Introduction

India is in the middle of a technological boom. It is the seventh-largest economy in the world measured by nominal GDP and the third-largest by purchasing power parity (PPP). The long-term growth prospective of the Indian economy is positive due to its young population, corresponding low dependency ratio, healthy savings and increasing integration into the global economy. To add to that increasing tax collection, improve trade balances and FDI surge has played a significant role. It is a combined impact of strong government reforms and RBI policy to check the inflation rate.

The World Bank and the Central Statistical Organization (CSO) expects the Indian economy to grow at 8% P.A. If the economy continues to grow at this pace and righteous government policies are implemented than it is expected to become the third largest economy in the world. Also According to IMF World Economic Outlook Update (January 2016), Indian economy is expected to grow at 7-7.75 per cent during FY 2016-17, despite the uncertainties in the global market.

Key economic indicators:

  • India is agriculture dominant economy about 49 percent of total labour force is part of agricultural sector, the industrial sector has 20 percent and Service Sector has about 31 percent of total labour force. However Service Sector has highest contribution to GDP i.e. 54.4 percent followed by 29.5 percent from industrial sector and the remaining agricultural sector of about 16.1 percent as on April,2016
  • The overall growth of gross domestic product (GDP) at factor cost at constant prices is estimated at 7.6 per cent in 2015-16 as compared to the growth of 7.2 per cent during 2014-15.The GDP growth rate for the fourth quarter of 2015-16 was as high as 7.9 percent.
  • The eight core infrastructure industries registered 2.9 per cent growth in January 2016 as compared to the growth of 2.3 per cent in January 2015. During April- January 2015-16, these sectors grew by 2.7 per cent which is equal to growth during April- January 2014-15.
  • Broad money (M3) for 2015-16 (up to February, 2016) increased by 11.3 per cent as compared to 11.2 per cent during the corresponding period of the last year. The growth of rate in investment in time deposits has dropped down from 11.3 percent to 10.7 percent.
  • Exports and imports declined by 5.7 and 5 per cent respectively ,still the current account deficit in balance of payment has narrowed down to $21.9billion from $26.1 billion from 2014-15.
  • Foreign Currency Assets stood at US$ 348.4 billion in end-March 2016 as compared to US$ 341.6 billion at end-March 2015.
  • The Rupee depreciated against US dollar, Pound sterling, Japanese yen and Euro by 1.4 percent, 0.6 percent, 3.5 percent and 4.3 percent respectively in the month of February 2016 over January 2016.
  • The WPI inflation for all commodities for the month of February 2016 has been constant at -0.9 percent. The all India CPI inflation declined to four month low of 5.2 per cent in February 2016 from 5.7 per cent in January 2016 on account of sharp fall in food inflation. However, the inflation rate in April 2016 has increased to 5.86 percent.
  • Gross tax revenue for the financial year 2015-16 (April-January) was Rs. 10, 57,704 crores, recording a growth of 21.3 percent over corresponding previous period.
  • Fiscal deficit as percentage of GDP has decreased to 3.1 percent from 4.1 percent in 2014-15

Government initiatives

There has been momentous increase in number of foreign companies that are setting up their facilities in India and this is on account of various government initiatives like Digital India, make in India, reforms in tax system etc. The Finance Minister of 2015 stated that the government is looking at a number of reforms and resolution of pending tax disputes to attract investments.

  • Make in India initiatives (2015) is an initiative brought forward by the Government of India to boost the manufacturing sector, which contributes about 15 per cent of GDP. This initiative is expected to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors. The focus of Make in India program is on 25 sectors. These include: automobiles, aviation, chemicals, IT & BPM, pharmaceuticals, construction, defense manufacturing, electrical machinery, food processing, textiles and garments, ports, leather, media and entertainment, wellness, mining, tourism and hospitality, railways, automobile components, renewable energy, biotechnology, space, thermal power, roads and highways and electronics systems. The initiative has been highlighted at key international events.
  • Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy.
  • The Government of India launched the “Start-up India” initiative and unveiled the Start-up Action Plan which includes creation of a dedicated Start-up fund worth Rs 10,000 crore (US$ 1.47 billion) apart from other incentives like no tax on profits for first three years and relaxed labour laws.
  • Hyderabad is set to become the mobile phone manufacturing hub in India and is expected to create 150,000 – 200,000 jobs. Besides, the Telangana Government aims to double IT exports to Rs 1.2 trillion (US$ 17.61 billion) by 2019
  • India has signed a loan agreement worth US$ 35 million with the World Bank for Madhya Pradesh Citizen Access to Responsive Services Project which aims to improve access and quality of public services in Madhya Pradesh through implementation of the 2010 Public Service Delivery Guarantee Act.
  • US-based First Solar Inc and China’s Trina Solar have plans to set up manufacturing facilities in India. Clean energy investments in India increased to US$ 7.9 billion in 2014, helping the country maintain its position as the seventh largest clean energy investor in the world.
  • • Budget 2016-17 has proposed several reforms in FDI Policy in areas of insurance and pensions, asset reconstruction companies and stock exchanges, such as easier governing and fund raising norms, clarification of tax related matters and higher FDI limits
  • Various cross-national ties have been entered to build towards a sustainably developed India
  • Gross tax revenue for the financial year 2015-16 (April-January) was Rs. 10, 57,704 crores, recording a growth of 21.3 percent over corresponding previous period.

With 1.27 billion people and the world’s third-largest economy in terms of purchasing power, India’s recent growth and development has been one of the most significant achievements. Over the six and half decades since independence, the country has brought about a landmark agricultural revolution that has transformed the nation from chronic dependence on grain imports into a global agricultural powerhouse that is now a net exporter of food. India will soon have the largest and youngest workforce the world has ever seen. Backed up with ever increasing foreign direct investment leading to increased job creation and modern, advanced and high tech systems, India is sure on a pathway of becoming one of the major economies of the world. Initiatives like “Make in India” and “Digital India” will play a vital role in the driving the Indian economy.

Source: www.ibef.org

http://www.ibef.org/download/monthly-economic-report-300913.pdf

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