BA/BBA

INDIAN ECONOMY AND FINANCIAL SYSTEM

SEMESTER – VII

Assignment – I

Submitted to

Dr. Himani Baxi

On

31/08/2023

Submitted by

Roll No. Name

20BABBA082 Sakshi Gokalani
 Growth of Indian Economy & Trend Analysis
India is the world's fifth-largest economy, sitting between France and Italy. Its GDP growth
recently dipped to 6.3% (As on September2017); still, India is growing faster than any other
large economy except for China. By 2050, India's economy is projected to be the world's second-
largest, behind only China.

Economic trend analysis involves examining a variety of indicators to understand the overall
health and direction of an economy. These indicators help economists, policymakers, businesses,
and investors assess economic performance, identify potential opportunities and challenges, and
make informed decisions. Here are some key indicators often used in economic trend analysis.

1) GDP (Annual %)

Gross Domestic Product (GDP) is a fundamental economic indicator that represents the total
monetary value of all final goods and services produced within a country's borders during a
specific time period. It's often used as a measure of the economic performance and size of a
country's economy. GDP provides insight into the overall economic activity and output of nation.

GDP
9
8
7
6
5
4
YoY%

3
2
1
0
s 1 2 3 4 5 6 7 8 9 0 1
ar - 8 - 8 - 8 - 8 - 8 - 8 - 8 - 8 - 8 - 9 - 9
Ye 980 981 982 983 984 985 986 987 988 989 990
1 1 1 1 1 1 1 1 1 1 1

Year
Public Private
 Source: CMIE Economic Outlook

Indian economy has shown a remarkable growth in past several years if we compare it with early
post-independence years. India’s GDP almost took 60 years to reach the 1 trillion dollars
milestone, while it only took 10 more years to reach the 3.5 trillion dollars milestone. India is on
the 5th positon in terms of GDP. Chief Economic Advisor V. Ananta the 5 trillion dollars mark
can be reached by 2026.Economis reforms plays an important role in the growth of GDP. Here
are some factors:

1. Non-banking financial companies: The companies like Bajaj finance, TATA capital etc.
have shown a great support. A growth of credit to GDP ratio (from 8.6 to 13.9) is seen in
these companies is past 9-10 years. These money lending companies play an important
role in boosting the economy by providing funds to small businesses. These companies
were allotted 30,000 crores worth funds from government under Atmanirbhar economic
package, which were later provided as loans by these companies to the people.
2. Reforms in corporate affairs: To boost ‘Make in India’ government took a step in 2019 to
cut down the corporate tax from 30% to 22%. This according the government helped in
the boosting of the economy. After this step within 5years India could see pretty good
foreign investments.
3. Eased FDI rules: If we compare the FDI rules in 2000s there were very few FDIs present.
But recently many FDI are seen in the country. Companies like Apple, Walmart etc. are
opening there manufacturing units in India due to eased FDI rules. In past 15 years the
FDI inflows have increased tremendously. India’s rank increased in ‘Ease of doing
business’ from 140 to 67. This is one of the factors contributing to GDP according to the
government. These are some of the factors which are contributing to the GDP growth.
There are many more factors which boosts the GDP of the country.
 2) Inflation data (Annual %)

Inflation

2022
2020
2018
2016
2014
2012
2010
2008
2006
Year

2004
2002
2000
1998
1996
1994
1992
1990
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00%
Annual Inflation%

Source: CMIE Economic Outlook

The CPI data indicates the change in the average price levels of the goods and services purchased
by the consumers over the time. The RBI has set a limit of 6% inflation rate. The inflation rates
in India are a bit volatile. They may seem higher if we compare it with last 3 decades, but the
overall trend is not worrisome. The CPI data is widely used to adjust the prices to set the
purchasing power. India inflation rate for 2018 was 4.86%, a 2.37% increase from 2017. India
inflation rate for 2017 was 2.49%, a 2.45% decline from 2016.India inflation rate for 2016 was
4.94%, a 0.93% decline from 2015. India inflation rate for 2015 was 5.87%, a 0.48% decline
from 2014.The inflation keep on fluctuating due to several reasons like rise in population, rise in
income, rise in government expenditures etc. which causes demand pull inflation. Rising
population and increase in GDP both of them cause inflation in the country. The current quarter
(2023) CPI is 4.25% which is within the limits. According to the government the inflation will
remain steady for few months. Also the increase in unemployment rate and increase in the
economy will cause a hike in inflation due to increase in purchasing powers.

3) Trade balance

Trade Balance
70

60

50

40

30
YoY%

20

10

0
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
95- 96- 97- 98- 99- 00- 01- 02- 03- 04- 05- 06- 07- 08- 09- 10- 11- 12- 13- 14- 15- 16- 17- 18- 19- 20- 21- 22-
19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
-10

-20

-30

Export Import

Source: CMIE Economic Outlook

Foreign trade is a very crucial thing for the economic development of a country. Foreign trade
increases the market available for the companies. The increase in sales will lead to higher
production and ultimately growth in business. This will boost the economy. The growth rate of
export increased to 35.2% and 28.3 per cent 2011-12. However, the export of India recorded a
negative growth rate continuously from 2014-15 to 2020-21 except 2016-17, 2017-18 and 2018-
19. Finally, the value of export in 2020-21 showed a growth rate of -7.25%. While, the growth
rate of import which was 17.7% in 1990-91 hiked to 36.3% 1995-96. However, it fell to 11% in
1997-98 but again hiked to 20.7% in 1999-2000 and thus it reached the highest growth rate of
39.5% in 2004-05. Again in 2006-07, it fell to 24.5% as against 33.8% in 2005-06. However, the
growth rate of import hiked to 35.7% in 2008-09 and again it dropped to -0.78% in 2009-10.
Over the period, it has been observed that total exports of India have increased after the adoption
of New Economic policy in India. Although India is facing a continuous deficit in its balance of
payment but the overall prosperity is unbounded. Despite of fluctuations in GDP growth rate, the
volume of trade is increasing day by day. The share of imports of petroleum and crude products
and other non-bulk items have increased significantly while the imports of food grains and
export-related items have declined.

4) Trends in fiscal policies

 Gross Fiscal Deficit
160

140

120

100

80
YoY%

60

40

20

0
r 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2
ea - 9 - 9 - 9 - 9 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 1 - 1 - 1 - 1 - 1 - 1 - 1 - 1 - 1 - 1 - 2 - 2 - 2
-20Y 995 996 997 998 999 000 001 002 003 004 005 006 007 008 009 010 011 012 013 014 015 016 017 018 019 020 021
1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
-40

Source: CMIE Economic Outlook

The period to 1991 saw large fiscal deficit and its monetization crunch to the external sector,
pushed by the Gulf-war the balance of payments situation turned dangerous and led to the
introduction of new economic policy. After 1991 period had private sector share the load of long
term development and contribute to capital receipts in the form of disinvestment. This coupled
with tax reforms had the fiscal deficit in control until 1996-97. India handled the credit crisis
well and then resumed the task of cutting the fiscal deficit through tax reforms and fiscal
consolidation. These efforts have ensured fiscal deficit reach more comfortable levels. Overall,
during 1980-81 to 2002-03 it was seen that the periods of crisis led to the beginning of the deficit
to unsustainable levels and prompted the government to introduce and adopt economic reforms
to ensure that the deficit stood at more reasonable levels. However, since 2003-04 the
government has been more controlling and has undertaken fiscal policy reforms to ensure a
steady reduction in fiscal deficit as a percentage of GDP leading to a stronger economy.

5) GST’s contribution to the economy

The Goods and service tax came into the effect from 1st July,2017. The introduction of GST was
aimed to replace the complex tax structure of the country. Also this was done to reduce the tax
evasion and corruption in the country. Revenue generated from GST will grow the GDP of the
country in the long run. Also it will help the government to collect taxes which will ultimately
help in the economic growth of the country.

GST
35
30
25
20
15
YoY%

10
5
0
Year 2019-20 2020-21 2021-22 2022-23
-5
-10

Source: CMIE Economic Outlook

After COVID-19 The GST collections have grown tremendously across the country. India
registered a GST collection of 1.65 lakh crores in May 2023. This is leading to formalization and
higher revenue generations. The overall CAGR of the GST collection so far rose by 11%. The
GST is showing promising revenues and ultimately boosting the infrastructure and economy of
the country.

Conclusion

Indian Economy has grown tremendously after the liberalization. India took 60
years to reach the world’s 7th largest economy, while it only took 10 more years to
reach 5th rank in the world economy ranking. Many private and public sectors have
grown so far. Agriculture, construction, capital market, money lending, innovation
and tech, manufacturing make in India, etc. like sectors are showing remarkable
growth.
References

1. Economy Watch. (2010, June). Fiscal Deficit. Retrieved from

http://www.economywatch.com/budget/india/fiscal-deficit.html

2. Narayan, S. (2006). Documenting Reforms: Case Studies from India. New

Delhi: Macmillan India Ltd.

3. De, S. (2012). Fiscal policy in India: Trends and Trajectory. Ministry of

Finance, working paper no. 4751. Retrieved from
http://finmin.nic.in/workingpaper/FPI_trends_Trajectory.pdf

4. RBI. (2015). Select Fiscal Indicators of the Central Government, (As

percentage of GDP), Handbook of Statistics on Indian Economy 2014-15.
Reserve Bank of India. Retrieved from https://www.rbi.org.in/

5. RBI. (2015). Major Heads of Expenditure of the Central Government,

Handbook of Statistics on Indian Economy 2014-15. Reserve Bank of India.
Retrieved from https://www.rbi.org.in/

6. Botre, P. R. (2018). A Study on Foreign Trade in India: An Overview. Pune

Research Scholar: An International Multidisciplinary Journal, 4(5), 1-11.
Retrieved from
http://puneresearch.com/media/data/issues/5c0abeab8f54d.pdf

7. Govindan, P. (2020). A Study on Growth and Impacts of India’s Foreign

Trade: An Engine for Entrepreneurship and Economic Development.
Applied Econometrics and International Development, 20(2), 161-174.
Retrieved from https://ideas.repec.org/a/eaa/aeinde/v20y2020i2_12.html

Data Source: CMIE Economic Outlook