Year 2009-10 started as a difficult Year for Indian economy. The Global Economic Slowdown had retarded the growth of our economy more prominently in the second half of 2008-09. This was a time when the Global Financial crisis was at its full swing and had spread its tentacles to all parts of the world. The overall growth of GDP at factor Cost at constant prices in 2008-09 as per revised estimates released by the Central statistical organization was 6.7 %. There was also a decline of agricultural output by 0.2 % in 2009-10 due to poor Monsoons.
In 2009-10, the Agriculture, Forestry & Fishing shows a decline of 0.2% while Service Sector shows maximum growth. The overall sectoral growth (Agriculture) rate at factor cost at 2004-05 prices is shown as follows :
The growth rate of Agriculture, Forestry & Fishing, which is also known as primary Sector of our economy, was 5.2% in 2005-06. In 2006-7 it declined to 3.7%. In 2007-08 is again rose to 4.7% and declined to 1.6% in 2008-09. In 2009-10 due to the poor monsoon through out the country the sector growth went in the negative zone with showing a negative 0.2% growth.
Crop Production in 2008-09:
For three consecutive years, from 2005-06 to 2008-09 (fourth advance estimates), foodgrains production recorded an average annual increase of over 8 million tonnes. Total foodgrains production in 2008-09 was estimated at 233.88 million tonnes as against 230.78 million tonnes in 2007-08. However, the production of major commercial crops (oilseeds, sugarcane, cotton, jute and Mesta) declined in 2008-09 compared to 2007-08 levels.
India received 23% less rainfall compared to an average rainfall (LPA) India has received. (it is called Long period Average LPA).
The central India experienced a 20% deficiency in the rainfalls, while, North east India experienced 27% decline, North West India experienced 36% decline (maximum) while Southern peninsula experienced 4% decline (Minimum).
The index of Industrial production has shown a U shaped curve since the first quarter of 2007-08. It was 11.6 % is the end of 2006-07 which decreased steadily for 8 quarters to become 0.5% in fourth quarter of 2008-09. This indicated the impact of recession on Indian Industry. Since last 3 quarters its has shown upward trend and in October-November 2009, it reaches to 11.0 %, which indicated the recovery .
From a macroeconomic perspective, low levels of budget deficits and public debt are generally considered as key ingredients for economic growth , reducing poverty and improving social outcomes. This owes to the stabilization models attributing resource-expenditure imbalances as the trigger for economic problems of many emerging/developing economies. The fiscal reforms initiated in 1990s with FD declining from 6.6% of GDP in 1990-91 to 4.1% of GDP in 1996-97; however it faltered and deteriorating in 1997-98 and reached a level of 6.2 % of GDP in 2001-02. It was against this background , that operationalization of the Fiscal Responsibility and Budget Management Act of 2003 (FRBMA) assumed urgency leading to the notification of the rules under the Act in july,2004. In the post-FRBMA period, progress in fiscal consolidation was more or less close to the targets envisaged thereunder.
Over all Saving rate for 2008-09 is 32.5% of GDP which is slightly less than the previous year 2007-08 (34.9%). The Capital Formation rate for 2008-09 is 34.9% of GDP which is too slightly less than last year 2007-08 (37.7%)
Per capita National Income for the Year 2009-10 is Rs. 43749 (factor cost at current prices) compared to Rs. 40141 for the previous year 2008-09. The growth rates in per capita income and consumption are the gross measures of welfare in general. The per capita income as well as consumption has increased, yet the growth in these two parameters has decreased. This reflects the decline in overall GDP growth. Growth in per capita income in 2007-08 was 8.1% which declined to 5.3% in 2009-10. Growth in percapita consumption was 8.3% in 2007-08 which has declined to 2.7 % in 2009-10.
Trends of the per capita income and consumption at 2004-05 market prices .
India’s foreign exchange reserves comprise foreign currency assets (FCA), gold, special drawing rights (SDRs) and reserve tranche position (RTP) in the International Monetary Fund (IMF)
India’s Foreign exchange reserves stood at US$ 283.5 billion at the end of December 2009 .
It was US$ 252 billion at the end of financial year 2008-09 i.e. March 2009.
35.6 % of this growth was attributed to higher inflows under FDI, and portfolio investments (BoP basis excluding valuation effect), while 64.4% attributed to valuation gain due to a weak US dollar against major currencies.
India’s share in world merchandise exports, after remaining unchanged at 1.1 per cent between 2007 and 2008, reached 1.2 per cent in 2009 (January-June).
However this growth was attributed to to the relatively greater fall in world export growth than India.
Changes in Export Composition:
There were substantial changes in the Composition of exports in 2008-09 and 2009-10(April- September) with the fall in share of petroleum, crude and products and primary products resulting in corresponding rise in share of manufactured goods .
Changes in Import Composition:
Due to growing domestic concerns like inflation, the share of food and allied products imports which fell from 2.3% in 2007-08 to 2.1% in 2008-09 increased to 3.5% in the first half of 2009-10 with the increase in imports of edible oils and pulses.
Inflation is perhaps the most closely monitored economic variable in India since it has considerable impact on the average consumer.
Price movement in the country is reflected by the wholesale price index (WPI) and the consumer price index (CPI). WPI is used to measure the change in the average price level of goods traded in the wholesale market. While, the Consumer Price Index (CPI) captures the retail price movement for different sections of consumers. There are at present four consumer price indices covering different socio-economic groups in the economy. These four indices are Consumer Price Index for Industrial Workers (CPI-IW); Consumer Price Index for Agricultural Labourers (CPI-AL); Consumer Price Index for Rural Labourers (CPI -RL) and Consumer Price Index for Urban Non-Manual Employees (CPI-UNME)
Economic Survey 2009-10 says that WPI (Wholesale Price Index) inflation has been volatile in 2009-10 and it is a major concern for the country.This soaring inflation was mainly contributed by the Composite Food Index which has a weight age of 25.4% in overall inflation calculation.The Food Inflation was 19.8 % in December 2009 compared to 8.6% in 2008.The survey holds the supply side bottlenecks responsible for Food Price Escalations & also in some of the essential commodities due to weak and irregular monsoons in 2009.
The survey says that very high consumer price inflation (particularly Food price escalation) was a result of a hype created over Kharif crop failure without taking into account the comfortable food stocks and rabi prospects. The survey said that this “Hype” may have exacerbated inflationary expectations encouraging hoarding and resulting in a higher inflation in food items.
The survey also partially explains the high sugar prices . It said that the delay in the market release of imported raw sugar may have contributed to the overall uncertainty which further led the prices to rise to unacceptably high levels in recent months
Monetary Trends (Annual Policy Statement of the RBI, 2008-09)
The Bank rate kept unchanged at 6%
The reverse-repo and repo rate kept unchanged at 6% and 7.75% respectively
The RBI retains the option to conduct overnight repo or longer term repo under the Liquidity Adjustment Facility (LAF) depending on market conditions and other relevant factors.
CRR of the scheduled banks increased to 8.25% with effect fro m the fortnight beginning May 24,2008
The four main monetary aggregates of measures of money supply which reflect the state of the monetary sector are:- (i) M1 (Narrow money)= Currency with the public + demand deposits of the public; (ii) M2= M1 + Post Office Savings deposits; (iii) M3 (Broad money)= M1 + time deposits of the public with banks; and (iv) M4= M3 + Total post office deposits.
A Balance of payments BOP is accounting record of all monetary transactions between India and rest of the world.
These transactions include payments for the India's exports and imports of goods, services, and financial capital, as well as financial transfers.
The BOP summarizes international transactions for a specific period.
BOP includes sources of funds such as exports or the receipts of loans and investments which are recorded as positive or surplus items and uses of funds, such as for imports or to invest in foreign countries which are recorded as a negative or deficit item.
The global financial slowdown has affected all the countries differently and the rich countries have been affected badly which is evident from the 3.2 % negative growth forecast for rich countries by IMF World Economic Outlook (January 2010).
This outlook says the developing countries will grow by 2.1% in 2009 and 6% in 2010 and the drivers of this growth will be India and China.
Due to signs of recovery and increased FII flows after March 2009 , Indian Rupee has been continuously strengthening against US Dollar. The rupee witnessed slight appreciation in the month of January 2010 vis-à-vis the USD. The Rupee Dollar exchange rate which averaged Rs 46.6/USD in the month of December 2009 was at Rs 45.9/USD in January 2010.
Each year since 1990 the Human Development Report has published the human development index (HDI) which looks beyond GDP to a broader definition of well-being. The HDI provides a composite measure of three dimensions of human development: living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and gross enrolment in education) and having a decent standard of living (measured by purchasing power parity, PPP, income).
This year's HDI, which refers to 2007, highlights the very large gaps in well-being and life chances that continue to divide our increasingly interconnected world. The HDI for India is 0.612, which gives the country a rank of 134 th out of 182 countries with data.
The HDI measures the average progress of a country in human development. The Human Poverty Index (HPI-1), focuses on the proportion of people below certain threshold levels in each of the dimensions of the human development index - living a long and healthy life, having access to education, and a decent standard of living. By looking beyond income deprivation, the HPI-1 represents a multi-dimensional alternative to the $1.25 a day (PPP US$) poverty measure.
The HPI-1 value of 28.0% for India, ranks 88 th among 135 countries for which the index has been calculated.
The HPI-1 measures severe deprivation in health by the proportion of people who are not expected to survive to age 40. Education is measured by the adult illiteracy rate. And a decent standard of living is measured by the unweighted average of people not using an improved water source and the proportion of children under age 5 who are underweight for their age.
The HDI measures average achievements in a country, but it does not incorporate the degree of gender imbalance in these achievements. The gender-related development index (GDI), introduced in Human Development Report 1995, measures achievements in the same dimensions using the same indicators as the HDI but captures inequalities in achievement between women and men. It is simply the HDI adjusted downward for gender inequality. The greater the gender disparity in basic human development, the lower is a country's GDI relative to its HDI.
India's GDI value, 0.594 should be compared to its HDI value of 0.612. Its GDI value is 97.1% of its HDI value. Out of the 155 countries with both HDI and GDI values, 138 countries have a better ratio than India's.
Every year, millions of people cross national or international borders seeking better living standards. Most migrants, internal and international, reap gains in the form of higher incomes, better access to education and health, and improved prospects for their children. Most of the world’s 195 million international migrants have moved from one developing country to another or between developed countries.
India has an emigration rate of 0.8%. The major continent of destination for migrants from India is Asia with 72.0% of emigrants living there.
The United States is host to nearly 40 million international migrants – more than any other country though as a share of total population it is Qatar which has the most migrants – more than 4 in every 5 people are migrants.
Agriculture, Forestry and Fishing, a economy has got a momentum. The worst period was 2008-09 , when almost all sectors and subsectors of the economy saw a worst decline in the growth rates. This has been attributed to the Global Financial crisis.
India’s engagement with the global economy became deeper since the 1990s. This
deepening global integration has made it vulnerable to the global financial and
However, three factors helped India to cope with the crisis and soften
the blow. They are:
(1) the robust, well-capitalised and well-regulated financial sector;
(2) gradual and cautious opening up of the capital account; and
(3) the large stock of foreign reserves.
There are now visible signs of recovery indicated by the emergence of manufacturing from stagnant or negative growth, the strong rally in equity markets, the huge mobilisation of funds by private corporate from the capital market etc. However, the poor monsoon , after successive good rains in the past seven years, is casting a shadow on recovery.
The growth in GDP dropped to 5.8 per cent (year-on-year) during the second half of
2008-09 from 7.8 per cent in the first half. Growth improved slightly to 6.1 per cent in the first quarter of 2009-10.
Industry, and particularly the manufacturing sector, was the most severely affected
by the crisis. Industrial growth plunged to 1.9 per cent in the second half of 2008-09
from 6.1 per cent in the first half and manufacturing growth collapsed to -0.3 % in the second half from 5.3 per cent in the first half. Industrial growth picked up to 5.0 per cent in the first quarter of 2009-10 and manufacturing to 3.4 per cent .
The services sector as a whole had been resilient up to the third quarter of 2008-09 but later showed signs of weakness with its growth declining to 8.6 per cent in the last quarter of 2008-09 (average 10 per cent growth in the previous three quarters) and further to 7.8 per cent in the first quarter of 2009-10.