1. Economic Environment
Group 8
PGP/25/070 Anushka Ghosh
PGP/25/080 Shivaprasad K
PGP/25/090 Naveen T
PGP/25/100 Raman Tripathi
PGP/25/110 Shreya Sekar
PGP/25/120 Pradyumna Telkhade
PGP/25/123 Vignesh A
2. Contribution of components in the GDP
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Q4
08
Q2
09
Q4
09
Q210 Q4
10
Q2
11
Q4
11
Q2
12
Q4
12
Q2
13
Q4
13
Q2
14
Q4
14
Q2
15
Q4
15
Q2
16
Q4
16
Q2
17
Q4
17
Q2
18
Q4
18
Q2
19
Q4
19
Q2
20
Q4
20
Q2
21
GDP Component Shares
(in percent of GDP)
Total Private Consumption Government Expenditure Total GFCF Net Exports
GDP = $ 3.05 TRILLION ( FY21 )
• Largely Consumption driven
• Investments : Second largest contributor
3. CONTRIBUTION OF GDP COMPONENTS
-50
-40
-30
-20
-10
0
10
20
Q4 09 Q4 11 Q4 13 Q4 15 Q4 17 Q4 19
Sources of Growth
(Contributions to Real GDP Growth YoY)
Private Consumption Government Expenditure Investment Net Exports Real GDP Growth %Δ Year-over-Year
4. SHARES OF THE COMPONENTS IN THE GDP GROWTH AT VARIOUS STAGES OF THE ECONOMY
Q4 09
Post Financial Crisis Recovery:
Highest contributor:
Investments
Q3 11
Stable economy:
Highest contributor:
Private Consumption
Q2 17
Economic slowdown:
Increased share:
Govt. expenditure
5. Nature of the GDP Components
ACYCLICAL
economic quantity is not dependent
on the GDP and doesn’t follow a
specific pattern
COUNTER-CYCLICAL
economic quantity that is negatively
correlated with the overall state of
the economy
PROCYCLICAL
economic quantity that is positively
correlated with the overall state of
the economy
C
6. Private Consumption – Procyclical
PRE COVID ECONOMY
Growth rate declining even before
covid
Consumption moves in the same
direction
ECONOMIC SLOWDOWN
Reduced purchasing power
GDP on a decline
Consumption goes down
HIGH GROWTH PHASE
GDP growth rate at its peak
8. Government Expenditure – Countercyclical
POST DEMONETIZATION/GST
GDP slipped
Govt. expenditure fueled recovery
HIGH GROWTH PHASE
Overall high consumption and
Investments
Govt. exp tends to be low
COVID LOCKDOWN
Huge negative economic impact
Govt. expenditure at it’s highest
9. Net Exports– Acyclical
• Independent on GDP
• No set pattern
2014 & 2017
(The Anomaly)
• Crude oil price surged
• Currency depreciation
10. How to see a Recession, Recovery or Boom coming?
Defining The Economic Business Cycle
-5,000,000.00
0.00
5,000,000.00
10,000,000.00
15,000,000.00
20,000,000.00
25,000,000.00
30,000,000.00
35,000,000.00
40,000,000.00
45,000,000.00
Q4
08
Q2
09
Q4
09
Q210
Q4
10
Q2
11
Q4
11
Q2
12
Q4
12
Q2
13
Q4
13
Q2
14
Q4
14
Q2
15
Q4
15
Q2
16
Q4
16
Q2
17
Q4
17
Q2
18
Q4
18
Q2
19
Q4
19
Q2
20
Q4
20
Q2
21
GDP AND COMPOMNENT GROWTH
Real GDP (Levels,2011-12) Private Consumption (Cp) Government Consumption (Cg) Public and Private GFCF (Ig) Net Exports (NX) Investments
Recovery from
Financial Crisis
Low – India’s own
economic crisis from
the twin deficit
Recovery High
Low
Recovery
Base Year
3 Major Indicators 1. Leading 3. Lagging
2. Coincident
11. Time
Real GDP
(2011-12)
YOY
Private
Consumption
% PC
Government
Consumption
% GFCE Net Exports (NX) %NX Investments %Investments
Q3 16 3,03,57,558.30 9.67 1,65,84,573.40 54.63% 34,31,793.50 11.30% -4,47,171.30 -1.47% 98,15,394.10 32.33%
Q4 16 3,07,96,216.10 8.58 1,71,65,612.70 54.99% 28,97,754.00 9.41% -6,07,654.60 -1.97% 99,79,780.50 34.41%
Q1 17 3,22,77,283.10 6.29 1,80,15,845.90 55.82% 26,97,103.60 8.36% -33,525.70 -0.10% 1,06,29,840.10 32.93%
Q2 17 3,14,63,362.80 6.11 1,76,32,249.60 56.04% 36,33,074.30 11.55% -13,68,956.90 -4.35% 1,08,08,651.20 34.35%
Q3 17 3,19,71,954.90 5.32 1,73,89,533.20 54.39% 36,83,644.30 11.52% -8,56,185.60 -2.68% 1,07,52,918.10 33.63%
CONSUMPTION
Leading
Indicator
Laggin
g
Reactive to the movement of GDP
,
clarifies the state of low growth
GOVERNMENT EXPENDITURE
Co-
incident
Indicator
Lowering of Private Consumption to predict and increasing Government Expenditure to confirm incoming Low Growth Phase
Low Growth Phase
Lowering of private consumption in the
prior quarters is indicative of the incoming
recession or period of low growth in the
Economy
Time
Real GDP
(2011-12)
YOY
Private
Consumption
% PC
Government
Consumption
% GFCE
Q4 11 2,22,51,352.30 6.18 1,26,49,395.00 56.85% 22,03,751.00 9.90%
Q1 12 2,36,54,614.00 5.63 1,28,16,105.00 54.18% 28,66,880.50 10.12%
Q2 12 2,20,52,234.40 4.87 1,22,51,568.10 55.56% 22,88,226.00 11.38%
2012-14 – Economic Crisis
2017-20 – Post Demonetization and GST
Massive decrease in
consumption
12. Time
Real GDP
(2011-12)
YOY
Private
Consumption
% PC
Government
Consumption
% GFCE Net Exports (NX) %NX Investments %Investments
Q3 14 2,56,22,415.80 8.70 1,41,28,040.20 55.14% 30,76,087.40 12.01% -5,51,033.40 -2.15% 92,99,161.50 36.29%
Q4 14 2,64,59,471.40 5.92 1,50,45,756.10 56.86% 25,19,731.90 9.52% -4,53,081.90 -1.71% 89,74,728.00 33.92%
Q1 15 2,78,37,332.30 7.11 1,57,81,119.50 56.69% 21,60,053.40 7.76% -1,43,187.90 -0.51% 98,68,314.00 35.45%
Q2 15 2,72,82,785.80 7.59 1,51,79,326.40 55.64% 29,18,432.10 9.70% -4,24,405.70 -1.56% 93,84,515.20 34.40%
Q3 15 2,76,80,871.00 8.03 1,51,31,303.00 54.66% 33,53,290.50 12.11% -6,00,743.60 -2.17% 95,23,521.90 35.40%
CONSUMPTION
Leading Indicator
Increasing Private Consumption and Government Expenditure are leading indicators of Recovery
Recovery Phase
When consumers feel comfortable to
start spending on the pent-up demand
often indicates the beginning of
recovery
2014-15
GOVERNMENT EXPENDITURE
Increased contribution from
government expenditure in an attempt
to resuscitate the GDP is predictive of
recovery
INVESTMENTS
Lagging Indicator
Consumers willing to invest in long
term assets and valuables when future
income is certain, confirms the
economic recovery
Once the economy starts doing better,
the government stops pushing
13. Growth in Investments and Private Consumption a quarter or two before boom indicative of incoming high growth phase
High Growth Phase
2015-16
Investments/Private Consumption
Leading Indicator
Both start increasing prior to a Boom
GOVERNMENT EXPENDITURE
Changes in real time to clarify the state
of the economy
Net Exports
Co-incident Indicator
Time
Real GDP
(2011-12)
YOY
Private
Consumption
% PC
Government
Consumption
% GFCE Net Exports (NX) %NX Investments %Investments
Q2 15 2,72,82,785.80 7.59 1,51,79,326.40 55.64% 29,18,432.10 9.70% -4,24,405.70 -1.56% 93,84,515.20 34.40%
Q3 15 2,76,80,871.00 8.03 1,51,31,303.00 54.66% 33,53,290.50 12.11% -6,00,743.60 -2.17% 95,23,521.90 35.40%
Q4 15 2,83,63,873.90 7.20 1,63,34,483.60 57.59% 27,27,991.70 9.62% -3,53,460.90 -1.25% 97,70,297.10 34.45%
Q1 16 3,03,67,379.10 9.09 1,71,69,074.00 56.54% 23,28,310.70 7.67% -33,971.30 -0.11% 1,04,98,928.90 34.57%
Q2 16 2,96,50,877.80 8.68 1,62,36,328.10 55.76% 29,89,329.60 8.08% -2,43,350.40 -0.82% 1,01,91,840.60 35.37%
Q3 16 3,03,57,558.30 9.67 1,65,84,573.40 54.63% 34,31,793.50 11.30% -4,47,171.30 -1.47% 98,15,394.10 32.33%
Indicative of the forthcoming low
growth phase post Demonetization
Becomes marginally less negative for
India during High Growth phases
