An overview of Indian Economy

1. AN OVERVIEW OF INDIAN ECONOMY &
COMPARISON
Presented by
G.Abirami , B.Gayathri, Gowsalya, Preethi, Sowmiyaa,
J.Sridevi, R.Veena

2. INDIAN ECONOMY
 The known Economic history of India begins with the Indus Valley civilization. The Indus
civilization's economy appears to have depended significantly on trade, which was facilitated by
advances in transport.
 Indus Valley civilisation, the first known permanent and predominantly urban settlement that
flourished between 3500 BC to 1800 BC boasted of an advanced and thriving economic system. Its
citizens practised agriculture, domesticated animals, made sharp tools and weapons from
copper, bronze and tin and traded with other cities. Evidence of well laid streets, layouts, drainage
system and water supply in the valley's major cities, Harappa, Lothal, Mohenjo-daro and Rakhigarhi
reveals their knowledge of urban planning.

3. AFTER THE INDEPENDENCE
 After the independence India adopted a socialist-inspired economic model with
elements of capitalism. India adopted a USSR like centralized and nationalized
economic programs called Five year plans . This Nehruvian policy was extended
too far beyond its use and led to decline in Indian economy.

4. Compare India (orange) with South Korea (yellow). Both started from about the same income
level in 1950. The shows GDP per capita of South Asian economies and South Korea as a
percent of the American GDP per capita.

5. 10 PRINCIPLES OF ECONOMICS
 Gregory Mankiw in his Principles of Economics outlines Ten Principles of Economics that we will
replicate here, they are:
 People face tradeoffs
 The cost of something is what you give up to get it
 Rational people think at the margin
 People respond to incentives
 Trade can make everyone better off
 Markets are usually a good way to organize economic activity
 Governments can sometimes improve market outcomes
 A country's standard of living depends on its ability to produce goods and services
 Prices rise when the government prints too much money
 Society faces a short-run tradeoff between Inflation and unemployment

6. THE FORCES AND TRENDS THAT AFFECT HOW
THE ECONOMY AS A WHOLE WORKS
 The standard of living depends on a country’s production
 Differences in the standard of living from one country to another are quite large.
 Changes in living standards over time are also quite large.
 The explanation for differences in living standards lies in differences in productivity
 Prices rise when the government prints too much money
 When the government creates a large amount of money, the value of money falls.
 Examples: Germany after World War I (in the early 1920s) and the United States in the 1970s

7. Contd…
 Society faces a short-run trade off between inflation and
unemployment
 An increase in the amount of money in the economy stimulates spending and
increases the demand of goods and services in the economy

8. COMPARISON
CHINA INDIA
• Since the late 1970s China has moved from a
closed, centrally planned system
• China has implemented reforms in a
gradualist fashion. In recent years, China has
renewed its support for state-owned
enterprises in sectors considered important to
"economic security," explicitly looking to
foster globally competitive industries.
• India is developing into an open-market
economy, yet traces of its past autarkic
policies remain
• Economic liberalization measures, including
industrial deregulation, privatization of state-
owned enterprises, etc. & in the early 1990s
and served to accelerate the country's growth,
which averaged under 7% per year from 1997
to 2011

9. COMPARISON
Most important problems in both economies are currently the same:
 Agrarian crisis
 Inadequate generation of employment in terms of “decent work”
 Public neglect of social sectors
 Growing inequalities.

10. COMPARISON
RUSSIA INDIA
• Russia has undergone significant changes
since the collapse of the Soviet Union,
moving from a globally-isolated, centrally-
planned economy
• Russia's reliance on commodity exports
makes it vulnerable to boom and bust cycles
that follow the volatile swings in global prices
• India is developing into an open-market
economy, yet traces of its past autarkic
policies remain.
• India's diverse economy encompasses
traditional village farming, modern
agriculture, handicrafts, a wide range of
modern industries, and a multitude of services

11. COMPARISON
USA INDIA
• The US has the largest and most technologically
powerful economy in the world
• US business firms enjoy greater flexibility than
their counterparts in Western Europe
• India is developing into an open-market economy
• Indian Government announced additional reforms
and deficit reduction measures, including
allowing higher levels of foreign participation in
direct investment in the economy

12. LESSONS
 For more inclusive growth, the generation of good quality productive employment is the most
critical variable.
 Need growth strategy that allows and encourages labour productivity increases overall while
significantly expanding expenditure – and therefore income and employment opportunities – in
social sectors.
 Major role for state intervention, through direct public investment and through fiscal, monetary and
market-based measures that alter the structure of incentives for private agents.