Economic Analysis<br />The economic analysis will be used for computing the performance of the shares based on various fac...
GDP on purchasing power parity(PPP)
GDP on Per Capita Income
GDP annual growth rate
Interest rates
Inflation
Imports
Exports
Exchange Rate
Stock Market
Debt  to GDP</li></ul>Gross Domestic Product:<br />The gross domestic product (GDP) is one of the measures of national inc...
Eco analysis 17
Eco analysis 17
Eco analysis 17
Eco analysis 17
Eco analysis 17
Eco analysis 17
Eco analysis 17
Eco analysis 17
Eco analysis 17
Eco analysis 17
Eco analysis 17
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Eco analysis 17

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Eco analysis 17

  1. 1. Economic Analysis<br />The economic analysis will be used for computing the performance of the shares based on various factors which has the implication. They are as follows.<br /><ul><li>Gross domestic product(GDP)
  2. 2. GDP on purchasing power parity(PPP)
  3. 3. GDP on Per Capita Income
  4. 4. GDP annual growth rate
  5. 5. Interest rates
  6. 6. Inflation
  7. 7. Imports
  8. 8. Exports
  9. 9. Exchange Rate
  10. 10. Stock Market
  11. 11. Debt to GDP</li></ul>Gross Domestic Product:<br />The gross domestic product (GDP) is one of the measures of national income and output for a given country's economy. GDP can be defined in three ways, all of which are conceptually identical. First, it is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time (usually a 365-day year). Second, it is equal to the sum of the value added at every stage of production (the intermediate stages) by all the industries within a country, plus taxes less subsidies on products, in the period. Third, it is equal to the sum of the income generated by production in the country in the period—that is, compensation of employees, taxes on production and imports less subsidies, and gross operating surplus (or profits). <br />India Gross Domestic Product is worth 1729 billion dollars or 2.79% of the world economy, according to the World Bank. Historically, from 1960 until 2010, India's average Gross Domestic Product was 339.84 billion dollars reaching an historical high of 1729.01 billion dollars in December of 2010 and a record low of 36.61 billion dollars in December of 1960. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India's output with less than one third of its labor force. The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points.<br />GDP Annual Growth Rate:<br />Economic growth is the increase in value of the goods and services produced by an economy. It is conventionally measured as the percent rate of increase in real gross domestic product, or GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment," which is caused by growth in aggregate demand or observed output. <br />The Gross Domestic Product (GDP) in India expanded 7.80 percent in the first quarter of 2011 over the same quarter, previous year. Unlike the commonly used quarterly GDP growth rate the annual GDP growth rate takes into account a full year of economic activity, thus avoiding the need to make any type of seasonal adjustment. Historically, from 2004 until 2011, India's average annual GDP Growth was 8.45 percent reaching an historical high of 10.10 percent in September of 2006 and a record low of 5.50 percent in December of 2004. <br />The Gross Domestic Product (GDP) in India expanded 7.80 percent in the first quarter of 2011 over the previous quarter. Historically, from 2000 until 2011, India's average quarterly GDP Growth was 7.45 percent reaching an historical high of 11.80 percent in December of 2003 and a record low of 1.60 percent in December of 2002. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India's output with less than one third of its labor force. The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. <br />Country19992000200220032004200520062007200820092010India5.564.38.36.28.49.297.47.410.4<br />GDP Per Capita Income: <br />India GDP per capita (Constant Prices Since 2000)<br />India GDP Per Capita stands at 718 US dollars, according to the World Bank. The GDP per capita is obtained by dividing the country’s gross domestic product, adjusted by inflation, by the total population. Historically, from 1960 until 2008, India's average GDP Per Capita was 316.47 dollars reaching an historical high of 718.00 dollars in December of 2008 and a record low of 181.00 dollars in December of 1960.<br /> <br /> The term Constant Prices refers to a metric for valuing the price of something over time, without that metric changing due to inflation or deflation. The gross domestic product per capita is the value of all final goods and services produced within a nation in a given year divided by the average (or mid-year) population for the same year. <br />Country19992000200220032004200520062007200820092010India1,8002,2002,5402,9003,1003,4003,8002,6002,9003,2003,500<br />The real GDP per capita of an economy is often used as an indicator of the average standard of living of individuals in that country, and economic growth is therefore often seen as indicating an increase in the average standard of living.However, there are some problems in using growth in GDP per capita to measure general well being.GDP per capita does not provide any information relevant to the distribution of income in a country. GDP per capita does not take into account negative externalities from pollution consequent to economic growth. Thus, the amount of growth may be overstated once we take pollution into account. GDP per capita does not take into account positive externalities that may result from services such as education and health. GDP per capita excludes the value of all the activities that take place outside of the market place (such as cost-free leisure activities like hiking). Economists are well aware of these deficiencies in GDP, thus, it should always be viewed merely as an indicator and not an absolute scale. Economists have developed mathematical tools to measure inequality, such as the Gini Coefficient. There are also alternate ways of measurement that consider the negative externalities that may result from pollution and resource depletion (see Green Gross Domestic Product.)The flaws of GDP may be important when studying public policy, however, for the purposes of economic growth in the long run it tends to be a very good indicator. There is no other indicator in economics which is as universal or as widely accepted as the GDP. Economic growth is exponential, where the exponent is determined by the PPP annual GDP growth rate. Thus, the differences in the annual growth from country A to country B will multiply up over the years. For example, a growth rate of 5% seems similar to 3%, but over two decades, the first economy would have grown by 165%, the second only by 80%<br />GDP per capita (Purchasing Power Parity PPP)<br />India GDP Per Capita, when adjusted by purchasing power parity, stands at 2946 US dollars, according to the World Bank. The GDP per capita is obtained by dividing the country’s gross domestic product, adjusted by purchasing power parity, by the total population. From 1980 until 2008, India's GDP Per Capita adjusted by Purchasing Power Parity averaged 1254.03 dollars, reaching an historical high of 2946.00 dollars in December of 2008 and a record low of 415.00 dollars in December of 1980. <br />Country19992000200220032004200520062007200820092010India1,8052,2002,6603,0333,3193,6664,1562,9663,2973,6804,060<br />The GDP dollar estimates given on this page are derived from purchasing power parity (PPP) calculations. Using a PPP basis is arguably more useful when comparing generalized differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of the countries, rather than using just exchange rates which may distort the real differences in income. However, economies do self-adjust to currency changes over time, and technology intensive and luxury goods, raw materials and energy prices are mostly unaffected by difference in currency (the latter more by subsidies), despite being critical to national development, therefore, the sales of foreign apparel or gasoline per liter in China is more accurately measured by the nominal figure, but everyday food and haircuts by PPP. The gross domestic product per capita is the value of all final goods and services produced within a nation in a given year divided by the average (or mid-year) population for the same year. <br />Interest Rate:<br />The benchmark interest rate (reverse repo) in India was last reported at 7 percent. In India, interest rate decisions are taken by the Reserve Bank of India's Central Board of Directors. The official interest rate is the benchmark repurchase rate. From 2000 until 2010, India's average interest rate was 5.82 percent reaching an historical high of 14.50 percent in August of 2000 and a record low of 3.25 percent in April of 2009.<br />The Central banks conduct their monetary policy by controlling some overnight or short term interest rates. Central banks use these rates to lend money to commercial banks influencing mortgage rates and other types of loans. Central bank interest rates are one of the most effective tools to promote growth and keep inflation under certain limits. For instance, the Governing Council of the European Central Bank aims at keeping annual inflation under 2% while the Board of Governors of the U.S. Federal Reserve has a dual mandate of promoting sustainable growth and maintaining price stability. Stocks and bond markets are also influenced by these benchmark rates because high interest rates reduce the present value of future cash flows, thereby reducing the attractiveness of investment opportunities. <br />Inflation Rate:<br />The inflation rate in India was last reported at 8.62 percent in June of 2011. From 1969 until 2010, the average inflation rate in India was 7.99 percent reaching an historical high of 34.68 percent in September of 1974 and a record low of -11.31 percent in May of 1976. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy<br />The most well known indicator of inflation is the Consumer Price Index (CPI) which measures the average price of consumer goods and services purchased by households. In sum, Inflation is the rate at which the general level of prices is rising. High rates of inflation are often associated with fast growing economies where the demand for goods and services is higher that the country’s productive capacity. The fight against inflation is done by central banks which control the money supply by increasing or decreasing short term interest rates. For instance, the Governing Council of the European Central Bank aims at keeping annual inflation under 2% to promote price stability and sustainable growth. <br />Country19992000200220032004200520062007200820092010India6.75.45.43.84.24.25.36.48.310.911.7<br />Government Debt to GDP:<br />The Government Debt in India was last reported at 69.2 percent of the country´s GDP. From 1991 until 2010, India's average Government Debt to GDP was 72.60 percent reaching an historical high of 81.20 percent in December of 2003 and a record low of 64.10 percent in December of 1996. Generally, Government debt as a percent of GDP is used by investors to measure India's ability to make future payments on its debt, thus affecting India's borrowing costs and government bond yields. This page includes a chart with historical data for India's General Government Gross Debt as a percent of GDP.<br />The highest gross Government debt as a percentage of GDP among countries tracked by Trading Economics was recorded in Japan (220% of GDP), Greece (143%) and Italy (119%). Debt to GDP ratio was also high in Singapore, Belgium, Ireland, United States and Portugal - above 90%. In Iceland, Euro Area, Sri Lanka, Canada, Germany, France, Hungary, United Kingdom, Israel, Egypt, Austria and Brazil, public debt was recorded between 70% and 80% of GDP. Government debt as a percent of GDP, also known as debt-to-GDP ratio, is the amount of national debt a country has in percentage of its Gross Domestic Product. Basically, Government debt is the money owed by the central government to its creditors. There are two types of government debt: net and gross. Gross debt is the accumulation of outstanding government debt which may be in the form of government bonds, credit default swaps, currency swaps, special drawing rights, loans, insurance and pensions. Net debt is the difference between gross debt and the financial assets that government holds. The higher the debt-to-GDP ratio, the less likely the country will pay its debt back, and more likely the country is to default on its debt obligations. <br />India Imports<br />India imports were worth 36872 Millions USD in June of 2011. India is poor in oil resources and is currently heavily dependent on coal and foreign oil imports for its energy needs. Other imported products are: machinery, gems, fertilizers and chemicals. Main import partners are European Union, Saudi Arabia and United States.<br />Country19992000200220032004200520062007200820092010India50.260.853.853.874.1589.33113.1187.9305.5274.3327<br />India Exports<br />India exports were worth 29213 Millions USD in June of 2011. Exports amount to 22% of India’s GDP. Gems and jewelry constitute the single largest export item, accounting for 16 percent of exports. India is also leading exporter of textile goods, engineering goods, chemicals, leather manufactures and services. India’s main export partners are European Union, United States, United Arab Emirates and China <br />Country19992000200220032004200520062007200820092010India36.343.144.544.557.2469.1876.23112176.4168.2201<br />India Stock Market Index<br />India's main stock market index, the SENSEX, declined 2313 points or 12.53 percent during the last 12 months. From 1979 until 2011 the SENSEX market value averaged 4919.96 points reaching an historical high of 21004.96 points in November of 2010 and a record low of 113.28 points in December of 1979. <br />Indian Rupee Exchange Rate Chart (USDINR)<br />The Indian Rupee exchange rate appreciated 1.95 percent against the US Dollar during the last 12 months. Historically, from 1973 until 2011 the USDINR exchange averaged 30.13 reaching an historical high of 51.97 in March of 2009 and a record low of 7.19 in March of 1973. The Indian Rupee spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the INR. While the Indian Rupee spot exchange rate is quoted and exchanged in the same day, the Indian Rupee forward rate is quoted today but for delivery and payment on a specific future date. <br />APPENDIX TABLE 11 : GROSS DOMESTIC SAVING AND INVESTMENTItemPer cent of GDP (at current market prices)Amount in Rupees croreAverage 1999-2000 to 2007-082005-062006-072007-08*2005-062006-072007-08*123456781Household Saving23.024.124.124.38,64,6539,94,89811,50,135 of which :        a) Financial Assets11.011.711.711.74,20,9744,82,8225,53,289 b) Physical Assets12.112.412.412.64,43,6795,12,0765,96,8462Private corporate sector5.87.78.38.82,76,5503,42,2844,16,9363Public sector0.92.43.34.586,8231,37,9262,12,5434Gross Domestic Saving29.734.235.737.712,28,02614,75,10817,79,6145Net capital inflow0.21.21.11.444,60446,69865,8996Gross Domestic Capital Formation29.935.536.939.112,72,63015,21,80618,45,5137Errors and Omissions0.20.70.50.323,74119,29716,1678Gross Capital Formation29.834.836.438.712,48,88915,02,50818,29,346 of which :        a) Public sector7.27.68.09.12,71,8353,29,6794,29,014 b) Private corporate sector9.513.714.815.94,91,9836,11,0447,49,894 c) Household sector12.112.412.412.64,43,6795,12,0765,96,846 d) Valuables #0.91.21.21.141,39249,70953,591Memo:Total Consumption Expenditure(a+b)67.966.165.1    a) Private Final Consumption Expenditure57.455.955    b) Government Final Consumption Expenditure10.510.210.1    Saving-Investment Balance(4-6)-1.3-1.2-1.4    Public Sector Balance#-5.2-4.6-4.6    Private Sector Balance#5.75.24.7    a) Private Corporate Sector-6.0-6.5-7.0    b) Household Sector11.711.711.7   GDP at Market Prices (at current prices)35,86,74341,29,17447,23,400   * : Quick Estimates.# : Valuables cover the expenditures made on acquisition of valuables, excluding works of art and antiques.Source : Central Statistical Organisation.<br />Monetary Policy:<br />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.<br />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). <br />All such economic indicators not only measure/analyse the present performance of an economy but also help in predicting and forecasting its future growth prospects. <br />(M0): Currency in circulation+ Other deposits with the RBI+ Banker deposits with the RBI (M1): Currency with the public+ Other deposits with the RBI+ Demand deposits  (M3)): Time deposits+(M1)<br /> Hghlights:<br />Broad money (M3) (up to July 1, 2011) increased by 4.8 per cent as compared to 3.8 per cent during the corresponding period of the last year. The year-on-year growth, as on July 1, 2011 was 17.1 per cent as compared to 16.0 per cent last year. <br /> Exports, in US dollar terms increased by 56.9 per cent and imports increased by 54.1 per cent, during May 2011.<br />The overall growth of GDP at factor cost at constant prices, as per Revised Estimates, was 8.5 per cent in 2010-11 representing an increase from the revised growth of 8.0 per cent during 2009-10. <br />  Foreign Currency Assets stood at US$ 283.7 billion at end June 2011 compared to US$ 249.9 billion at end June 2010. <br /> Rupee appreciated against US dollar and Pound Sterling and depreciated against Japanese Yen and Euro in the month of June 2011 over May 2011. <br /> Year-on-year inflation in terms of Wholesale Price Index was 9.44 per cent for the month of June 2011 as compared to 10.25 per cent in the corresponding month last year.<br />

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