Indian Economy Archives - Anakeen Business Networks

Indian Economy - Anakeen Business Networks

Good news is underway for Indian Economy as India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF) and further, as the short term disruptions caused by major reforms such as the Goods and Services Tax (GST) and demonetization recede, the economy is on the rebound and is likely to achieve higher growth targets.

India’s GDP is estimated to have increased 6.6 per cent in 2017-18 and is expected to grow 7.3 per cent in 2018-19. India’s gross domestic product (GDP) at constant prices grew by 7.2 per cent in September-December 2017 quarter as per the Central Statistics Organisation (CSO).

Sectoral Growth : Overview

According to the CSO, sectors that are expected to grow at a higher pace in FY 2018 relative to the advance estimates include mining, quarrying, manufacturing, construction, trade hotels, financial, real estate and professional services.

The agricultural sector registered moderate growth as erratic monsoon in several parts and flooding in some states impacted performance. The economy saw high inflation during October 2017 owing to elevated food prices. Going forward, this is likely to be contained on account of a good harvest and favourable monsoons.

Industrial growth accelerated sharply during the second quarter of FY 2018 and jumped to 6.9% from 1.5% in the previous quarter, on account of a sharp increase in manufacturing and electricity, gas, water supply and utility services. Manufacturing registered an impressive growth at 7% in 2QFY18 as compared to 1.2% posted in the first quarter.

Services sector grew only marginally at 6.6% in the second quarter as compared to 7.8% in the previous quarter.

The strong emphasis on ease of doing business, where India has improved 42 ranks has now impact on the ground. Starting a business, paying taxes, trade facilitation and obtaining permits are being emphatically taken up. CII highlighted that with active participation of state governments, a facilitative investment climate is evolving. India has retained its position as the third largest startup base in the world with over 4,750 technology startups, with about 1,400 new start-ups being founded in 2016, according to a report by NASSCOM.

Source: CII

Union Budget 2018 – 19 : Policies to Uplift the Economy

Agriculture Sector– The government is committed towards doubling the farmers’ income by 2022. A total of Rs 14.34 lakh crore will be spent for creation of livelihood and infrastructure in rural areas.
Health and Education – Budgeted expenditure on health, education and social protection for 2018-19 is Rs 1.38 lakh crore which is expected to increase by Rs 15,000 crore. The world’s largest government funded health care programme will be launched which will cover over 10 million poor families with a coverage of up to Rs 5 lakh.
Employment – As per an independent study conducted, over 7 million formal jobs will be created in the country during 2018-19. The Government of India will contribute 12 per cent of the wages of the new employees in the Employees’ Provident Fund for all the sectors in the next three years.
Infrastructure – Investments in excess of Rs 50 lakh crore are required in the country’s infrastructure to increase the growth of GDP and connect and integrate country’s transport network. Budgetary allocation for infrastructure is set at Rs 5.97 lakh crore for 2018-19.

Challenges

A FY 2018 budget skewed to benefit rural incomes should also boost private consumption. Nonetheless, risks of fiscal slippage, concerns over India’s banking sector and higher oil prices cloud prospect.

The World Bank said key risks to India are domestic in nature such as setbacks to reforms to resolve corporate and financial sector balance sheet deterioration and debt write-offs for farmers. “Corporate debt overhangs and high levels of non-performing loans have been long-standing concerns in some countries (e.g. Bangladesh, India). Setbacks in efforts to resolve these domestic bottlenecks would continue to weigh on investment, and more broadly on medium-term growth prospects in the region,” it added. The World Bank said strong private consumption and services are expected to continue to support economic activity.

Inflationary pressures also remain a concern. Though food prices are likely to be contained on account of favourable monsoons, caution must be exercised as upside risks still remain in the form of implementation of farm loan waiver and 7^th Pay Commission hand-outs.

The economy benefitted from increased foreign inflows during the latter half of 2017. While this is good news, efforts to contain further appreciation of the rupee should be in place as further strengthening may affect exports and job creation.

Other challenges for the economy include addressing infrastructural bottlenecks in the agricultural sector, investment in human resources to leverage the demographic dividend, increasing expenditure on education and healthcare sectors, and social security provision for the unorganized sector.

On an OPTIMISTC View

Inspite of facing so many challenges the economic visage is not so bleak as they say every cloud has a silver lining so is the view point of the experts regarding future of Indian economy.

With on-going reforms that are beginning to positively impact the economy, CII is optimistic about Indian growth prospects in 2018. At the same time, policymakers need to be watchful and address the current macroeconomic challenges for a sustainable and fruitful recovery.

“In all likelihood, India is going to register higher growth rate than other major emerging market economies in the next decade. So, I wouldn’t focus on the short-term numbers. I would look at the big picture for India and big picture is telling us that it has enormous potential,” Ayhan Kose, director, development prospects group, World Bank, told PTI in an interview.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by PricewaterhouseCoopers.

References : IBEF, CII, News reports.

Agricultural Sector of India has made a lot of progress since independence in terms of growth in output, yields and area under many crops. It has gone through a green revolution, a white revolution, a yellow revolution and a blue revolution.

Agriculture sector continues to be the mainstay of the Indian economy. Agriculture is the only means of living for almost two-thirds of the employed class in India. India depends heavily on the agriculture sector, especially on the food production unit after the 1960 crisis in food sector. Since then, India has put a lot of effort to be self-sufficient in the food production and this endeavor of India has led to the Green Revolution. As agriculture has backward and forward linkages with other economic sectors, changes in agricultural performance have a multiplier effect on the entire economy.

Agricultural Growth

India has made a lot of progress in agriculture since independence in terms of growth in output, yields and area under many crops. It has gone through a green revolution, a white revolution, a yellow revolution and a blue revolution. India has been the world’s largest producer of milk for the last two decades and contributes 19 per cent of the world’s total milk production.

India is emerging as the export hub of instant coffee which has led to exports of coffee increase 17 per cent in calendar year 2017 to reach US$ 958.80 million. Tea exports from India reached a 36 year high of 240.68 million kgs in CY 2017.

Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity. Agricultural exports from India reached US$ 28.09 billion during April 2017-January 2018 with exports of basmati, buffalo meat reaching US$ 6.19 billion and US$ 6.59 billion, respectively. (Source : IBEF, CSO, Ministry of Commerce).

GDP From Agriculture in India averaged 4052.74 INR Billion from 2011 until 2018, reaching an all time high of 5666.82 INR Billion in the fourth quarter of 2017 and a record low of 2690.74 INR Billion in the third quarter of 2011.

Investment is one of the crucial factors determining the growth rate of agricultural sector. The government plays a very significant role in boosting agricultural growth through its increased investment in this field as also inducing the private investment in agriculture.

According to the Department of Industrial Policy and Promotion (DIPP), the Indian agricultural services and agricultural machinery sectors have cumulatively attracted Foreign Direct Investment (FDI) equity inflow of about US$ 2.02 billion and US$ 466.31 million, respectively, during April 2000 to December 2017. The food processing sector attracted FDI of US$ 8.37 billion in the same period.

In January 2018, India Agri Business Fund II (IABF-II), co-sponsored by Rabobank, the UK’s CDC Group and Asian Development Bank (ADB), made an investment worth US$ 10 million for a minority stake in Global Gourmet Pvt Ltd, a frozen food products exporting company.

Challenges Still Existing

Due to intensive involvement of labour in different farm operations, the cost of production of many crops is quite high. Human power availability in agriculture also increased from about 0.043KW/ ha in 1960-61 to about 0.077 KW/ ha in 2014-15. However, as compared to tractor growth, increase in human power in agriculture is quite slow.

There is a need to innovate custom service or a rental model by institutionalisation for high cost farm machinery such as combine harvester, sugarcane harvester, potato combine, paddy transplanter, laser guided land leveller, rotavator etc. to reduce the cost of operation and it can be adopted by private players or state or central organisation in major production hubs.

According to the World Bank estimates, half of the Indian population would be urban by the year 2050. It is estimated that percentage of agricultural workers in total work force would drop to 25.7 per cent by 2050 from 58.2 per cent in 2001. Thus, there is a need to enhance the level of farm mechanization in the country.

India has the capacity to produce the food grains which can make vast difference in Indian Economy. To achieve targeted mark by the government it needs to provide support in case of land, bank loans and other machinery to the small farmers along with the big farmers with this we can expect some improvement in Indian economy.

Irrigation is the most important agricultural input in a tropical monsoon country like India where rainfall is uncertain, unreliable and erratic India cannot achieve sustained progress in agriculture unless and until more than half of the cropped area is brought under assured irrigation.

Government Reforms

Economic Survey indicated that the government was keen on doubling farmers’ income by 2022, for which it has launched several new initiatives that encompass activities from seed to marketing.
Credit from institutional sources will complement all such government initiatives like Soil Health Card, Input Management, Per Drop More Crop in Pradhan Mantri Krishi Sinchai Yojana (PMKSY), PMFBY, e-Nam, etc, the survey said.
The Economic Survey has pointed that flagship project Jalyukta Shivar has yielded positive results and would be continued to make the remaining 6,000 villages out of a total 25,000 drought-free by 2019. In 2016-17, 5,291 villages were made water neutral with 1.51 lakh works with expenditure of Rs 2,235 crore. Whereas, the first phase of farm ponds with target of 1,12,311 has seen completion of 60,496 farm ponds.

With small and marginal farmers accounting for 78 per cent of the total 1.36 crore farmers, the state government has decided to extend the group farming projects across 40,913 villages. A group of 20 farmers with cumulative land holding not exceeding 100 acres would be provided subsidies up to Rs 1 crore for group farming.

References : IBEF, Economic Times News Articles, Indian Express News Articles, tradingeconomies.com, CSO

Tag: Indian Economy

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