oct. 1989

For providing employment to urban unemployed.

20.

Agriculture and Rural Debt Relief Scheme (ARDRS)

1990

To exempt bank loans upto Rs. 10,000 of rural artisans and weavers.

21.

Scheme of Urban Micro Enterprise (SUME)

1990

To assist the urban poor people for small enterprise.

22.

Scheme of Urban Wage Employment (SUWE)

1990

To provide wages employment after arranging the basic facilities for poor people in the urban areas where population is less than one lakh.

23.

Scheme of Housing and Shelter Upgradation (SHASU)

1990

To provide employment by means of shelter upgradation in the urban areas where population is between 1 to 20 lakh.

24.

Employment Assurance Scheme (EAS)

Oct. 2, 1993

To provide employment of at least 100 days in a year in villages.

25.

Members of Parliament Local Area Development Scheme (MPLADS)

December 23, 1993

To sanction Rs. 1 crore per year to every Member of Parliament for various development works in their respective areas through DM of the district.

26.

Scheme of Infrastrural Development in Mega Cities (SIDMC)

1993-94

To provide capital through special institutions or water supply, sewage, drainage, urban transportation, land development and improvement of slum project undertaken in Mumbai, Kolkata. Bengaluru, Chennai and Hyderabad.

27.

Scheme of Integrated Development of Small and Medium Towns

Sixth Five Year Plan

To provide resources and create employment in small and medium towns for prohibiting the migration of population from rural areas to big cities.

28.

Mahila Samridhi Yojana

2 October, 1993

To encourage the rural women to deposit in Post Office Savings Account.

29.

Child Labour Eradication Scheme

August 15, 1994

To shift child labour from hazardous industries to schools

30.

Prime Minister’s Integrated, Urban Poverty Eradication Programme (PMIUPEP)

November 18, 1995

To attack urban poverty in an integrated manner in 345 towns having population between 50,000 to 2 lakh.

31.

Group Life Insurance Scheme in Rural Areas

1995-96

To provide insurance facilities to rural people on low premium.

32.

National Social Assistance Programme

1995

To assist people living below the poverty line.

33.

Ganga Kalyan Yojana

1997-98

To provide financial assistance to farmers for exploring and developing ground and surface water resources.

34.

Kasturba Gandhi Education Scheme

August 15, 1997

To establish girls schools in districts having low female literacy rate.

35.

Swarna Jayanti Shahari Rozgar Yojana (SISRY)

December, 1997

To provide gainful employment to urban unemployed and under employed poor through self-employment or wage employment.

36.

Bhagya Shree Bal Kalyan Policy

Oct. 19, 1998

To uplift the girls conditions.

37.

Rajeshwari Mahila Kalyan Yojana

Oct. 19, 1998

To provide insurance protection to women.

38.

Annapurna Yojana

March 1999

To provide 10 kg. foodgrains to senior citizens (who do not get pension).

39.

Swarna Jayanti Gram Swarozgar Yojana

April 1999

For eliminating rural poverty and unemployment and promoting self-employment.

40.

 

Jawahar Gram Samridhi Yojana (JGSY)

April 1999

Creation of demand driven community village infrastructure.

41.

Jan Shree Bima Yojana

Aug 10, 2000

Providing insurance security to people living below poverty line.

42.

Pradhan Mantri Gramodaya Yojana

2000

To fulfil basic requirements in rural areas.

43.

Antyodaya Anna Yojana

Dec. 25, 2000

To provide food security to the poor.

44.

Ashraya Binna Yojana

June 2001

To provide compensation to labourers who have lost their employment.

45.

Pradhan Mantri Gram Sadak Yojana (PMGSY)

Dec. 25, 2000

To line all villages with Pacca Roads.

46.

Khetihar Mazdoor Bima Yojana

2001-2002

Insurance of Landless agricultural workers.

47.

Shiksha Sahyog Yojana

2001-2002

Education of children below poverty line.

48.

Sampurna Gramin Rojgar Yojana

Sep. 25, 2001

Providing employment and food security to rural people.

49.

Jai Prakash Narain Rojgar Guarantee Yojana

Proposed in 2002-0-3 Budget

Employment guarantee in most poor districts.

50.

Swajaldhara Yojana

2002

Started in Dec. 2002, for ensuring drinking water supply to all villages by 2004.

51.

Hariyali Pariiyojana

2003

Inaugurated on January 27, 2003 by the Prime Minister. It aims at tackling the problems of irrigation and drinking water, along with boosting tree plantation, programme & fisheries developments in rural areas.

52.

Food-For-Work-Programme

Nov. 14, 2004

Inaugurated by Prime Minister Manmohan Singh on November 14, 2004. This programme is to be implemented initially in 150 districts of the country. It aims at providing 100 days’ employment in a year to all able bodied unemployed rural folk.

53.

Mid Day Meal Scheme

Feb. 29, 2008

The Mid day meal scheme is the largest school lunch programme in the world covering 11.4 crore children.