INDIAN ECONOMIC FORECAST

ndia economic forecast for 2009-10
As per India economic forecast for 2009-10, in coming general election there would be a new coalition government at center. According to assumptions, Indian National Congress, which is administering India at present would find it hard to hold on to their present seat of power.

According to economic forecast India, Indian national government would find it hard to adjust to effects of recession that is holding entire economic globe in it clutches. Reasons being, they do not have a proper economic backup plan and present fiscal policies are not firm enough to shore up Indian economy.

As a result of this financial crisis, Indian national government had to turn their economic policies upside down. There had been a deduction in rates of interest by 100 basis points and more is supposed to follow in financial year 2009.

There would be measures taken in India to minimize risks associated with global economic meltdown. It has been forecast that in financial year 2009-10, rate of growth of real gross domestic product of India would be 6.1 percent.

Indian economy has recently experienced a reversal in increase of prices of commodities. In spite of that there are chances of upward inflation and this would be harmful to Indian economy.

Value of Indian national rupee would increase and there would be more parity in its exchange rate statistics as far as United States dollar is concerned. There would, however, be a fall in financial year 2009, in value of Indian national rupee at a rate of 7.8 percent, when seen from a year-on-year perspective. On an average, in that financial year $1 would be worth INR 47.

Asian Development Bank's predictions on Indian economy
Asian Development Bank

has opined that there would be growth of Indian economy in financial year 2009. Previously, it had predicted that rate of economic growth of India would be lesser in fiscal 2008 compared to fiscal 2007. Much of this situation in fiscal 2008 could be attributed to tightening of financial policies by Reserve Bank of India, which is apex body of Indian economics

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INDIA ECONOMIC DEVELOPMENT

Agriculture, services and manufacturing industries play a vital role in the development of the Indian economy. The IT outsourcing, software and call center/ BPO industries, in particular, have helped skyrocket India’s economic development in recent years.

Economic development in India still depends on the various sectors that constitute the Indian economy – agriculture, services and manufacturing industries.

India is rated as one of the top economies in the world in terms of purchasing power parity (PPP) of the gross domestic product (GDP) by leading financial entities of the world, such as the International Monetary Fund, the World Bank, and the CIA (as referenced in the CIA World Factbook).

As far as agriculture is concerned, India is the second largest in volume of output. Certain related sectors of agriculture have played a major role in the development of the Indian economy by providing employment to a number of people in the forestry, fishing and logging industries.

In 2009, the agricultural sector contributed 17.5% to the entire GDP, and more than 50% of the total labor force working in India is employed in the agricultural sector.

Production volume has gone up in Indian agriculture at a consistent rate since the 1950s. Much of this improvement can be attributed to the five-year plans that were established for the development of Indian agriculture. Developments in irrigation processes, as well as various modern technologies used have contributed to the overall advancement of agricultural processes.

Substantial amounts of research and development have been carried out in the agricultural space in India by organizations such as the Indian Agricultural Research Institute, the Indian Agricultural Research Statistics Institute and the Indian Council of Agricultural Research.

In the industrial arena, India is 14th in terms of volume of factory output. Various developmental initiatives are also being carried out in the areas of gas, mining, electricity and quarrying. All these sectors contribute significantly to the GDP, and provide jobs to India’s citizens.

India is regarded as the 15th best economy in terms of production in the services sector. A sizeable amount of the Indian workforce is also employed by the service sector. In the ten-year period between 1990 and 2000, the rate of growth has been 7.5%, up from 4.5% during the 30-year period from 1951 to 1980.

Verticals, such as information technology (IT), software development, call centers, IT outsourcing, Business Process Outsourcing (BPO) and other IT-enabled services, have been the biggest contributors in the services sector of the Indian economy.

An increasing number of Indian companies have emerged as leading global players. The following Indian companies are part of the Forbes Global 2000 list for the year 2009:

• Reliance Industries Limited (RIL)

• State Bank of India (SBI)

• Oil and Natural Gas Corporation (ONGC)

• Steel Authority of India Limited (SAIL)

• Reliance Communications

• Larsen and Toubro Limited (L&T)

• Bharat Petroleum Corporation Limited (BPCL)

• Bharat Heavy Electricals Limited (BHEL)

• HDFC Bank

• Tata Consultancy Services (TCS)

THE WORLD'S TOP 10 ECONOMIES

Key factors determine a country’s economic ranking including the business environment, infrastructure, tax rates, and the general ease of operations within that country.

The world’s top ten economies can be determined by examining factors such as growth prospects, business environments, infrastructure, educational levels of the citizens, and governmental policies and institutions.

Perhaps the most authoritative ranking is the Global Competitiveness Report. It is produced in conjunction with the World Economic Forum, and captures both the perceptions of thousands of business leaders and statistical analysis by academics at universities and think tanks worldwide. Indeed, it includes the WEF’s Global Competitiveness Index, developed by Professor Martin at Columbia University, and the Business Competitiveness Index, developed by Professor Porter at the Harvard Business School.

According to the Global Competitiveness Index 2007 - 2008, the top ten economies of the world are:

• United States
• Switzerland
• Denmark
• Sweden
• Germany
• Finland
• Singapore
• Japan
• United Kingdom
• Netherlands

It is interesting to note that seven out of the top ten economies are from Europe. These include a number of small but well-run economies, such as Switzerland, Denmark and Finland. Singapore has a similar profile and is often dubbed the ‘Switzerland of Asia’.

Some of the largest economies in the world, however, such as China, France, Italy, Spain and Canada do not make the top ten list by competitiveness.

The Chinese economy still has many elements of state control and lacks some crucial legislative frameworks such as IP protection. France continues to be victimized by powerful unions while Italy has been called the ‘Sick Man of Europe’ after growth stalled in 1999. Spain is suffering from some fundamental economic problems such as its vast trade deficit, lower competitiveness and higher inflation.

Canada has made economic improvement one of its top priorities. It has benefited from global growth and the NAFTA free trade agreement, but maintained high levels of taxation and regulation, and hence has not made the list.

One of the major characteristics of the world’s top economies is the presence of organizations with sustained financial success. The quality of management at various levels has been high in all these countries, as has the level of education. There has also been a lot of innovation in the field of technology. All these factors have contributed substantially to the standings of the countries that are in the list of the top ten economies of the world. This is particularly true in the case of countries like Switzerland, Sweden, Finland, Denmark, and Singapore.

INDIAN ECONOMY STATISTICS

he industrial production growth rate in December 2009 showed an improvement in the industrial output, a rise of 17.6% vis-à-vis the weak growth witnessed in the previous months. Growth in December 2008 was negative. Output in mining, manufacturing and electricity rose by 10.7%, 19.3% and 5.4%, respectively, in December 2009, as compared to 2.2%, -0.6% and 1.6% growth, respectively, in 2008. The basic goods market grew by 7.7%, intermediate goods market by 22.7% and capital goods by 13.2%. The growth of 13.2 % in the consumer goods category was mainly seen coming from the consumer durables segment, the growth in consumer durables was on account of an increase in sales during the festive season. Growth mainly picked up in ten industry sectors, where cotton textiles grew by 7.6 %, wool , silk and fibers by 24.5 %, textile products by 14.5 %, wood products by 10.4 %, paper by 4.4 %, basic chemicals by 5.8 %, rubber, plastic , petroleum and coal products by 21.6 %, metal products by 12.2 %, machinery equipment by 44.8 % and transport equipment by 83.4 %.

Core Infrastructure

Growth in the overall core infrastructure sector increased from 3.8 % in October 2009 to 9.4 % in January 2010, compared to the low growth of 2 % achieved during the corresponding months of the previous year. In January 2010, acceleration in growth was seen in all the six core industry sectors.

Fiscal Trends

With an increase of 17%, the total expenditure incurred by the government grew from $150 billion during the period April-January 2008-09 to $175 billion in the current fiscal. In case of revenue receipts, the figures have also showed an increase of 5% during the same period. As a result, the fiscal deficit increased moderately at the rate of 33% and went up from $58 billion to $77 billion during April-January 2009-10.

Foreign Investments

Foreign direct investment accumulated during the April-December period of 2009-10 stood at $26.5 billion, which was $2 billion higher than what was achieved previously. Portfolio investments came in at $23.6 billion, compared to negative $11 billion in the previous year. The rise in portfolio investments was particularly due to an increase in FII investments.

Foreign Exchange Reserves

India's reserves as of March 2010 are at above $280 billion. In December 2009, the forex was at $283.5 billion, increasing from $251 billion in April 2009. The forex, at $283 billion, was less than the $286 billion achieved in the previous month of 2009.

Global economic policy The deflation dilemma

Rich countries must act to prevent prices from falling. That will cause problems for emerging economies

SHOULD you fret more about inflation or deflation? Few questions matter more for investors and policymakers, yet few seem so uncertain. Financial markets are sending mixed signals. Falling yields on Treasury bonds suggest that many investors worry about economic stagnation and deflation; the soaring price of gold points to fears of runaway inflation.

Economists also differ in their assessment of where the greater risks lie, depending largely on the country and time frame they are looking at. Judging by the discussion in a new online forum of more than 50 leading economists from around the world, which The Economist launched this week, deflation is the bigger short-term danger in big, rich economies, whereas inflation is an immediate worry in many emerging economies and, potentially, a longer-term danger in rich ones.

That seems a fair assessment. In America, the euro area and Japan, deflation is either uncomfortably close or a painful reality, despite near-zero interest rates and other efforts by central banks. In the year to April core consumer prices rose by a mere 0.9% in America, the slowest pace in four decades. In the euro area they rose by 0.7%. And in Japan, which has battled falling prices for more than a decade, they fell by 1.5%.

Nor is there much reason to expect a sudden turnaround. Broad measures of money and credit growth are stagnant or shrinking in all three places. Unemployment is high and there are large gaps between the economies’ actual output and their potential. In the euro area, especially, austerity plans will further sap domestic demand. Thankfully, there is unlikely to be a sudden price plunge, not least because ordinary people still expect consumer prices to rise modestly, and these expectations of future inflation help anchor actual prices. But the short-term balance of pressures clearly points downward.

So, too, does the balance of risks. Deflation, if it becomes entrenched, is more dangerous than most forms of inflation. When prices fall consumers put off their purchases in anticipation of even greater bargains later, condemning the economy to a vicious cycle of weak spending and sliding prices. In heavily indebted economies falling prices would increase the real burden of consumers’ and governments’ debts.

Deflation is also harder to fight than inflation. Over the past two decades central bankers have gained plenty of experience in how to conquer excessive price increases. Japan’s ongoing inability to prevent prices falling suggests the opposite task is rather less well understood. Although it is true that heavily indebted governments might be tempted to erode their debts through higher inflation, there are few signs that political support for low inflation is waning (see article).

Add all this together and the world’s big three central banks—in America, the euro zone and Japan—should worry most about falling prices. The scale of budget belt-tightening suggests these banks’ policy rates could stay way down for several years. But this will cause problems elsewhere. Near-zero interest rates in the big, rich economies send capital flooding elsewhere in search of higher yields, making it harder for the healthier countries to keep their economies stable.

Helps here, hurts there

The problem will be most acute in emerging economies. Many are already overheating, with prices rising and asset bubbles inflating. Most have inappropriately loose monetary policy. Real interest rates are negative in two-thirds of the 25 emerging economies tracked by The Economist. Their inflation expectations are less stable, so prices can quickly spiral upwards.

This suggests a need for tighter monetary policy. Central banks in Brazil, Malaysia and elsewhere have begun. But the most important emerging economy, China, pegs its currency to America’s dollar, which limits its ability to raise interest rates. And even those with more flexible exchange rates worry that higher interest rates will send their currencies soaring.

In fact, stronger currencies in emerging markets are a necessary part of the “rebalancing” of the global economy that will allow enfeebled rich economies an escape from deflationary pressure. Tighter fiscal policy in emerging economies would help dampen price pressure. Capital controls should be part of their defences, too, against sudden floods of foreign cash.

History suggests, however, that none of these policies will be a panacea. When monetary conditions in the rich world are loose, emerging economies are prone to lending binges and asset bubbles. The price of avoiding deflation in the rich world today may be a bust in the emerging world tomorrow.