1

ECONOMIC GROWTH ASSESMENT

NAME

INSTITUTION
 2

1.0 INTRODUCTION

The goal of the subject matter is to define an economic growth assessment in Russia and

India. The economic growth assessment will be based on three major parameters namely the

current price of the GDP using in PPP, the GDP at current prices of the respective countries

national prices and GDP in constant prices percent change. The benefits and disadvantages of the

above economic parameters will be discussed in length. The major issues that have led to the

existing pattern of the country s GDP and those that have increased the current growth of the

GDP will be assessed based on the growth pattern of these countries. Further assessment shall be

done to determine the stage of the business cycle of the country and factors that are poised to

increase the economic growth and those that may impact it in the short period term for the

coming twelve months.

1.2 GROSS DOMESTIC PRODUCT AT CURRENT PRICES

India has a gross domestic product of $1.84 trillion at current prices. Russia has $2.01

trillion of GDP at current prices. India has undertaken a number of economic liberalization

measures such as state owned enterprises have been privatized, industrial deregulation, and

decreased control of foreign investment and trade. The economic liberalization has served to

increase the pace of economic growth since its introduction from the year 1990. The economic

growth has averaged 7% per annum since 1997. The diverse economy of India includes modern

agriculture, traditional village farming, handicrafts, and other services. The more than half of the

India workforce is in agriculture which accounts for a high percentage of economic growth.

Services constitute more than two-thirds of India’s output and have less than a third of the labor

force. India is capitalizing on its high number of English speaking populace to attain a caliber as

major information technology services exporter, software workers and outsourcing of business
 3

services (OECD, 2018). India has a high domestic demand and the GDP has been increasing by

8% in real terms from year to year. The high economic growth rate slowed down from 2011 due

to reduced government spending. The high fuel prices have increased government subsidies

which have resulted in the increased fiscal deficit and declining current account deficit.

Russia is the global leader in oil production and global runners up in production of

natural gas. Russia has the second highest coal reserve, highest largest natural gas reserves, and

massive crude reserve. Russia is a major metal exporter such as aluminum and steel. The reliance

of Russia to export commodity make it more exposed to economic recession and boom cycles.

However, the country has set up high technology sectors to reduce dependence on export

markets. The average growth of Russia economy had averaged 7% over the past decade. The

economy of Russian was significantly affected in the 2008/2009 economic crisis that affected oil

prices. Russia long term challenges include shrinking workforce, underinvestment in

infrastructure and rampant corruption. Russia has faced challenges in attracting foreign investors

and has seen tremendous cash outflows in the recent past which prompted Russia officials to

increase the investment climate of Russia in international rankings (OECD, 2018).

REAL GDP AT
CURRENT PRICE  
200 200 200 200 200 200 200 200 200 200 201
  0 1 2 3 4 5 6 7 8 9 0
259. 306. 345. 430. 591. 763. 989. 1,29 1,66 1,22 1,48
RUSSIA 702 583 126 289 177 704 932 9.70 0.85 2.69 7.29
476. 487. 510. 590. 688. 808. 908. 1,15 1,25 1,25 1,59
INDIA 35 799 285 968 74 668 465 2.81 1.37 3.98 7.95

               
2011 2012 2013 2014 2015 2016 2017 2018
1,850.4 2,021.9 2,310.8 2,473.6 2,658.9 2,868.4 3,105.8 3,352.6
0 0 2 8 2 2 1 3
1,676.1 1,779.2 1,961.6 2,163.5 2,384.4 2,628.9 2,906.4 3,212.3
4 8 6 4 7 3 9 6
 4

TABLE 1: shows real GDP at current price. Source IMF World Economic Outlook

October 2018 database

REAL GDP AT CONSTANT PRICES

4000
3500
3000
2500
2000
1500
1000
500
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

RUSSIA INDIA

1.2 GDP PER PURCHASING POWER PARITY

The GDP of Russia in PPP terms is $4.0trillion as per 2018 and was the sixth largest

surpassing Japan. India has GDP in terms of PPP of $9.68 trillion while the GDP in nominal

terms is $2.65 trillion. India is in the 7th position in terms of its nominal GDP. India has the third

largest economy globally in PPP terms and it’s poised to become the world largest economy in

the years to come. India still lags behind in other parameters such as infrastructure development

and educational attainment. Russia is the fifth largest economy using Purchasing power parity

mostly driven by its energy sector in natural gas and oil production. It has the potential of

expanding consumer market. Major challenges include lack of economic modernization and

diversification. Government policy has been set up to tackle the long term key challenges by

investing in Skolkov innovation Centre, an equivalent to the Silicon Valley (OECD, 2018).
 5

Bureaucracy, state control and corruption still remains the main problem that hampers business

in Russia. The working population is at decline trend despite the recent short term baby boom.

The declining working age population will pose a demographic challenge in sustaining an

economy that is not dependent on oil.

To compare the data, statistics of the country must be converted to a common currency.

In purchasing power parity exchange rate, refers to the rate used by one country into that of the

other country to purchase the same amount of services and goods in each of the country.

GDP
BASED
  ON PPP                  
                     
  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1,204 1,282 1,404 1,546 1,696 1,894 2,115 2,276 2,120
RUSSIA 1,120.87 .56 .13 .04 .82 .73 .37 .71 .13 .73
1,669 1,773 1,935 2,157 2,431 2,748 3,111 3,377 3,637
INDIA 1,571.46 .40 .76 .15 .35 .20 .93 .32 .06 .21

                 
                 
2010 2011 2012 2013 2014 2015 2016 2017 2018
2,237.3 2,383.4 2,510.7 2,648.9 2,793.7 2,950.1 3,113.0 3,295.4 3,352.3
9 0 9 8 5 6 1 2 6
4,069.9 4,457.7 4,824.5 5,254.5 5,734.5 6,276.2 6,873.9 7,574.4 8,125.2
3 8 5 8 8 4 8 6 5
TABEL 2: showing GDP based on PPP. Source: IMF World Economic Outlook October

2018 database
 6

GDP BASED ON PPP

9,000.00
8,000.00
7,000.00
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

RUSSIA INDIA

1.3 GDP AT CONSTANT PRICES PERCENT CHANGE

The real domestic product constant price change refers to the inflation adjusted measure

which reflects the services and goods value produced in a given year by an economy which is

expressed using a specific base year. Compared to nominal GDP, real GDP account for changes

in price level and thus contributes to a more a more accurate figure of economic growth. If, for

example, the prices in the economy increases by 1%, the number to be used as deflation is 1.01.

If the nominal GDP increases by $1000000, the real GDP will be $1m/1.01 or $990099 adjusted

to base year. GDP is not a truly accurate measure of economic development since it omits some

services such as elderly care, volunteer work and childcare. The GDP takes only the final

production of an economy and measures the level of quarter output produced and eliminates the

manufacturing production of frames, bike components and tires. Only finished goods are counted

such as bicycle. This is disadvantageous.

Percentage change
in GDP (%)                            
20 20 20 20 20 20
20 20 20 20 20 20 20 20
  00 01 02 03 04 05
10 11 12 13 06 07 08 09
10.
INDIA 4 4.9 3.9 7.9 7.8 9.3 9.3 9.8 3.9 8.5 3 6.6 5.5 6.4
 7

-
RUSSIA 6.4 10 5.1 4.7 7.3 7.2 6.4 8.2 8.5 5.2 7.8 4.5 5.1 3.7

                   
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
7.4 8.2 7.1 6.7 7.3 7.4 7.7 7.7 7.7 7.7
1.8 0.7 -2.5 -0.2 1.5 1.7 1.8 1.8 1.6 1.3
TABLE 3: Shows percentage change in GDP: Source IMF World Economic Outlook

October 2018 database

GDP PERCENT CHANGE

20
18
16
14
12
10
8
6
4
2
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20

INDIA RUSSIA

1.5 CONCLUSION

In conclusion, both Russia and India have the potential to improve their GDP growth in

the coming periods. They are developing economies with huge potential in both consumer

expansion and increased natural resources and human capital. Russia has witnessed tremendous

changes since the collapse of Soviet Union. They have transformed from being centrally planned

economy, globally isolated to more globally integrate and market based economy. The

significant economic changes happened in 1990s when major industries were privatized with

notable exceptions in defense related and energy sectors. The private sector is still under heavy
 8

state interference and a weak property rights protection. Russia is now leading in world oil

production. On the other hand, India is growing to be an open market economy with few traces

that dates back to autarkic policies remaining. India is currently experiencing long term

challenges such as corruption, poverty, and gender discrimination, ineffective implementation of

the intellectual property right and inefficient distribution and generation of power, limited

nonagricultural employment opportunities, inadequate transport and agricultural infrastructure,

poor quality high educational and rampant rural urban migration.

 9

REFERENCE

OECD (2018), Real GDP forecast (indicator). doi: 10.1787/1f84150b-en (Accessed on 25

October 2018)

IMF World Economic Outlook October 2018 database: Start from address below: Select

the data that you require and copy it into a spreadsheet to produce the graphics required

(www.imf.org)