The document provides information about India's economy and demographics. Some key points: - India is the 7th largest country by area and has the 2nd largest population in the world at over 1.2 billion people. It is also the largest democracy globally. - India has a rapidly growing economy, currently ranking as the 10th largest GDP nationally and 4th largest by PPP. It has experienced strong export growth and overtook China in this area in 2011. - However, India also faces economic challenges like high inflation, unemployment, poverty, and infrastructure deficits. Over 30% of the population lives below the international poverty line.

1. India at a Glance
• A Sub-continent endowed with huge natural resources
and bio-diversity is protected by the mighty Himalayas
on the north , the Arabian sea on the West, the Indian
Ocean on the South and the Bay of Bengal on the East
.
• 7th largest country in geographical area.
• 2nd largest country in population (1.2 billion).
• Largest democracy in the world.
• An epitome of unity in diversity- a multi-ethnic, multireligious, multi-cultural and multi-linguistic plural
society.
• 2nd fastest growing economy in the world.
• Ranks 10th in GDP in nominal terms and 4rth in PPP
terms.
2/19/2014
hasnain baber (c)
1

2. INDIA BY THE NUMBERS 2012
•
•
•
•
•
•
•
•
•
•
Population: 1.22 billion
Yearly increase: 18 million
Major group: 50% - 0 – 25 years
More than 1.53 billion people by the end
of 2030.
Average life expectancy: 68.6 years
Average fertility rate: 2.7 children per
woman
Male literacy rate at 75.96% and female
at 54.28%
LR 74.04% in 2011 from 65.38% in 2001
About 72.2% of the population lives in
some 638,000 villages and the rest 27.8%
in about 5,480 towns and urban
agglomerations
Homes without electricity: 25 per cent
2/19/2014
hasnain baber (c)
2

3. INDIA BY THE NUMBERS 2012
• In 2011, World Bank stated, 32.7% of the
below the international poverty line of
US$ 1.25 per day (PPP) while 68.7% live
on less than US$ 2 per day.
• Internet users: 105 million today and 150
million in Dec, 2012
• Mobile phone subscribers: 960.90
million,
• Telephone landlines: 38.76 million
• GDP: 1847.98 billion US dollars in 2011
• Unemployment rate: 3.8 per cent in
2010/11 fiscal year.
• Inflation: 6.87 per cent in July of 2012
• India has overtaken China in exports
growth rate recording an increase of
16.1% in 2011
• Officially recognized languages: 18
2/19/2014
hasnain baber (c)
3

4. EU crisis: Impact on India
- bad
• Eliminated the benefits of
a weak rupee, which is
down 20% in a year, to
Indian exporters
• No more Cheap money
from Europe
• If it (the Eurozone
collapses) happens, the
implications will be very
strong on Indian
Economy.“
• Foreign investment is
withering badly too.
2/19/2014
hasnain baber (c)
4

5. Impact of Crisis on Indian Economy bad
• Country is feeling some pain of financial crisis
• Tourism, textiles and the crucial information technology
sectors are all suffering as demand from western countries
dries up.
• Investment on Infrastructure is the remedy – Dr. M. Singh
2/19/2014
hasnain baber (c)
5

6. Impact of Crisis on Indian Economy Good country's banks counterparts
• The
seem stable
compared to their
•
•
•
•
2/19/2014
in richer countries.
Bollywood is thriving as the stuff
of dreams continues to sell even
in hard times.
That people in India love to save
money
Most Indians typically spend their
entire lives saving for a house
even if it takes them 20 years to
do that. Seldom do they take
loans [just] to finance their
lifestyle.
That domestic demand doesn't
slump
hasnain baber (c)
6

7. Impact of Crisis on Indian Economy Good lot of what India produces
• "“A
is for domestic consumption
given the large home-based
market. So it kind of hedges
the slow down.”- Murtaza
Haider, Ryerson University
• Indians use their savings in
troubled times as a kind of
informal social safety net.
• It fuels consumer demand and
can ease some of the worst
effects of the downturn.
• Enemy is overspending. Typical
Indian
attitude
is
the
scapegoat.
2/19/2014
hasnain baber (c)
7

8. Impact of Crisis on Indian Economy Ugly
• India reported a current account deficit equivalent to 21.7 Billion
USD in the first quarter of 2012.
• India Current Account averaged -1.1700 Billion USD reaching an
all time high of 7.3600 Billion USD in March of 2004 and a record
low of -21.7000 Billion USD in March of 2012.
2/19/2014
hasnain baber (c)
8

9. Indian Economy – Ugly side
• Rural poverty leads horrible wave
of suicides by indebted farmers
• Nos. 250,000.
• Two farmers a day killing
themselves, for the past 15 years.
• India lives in the modern world
with 14th-century infrastructure.
• India has name-sake roads,
dungeon airports, and stinking
seaports, even sanitation projects
are subject to cutbacks.
2/19/2014
hasnain baber (c)
9

10. Indian Polity – Ugly side
• 2G - illegally undercharging
mobile telephony
companies for frequency
allocation licenses.
• Commonwealth: large scale
misappropriation of money
• Coal Mines Corruption (KN)
– Illegal allotment and Kick
Backs
• Adarsh – Violation of
Allotment of Flats (MH)
• S-band spectrum by Antrix
to Devas – no bidding
2/19/2014
SCAM
LOSS
Action
2G
US$33.56
billion
Underway
CW
Rs.70,000
crores
Taken
Mines
Outsmarts
all scams
Underway
Adarsh
Value not
known
Underway
S-band
Rs.200000
crores
Underway
hasnain baber (c)
10

11. Some Findings – For your
introspection
• India’s Real GDP is to register an average growth of around 9.2% during FY11FY20, on the back of
• robust private consumption demand,
• increased infrastructure spending, substantial growth in investment activity and
• strong growth in services sector.
2/19/2014
hasnain baber (c)
11

12. India GDP to Claim over US in this
Decade
2/19/2014
hasnain baber (c)
12

13. Some Findings – For your
introspection
• India and China have over US in terms of college graduates in science and math
is overwhelming. Michael's graph estimated the trend that from 1973 to 2001
the US share was diminishing as India and China were growing rapidly.
• Not every one of those graduates according to the McKinsey Global Institute is
up to par with the standards that we have in the U.S. (10% in China and 25% in
India) but that is clearly changing.
2/19/2014
hasnain baber (c)
13

14. Areas of Concern
• High rate of Inflation( 10-12%)
• Extreme Poverty (37% , more than 300 million below poverty level)
• High Unemployment
• Illiteracy and Education ( lack of quality education)
• Lack of Health Care to the masses and Sanitation.
• High Public Debt.
• Corruption, Black money, stashing in foreign banks.
• Crime and Violence in politics and society- lack of social justice.
2/19/2014
hasnain baber (c)
14

15. Elements of Economic Environment
It has mainly five main components:1. Economic Conditions
2. Economic System
3. Economic Policies
4. International Economic Environment
5. Economic Legislations
2/19/2014
hasnain baber (c)
15

16. Economic Conditions
• Economic Policies of a business unit are largely affected
by the economic conditions of an economy. Any
improvement in the economic conditions such as
standard of living, purchasing power of public, demand
and supply, distribution of income etc. largely affects the
size of the market.
• Business cycle is another economic condition that is very
important for a business unit. Business Cycle has 5
different stages:(i)Prosperity,
(ii)Boom,
(iii)Decline,
(iv)Depression,
(v)Recovery.
2/19/2014
hasnain baber (c)
16

17. Following are mainly included in Economic
Conditions of a country:I. Stages of Business Cycle
II. National Income, Per Capita Income and
Distribution of Income
III. Rate of Capital Formation
IV. Demand and Supply Trends
V. Inflation Rate in the Economy
VI. Industrial Growth Rate, Exports Growth Rate
VII. Interest Rate prevailing in the Economy
VIII. Trends in Industrial Sickness
IX. Efficiency of Public and Private Sectors
X. Growth of Primary and Secondary Capital Markets
XI. Size of Market
2/19/2014
hasnain baber (c)
17

18. MEASURING PRODUCTIVITY
• Gross National Income (GNI):
The market value of final goods and services newly
produced by domestic factors of production at home
or abroad.
e.g.: Ford U.S. $ + Ford Mex with U.S. $ = U.S. GNI
• Gross Domestic Product (GDP):
Measures the value of production that occurs within a
country’s borders without regard to whether the
production is done by domestic or foreign factors of
production.
2/19/2014
hasnain baber (c)
18

19. KEY ECONOMIC INDICATORS
• Per Capita Income: Income level per person.
• Per Capita GNI: Used by the world bank for lending
policies
• Quality of Life: Life expectancy, educational standards
(Literacy), etc.
• Purchasing Power: What a sum of money actually can
buy.
• Percentage of GDP Generated from Agriculture: Higher in
developing countries.
2/19/2014
hasnain baber (c)
19

20. WORLD BANK
CLASSIFICATION
• First World:
High income industrial countries.
• Second World:
Countries that formerly had centrally planned
economies. These countries are undergoing rapid
change and are found in both the upper-middle and
the lower-middle income categories.
• Third World:
Also known as Developing Countries or LDC’s are the
lower-middle and low income economies.
2/19/2014
hasnain baber (c)
20

21. KEY ECONOMIC FACTORS
• Economic Growth.
• Privatization.
• Inflation: Affects interest rates, the cost of living, &
consumer & investor confidence.
• Hyperinflation: Is a rate of inflation that is extremely
high for a sustained period of time.
• Balance of payments: Summarizes all international
transactions between domestic residents & foreign
residents.
• External Debt.
2/19/2014
hasnain baber (c)
21

22. Economic Systems
An Economic System of a nation or a country may be
defined as a framework of rules, goals and incentives
that controls economic relations among people in a
society. It also helps in providing framework for
answering the basic economic questions. Different
countries of a world have different economic systems
and the prevailing economic system in a country affect
the business units to a large extent.
2/19/2014
hasnain baber (c)
22

23. Economic conditions of a nation can be of any one of
the following type:1. Capitalism:- The economic system in which business
units or factors of production are privately owned and
governed is called Capitalism. The profit earning is the sole
aim of the business units. Government of that country does
not interfere in the economic activities of the country. It is
also known as free market economy. All the decisions
relating to the economic activities are privately taken.
Examples of Capitalistic Economy:- England, Japan, America
etc.
2/19/2014
hasnain baber (c)
23

24. 2. Socialism:- Under socialism economic system, all the
economic activities of the country are controlled and
regulated by the Government in the interest of the public.
The first country to adopt this concept was Soviet Russia. The
two main forms of Socialism are: (a) Democratic Socialism:- All the economic activities are
controlled and regulated by the government but the people
have the freedom of choice of occupation and consumption.
(b) Totalitarian Socialism:- This form is also known as
Communism. Under this, people are obliged to work under
the directions of Government.
3. Mixed Economy:- The economic system in which both public
and private sectors co-exist is known as Mixed Economy.
Some factors of production are privately owned and some
are owned by Government. There exists freedom of choice of
occupation and consumption. Both private and public sectors
play key roles in the development of the country.
2/19/2014
hasnain baber (c)
24

25. Economic Policies
• Government frames economic policies. Economic Policies affects the
different business units in different ways. It may or may not have
favorable effect on a business unit. The Government may grant subsidies
to one business or decrease the rates of excise or custom duty or the
government may increase the rates of custom duty and excise duty, tax
rates for another business. All the business enterprises frame their
policies keeping in view the prevailing economic policies. Important
economic policies of a country are as follows:-
1. Monetary Policy:- The policy formulated by the central bank of a country
to control the supply and the cost of money (rate of interest), in order to
attain some specified objectives is known as Monetary Policy.
2/19/2014
2. Fiscal Policy:- It may be termed as budgetary policy. It is related with the
income and expenditure of a country. Fiscal Policy works as an instrument
in economic and social growth of a country. It is framed by the
government of a country and it deals with taxation, government
expenditure, borrowings, deficithasnain baber (c) and management of public
financing
debts in an economy.
25

26. 3. Foreign Trade Policy:- It also affects the different business
units differently. E.g. if restrictive import policy has been
adopted by the government then it will prevent the domestic
business units from foreign competition and if the liberal
import policy has been adopted by the government then it will
affect the domestic products in other way.
4. Foreign Investment Policy:- The policy related to the
investment by the foreigners in a country is known as Foreign
Investment Policy. If the government has adopted liberal
investment policy then it will lead to more inflow of foreign
capital in the country which ultimately results in more
industrialization and growth in the country.
5. Industrial Policy:- Industrial policy of a country promotes and
regulates the industrialization in the country. It is framed by
government. The government from time to time issues
principals and guidelines under the industrial policy of the
country.
2/19/2014
hasnain baber (c)
26

27. Global/International Economic
Environment
The role of international economic environment is
increasing day by day. If any business enterprise is
involved in foreign trade, then it is influenced by not
only its own country economic environment but also
the economic environment of the country from/to
which it is importing or exporting goods. There are
various rules and guidelines for these trades which are
issued by many organizations like World Bank, WTO,
United Nations etc.
2/19/2014
hasnain baber (c)
27

28. Economic Legislations
Besides the above policies, Governments of
different countries frame various legislations which
regulates and control the business.
2/19/2014
hasnain baber (c)
28

29. Objectives of Economic Environment
 Proper Functioning of an
Economy
 Knowledge of New
Opportunities & Resources
 Study of Environmental
Factors
 Removal of Obstacles &
Challenges
 Changeable Use of
Environment
 Optimum Use of
Environment
 Minimizing ill effects
2/19/2014
hasnain baber (c)
29

30. Classifications of the Economic
Environment
• Microeconomic environment: It includes the economic environment
of a particular industry, firm or household and is primarily concerned
with price determination of individual factors. The main consideration
from a microeconomic perspective is the efficient allocation of
resources. This is necessary to maximize total output.
2/19/2014
hasnain baber (c)
30

31. • Macroeconomic environment: It includes all the
economic factors in totality. The main consideration
here is the determination of the levels of income and
employment in the economy.
Over the course of the twentieth century, the focus
has shifted from cities and countries to the global
economy being the chief economic unit.
2/19/2014
hasnain baber (c)
31

32. Factors Affecting the
Economic Environment
The economic environment of a nation as well as the
world is impacted by:
• Inflation and deflation: Inflationary and deflationary
pressures alter the purchasing power of money. This
has a direct impact on consumer spending, business
investment, employment rates, government programs
and tax policies.
2/19/2014
hasnain baber (c)
32

33. • Interest rates: Interest rates determine the cost of
borrowing and the flow of money towards businesses.
• Exchange rates: This impacts the price of imports, the
profits made by exporters and investors and
employment levels (also through the impact on the
tourism industry).
• Monetary and fiscal policy: This helps in attaining full
employment, price stability and economic growth.
2/19/2014
hasnain baber (c)
33

34. The economic environment is also influenced by
various political, social and technological factors.
These include a change in government and the
development of new technology and business tools.
2/19/2014
hasnain baber (c)
34

35. Economic Systems: MARKET ECONOMY.
•
The market mechanism involves interaction of price,
quantity, supply and demand for resources and
products.
Factors that make market economy work:
•
•
•
•
•
2/19/2014
Consumer sovereignty  The right of the consumer to decide
what to buy.
Freedom of the enterprise to operate in the market.
The interplay of supply and demand should ensure
proper allocation of resources.
A perfect market economy doesn’t exist.
hasnain baber (c)
35

36. Economic Systems: MARKET ECONOMY.
Characteristics of Market Economies:
• More means of production are privately owned.
• Markets are very competitive.
• Strong currencies.
• Institutional support.
• Well-functioning infrastructure.
• Investment opportunities for individuals.
2/19/2014
hasnain baber (c)
36

37. Economic Systems: MARKET ECONOMY.
Models of Market Economies:
1.
2.
Consumer-directed: Minimal governmental
participation and promotion of growth through
mobility of production factors.
3.
2/19/2014
Social Welfare: Heavy government spending and high
taxation to pay for social services.
Administratively Guided: Cooperation among
government, management and workers to achieve
growth and full employment.
hasnain baber (c)
37

38. Economic Systems: COMMAND ECONOMY
• The government coordinates the activities of the
economic sectors.
• Goals are set for every enterprise in the country.
• The government is assumed to be a better judge of
how resources are allocated.
• Few countries use strict central planning today.
2/19/2014
hasnain baber (c)
38

39. Economic Systems: MIXED ECONOMY.
• Higher degree of government intervention regarded
in two ways:
• Government ownership of the means of production.
• Government influence in economic decision making.
• Greater degree of reliance on market forces.
2/19/2014
hasnain baber (c)
39

40. INFLATION
• Condition in which prices are going up.
• Consumer Price Index (CPI) measures a fixed basket of goods and
compares their prices over time.
• High Inflation  High Interest Rates
• Banks need to attract money.
• Governments have to slow down economic growth.
2/19/2014
hasnain baber (c)
40

41. BALANCE OF PAYMENTS
• Is a summary statement of all transactions that take place between a
country and the rest of the world during a given period of time
(usually a year).
• Transactions are recorded as debits and credits.
2/19/2014
hasnain baber (c)
41

42. DEBIT TRANSACTIONS
• A debit transaction is a flow for which the home country must pay
and requires the supply of the home currency.
• Imports of goods and services
• Transfers to foreign residents (remittances)
• Acquisition of long-term assets or reduction of a long-term liability (i.e.,
stocks, bonds, real capital)
• Acquisition of a short-term asset or reduction of a short-term liability (i.e.,
bank deposits, cash or short-term bonds such as treasury bills).
2/19/2014
hasnain baber (c)
42

43. CREDIT TRANSACTIONS
• A credit transaction is a flow for which the home country is paid and
increases the demand for the home currency by foreign residents.
•
•
•
•
2/19/2014
Exports of goods and services
Transfers from foreign residents
Sale of a long-term asset or increase of a long-term liability.
Sale of a short-term asset or increase of a short-term liability.
hasnain baber (c)
43

44. 2/19/2014
hasnain baber (c)
44

45. ACCOUNTS IN THE BALANCE OF
PAYMENTS
• Current account: trade in good and services and income from assets
abroad.
• Merchandise trade balance: the net balance of exports minus imports of
merchandise.
• Services: travel, passenger fares, royalties and fees.
• Income receipts: payments on assets.
2/19/2014
hasnain baber (c)
45

46. ACCOUNTS IN THE BALANCE OF
PAYMENTS
• Capital account: transactions in real or financial assets between
countries, such as the sale of real state to a foreign investor.
• Deficit: imports exceed exports.
• Surplus: exports exceed imports.
2/19/2014
hasnain baber (c)
46

47. THE FOREIGN EXCHANGE MARKET
• Exchange rate: relative price, that can be expressed in either
direction.
• If the euro rises against the US dollar, the US dollar falls against the euro.
• Indirect Quotation: How much foreign currency exchanges for one
unit of the domestic currency.
• 1 home currency unit = x foreign currency units.
• Direct Quotation: A country's home currency as the price currency.
• 1 foreign currency unit = x home currency units
.
2/19/2014
hasnain baber (c)
47

48. 02/09/2011
• Direct Quotation
• 1 USD to COP = 1 779
• Indirect Quotation
• 1 COP to USD = 0.000562
2/19/2014
hasnain baber (c)
48