1. ECONOMY AND LABOUR FORCE IN INDIA<br /> <br /> <br /> Submitted To:<br />Mrs. Bandhan Preet Kaur Submitted By:<br /> Yogesh Verma<br /> MBA(6414)<br /> <br /> India at a Glance<br /> India is one of the biggest countries with significant diversity. With a land area of 3,287,240 square km and a population of 1,178,732,000, India has abundant natural resources and a large labor pool to grow at a stupendous rate. Under Dr. Manmohan Singh’s leadership and the manifesting of the liberalization policy, the Indian economy has picked up steam and has been registering around 7% real growth every year. The economy was not severely impacted by the global recession of 2007-2009, as tight fiscal regulations kept credit crisis at bay.<br />The issues weighing down on the Indian economy are its unemployment rate and a rather constant poverty rate. The unemployment rate grew in 2009 to 10.7% from 10.4% in 2008 and almost 25% of the population lives under the poverty line. In order to combat this, the Indian administration is keen on encouraging privatization and improving the employment scenario. Privatization will also attract FDI that can help in structural improvements and thus trigger growth.<br />India At A Glance: The Right Place For FDI<br />Be it Foreign Institutional Investors (FII) or Foreign Direct Investment (FDI), ever since India opened up its economy to the world, a plethora of investors have come up, in a bid to tap the huge potential of the market. FDI has been flowing in at an exponential growth rate and FII has been around $10 billion from April-September 2009-2010. These investments have come from the primary market. The amount increased from $7.08 billion in 2006, according to the Securities and Exchange Board of India (SEBI).<br /> The FDI, according to the 2009 figure, was $161.3 billion. Most of the FDI went toward the IT and ITeS sector. With BPOs preferring India as their favorite destination for operations, the English speaking population has contributed to the services sector even more. Besides generating jobs for the skilled workforce, it has broadened the consumer base and resulted in an increase in demand. Experts expect the Indian economy to be the world’s biggest economy by 2040.<br />However, for India to grow into a superpower, major infrastructural changes, along with socialistic programs that address issues such as poverty and unemployment, need to be implemented.<br /> Indian Economy: Statistics<br />In 2009, India's PPP Gross Domestic Product stood at $3.548 trillion, and was the fourth largest economy by volume.<br /> <br />The services sector, backed by the IT revolution, remained the biggest contributor to the national GDP, with a contribution of 58.4%. The industry sector contributed 24.1% and the agriculture sector contributed 17.5% to the GDP.<br />The employment scenario was dominated by the services sector, creating 62.6% of the jobs for the 467 million workforce. The industry sector contributed 25.8% to the GDP and employed 20% of the workforce. The agriculture sector contributed 15.8% to the GDP and created 17.5% jobs (India Labor Force). The unemployment rate remained around 10% in 2009. However, rising inflation became a major concern, and measures to check it are being implemented. In 2009, the rate of inflation was around 10.7% (India Inflation Rate Change).<br />The Poverty Challenge<br />One of the major challenges for the Indian economy and those responsible for operating it, is to remove the economic inequalities that are still persistent in India after its independence in 1947. Poverty is still one of the major issues although these levels have dropped significantly in recent years. Over 25% of the working Indian populace is living below the poverty line (India Poverty Line and Gini Index).<br /> <br />Poverty is a challenge that’s becoming increasingly important in relationship to the alarming rate of new births. This implies that ever more rapid change, or birth control policies like the ‘One Child’ policy in China, are needed to reduce the numbers affected by poverty in the vast Indian economy.<br /> <br />The per capita income of India is 4,542 US Dollars in the context of Purchasing Power Parity. This is primarily due to the 1.1 billion population of India, the second largest in the world after China. In nominal terms, the figure comes down to 1,089 US Dollars, based on 2007 figures. According to the World Bank, India is classed as a low-income economy. <br />India - Fast Facts<br />India is a lower income economies comes under South Asian region as to the classification made by the World Bank on the basis of income and region for the year 2006.<br />India is one among the fastest growing economies over the world. The economy follows a mixed type nature with high importance to the market friendliness. The services sector contributes a largest share to the GDP in the country followed by the industries.<br />Major agricultural products in the country are rice, wheat, jute, cotton, sugarcane, fish, and goat. Important industries<br />are steel, chemicals, textiles, machinery, software, and food processing. The services industry in the country is experiencing a faster growth presently.<br />Indian economic review<br />Indian economy has been among one of leading performers in global economic scenario. However, there have been a couple of problems like inflation that have offset progress of Indian economy in recent times<br />Growth of Indian economy<br />As per economic review of India, this nation has been making steady progress in last few years, a fact which is obvious when its rate of growth in last couple of financial years is looked at. For example in financial year 2006, rate of growth achieved by Indian economy was 9.6 percent and in fiscal 2007, this rate came down a touch to about 9.2 percent.<br />There have been a number of causes behind growth of Indian economy in last couple of years. A number of market reforms have been instituted by Indian government and there has been significant amount of foreign direct investment made in India. Much of this amount has been invested into several businesses including knowledge process outsourcing industries.<br />India's foreign exchange reserves have gone up in last few years. Real estate sector as well as information technology industries of India have taken off. Capital markets of India are doing pretty well too. All these factors have contributed to growth of Indian economy.<br />Problems of Indian economy<br />However, as of financial year 2008, situation of Indian economy is far from being rosy. A number of economic crises have besieged Indian economy of late. Rates of inflation have been high. Reserve Bank of India, which is apex economic body of India, has been trying its best to limit rate of inflation to 4 percent but by middle phase of financial year 2008, rate of inflation had reached 11 percent. This has been highest in last decade and one year.<br />There have been other problems like increase in expenses of important commodities like food and oil. India is facing a boom in construction industry, but there are not enough resources. Problems like these are only adding to India's woes. India has also been hit hard by ongoing global recession and it is being assumed that it would take a bit of time for Indian economy to come out of it.<br />India economic report<br />An India economic report contains detailed information on various aspects that are important to its economy as a whole. Economic report India is releases by Finance Ministry of India.<br />Monthly economic reports<br />Monthly economic reports are an important part of Indian economic reports. These are brought out on a monthly basis. These reports provide highlights of economic developments that have been achieved by Indian economy in a particular month. There are other important details like rate of growth in that month in comparison to same time period, previous financial year.<br />India economic growth<br />India's economic growth really kicked off in 1990s when India made its markets more accessible. This was done by introducing a number of economic reforms. From that point in time Indian economy has been growing at a steady pace. However, India's economic growth<br />has not been exactly steady. In 1991, Rajiv Gandhi-led Indian government imposed limits on office holders regarding expansion of capacity, brought down corporate taxes, and abolished price controls. This led to an increase in growth of Indian economy.<br />But there are some disparities across states and sectors. For example, Maharashtra has been in better economic condition than states like Bihar.<br />In past, India's economic growth has been hampered by a variety of factors. For example in 2002, lesser expenditures in areas like power, telecommunications, construction, real estate and transportation prevented good growth of Indian economy. This led to permission and promotion of foreign investment, which has contributed to a continuous rate of development in last one and a half year.<br />India Economic Forecast<br />India is a fascinating country from an economic standpoint because it is so diverse. In India, you see many of the more traditional industries such as village farming, fishing, and handicrafts that are blended with modern sectors such as telecommunications, transportation, and tourism. Today, nearly 50% of the people work in the agriculture, fisheries, and farming sectors and with the Progressive Alliance or UPA, India’s government has been able to boost the rural economy by developing basic facilities and infrastructure. With this, the quality of life for the poor people living and working in rural areas has improved significantly.<br />Some of the other areas that have changed to improve India’s economy includes the government reducing controls on foreign imports and exports, loosening controls for investments, and allowing higher limits for Foreign Direct Investment in a few of the primary sectors. While this country has experienced growth and economic improvements, fast tariff growth in some of the more sensitive sectors to include agriculture, fisheries, and farming could cause challenges for foreign access to the country’s huge and expanding market.<br />India economic forecast for 2009-10<br />As per India economic forecast for 2009-10, in coming general election there would be a new coalition government at center. According to assumptions, Indian National Congress, which is administering India at present would find it hard to hold on to their present seat of power.<br />According to economic forecast India, Indian national government would find it hard to adjust to effects of recession that is holding entire economic globe in it clutches. Reasons being, they do not have a proper economic backup plan and present fiscal policies are not firm enough to shore up Indian economy.<br />As a result of this financial crisis, Indian national government had to turn their economic policies upside down. There had been a deduction in rates of interest by 100 basis points and more is supposed to follow in financial year 2009.<br />There would be measures taken in India to minimize risks associated with global economic meltdown. It has been forecast that in financial year 2009-10, rate of growth of real gross domestic product of India would be 6.1 percent.<br />Indian economy has recently experienced a reversal in increase of prices of commodities. In spite of that there are chances of upward inflation and this would be harmful to Indian economy.<br />Value of Indian national rupee would increase and there would be more parity in its exchange rate statistics as far as United States dollar is concerned. There would, however, be a fall in financial year 2009, in value of Indian national rupee at a rate of 7.8 percent, when seen from a year-on-year perspective. On an average, in that financial year $1 would be worth INR 47.<br />India and the Global Economy<br />India, an emerging economy, has witnessed unprecedented levels of economic expansion, along with countries such as China, Russia, Mexico and Brazil. India, being a cost effective and labor intensive economy, has benefited immensely from outsourcing of work from developed countries, and a strong manufacturing and export oriented industrial framework. As the economic pace is picking up, global commodity prices have staged a comeback from their lows and global trade has also seen reasonably healthy growth over the last two years.<br /> Economic Prospects for 2010<br />The global economy seems to be recovering after the recent economic shock. The Indian economy, however, was hit in the latter part of the global recession and the real economic growth has witnessed a sharp fall, followed by lower exports, lower capital outflow and corporate restructuring. The global economies are expected to continue to sustain themselves in the short-term, as the effect of stimulus programs is yet to bear fruit and tax cuts are working their way through the system in 2010. Due to the strong position of liquidity in the market, large corporations now have access to capital in the corporate credit markets.<br />India’s Economic Outlook Projection 2007200820092010 GDP Growth 9.40%7.30%5.40%7.20%CPI 6.40%9.30%5.50%4.90%<br />Indian Economy 2010<br />In order to sustain economic growth during the time of the worst recession, government authorities in India have announced the stimulus packages to prop up economic growth. To finance the stimulus packages, the Indian government has raised over $100 billion over the last four quarters in a way to finance the stimulus package. The country’s public debt, according to the RBI, has surged to over 50% of the total GDP and the RBI has started printing new currency notes.<br /> <br />Central Government Debt in Rs. Crores (10 Million)Q3 2008Q3 2009% of GDP Public Debt (Sum of 1 and 2)2,099,286.23 2,505,450.74 50.71% 1. External Debt237,351.77 294,941.67 2. Internal Debt1,861,934.46 2,210,509.07 <br />Labour Force In India<br />India's labour force exhibits extremes ranging from large numbers of illiterate workers unaccustomed to machinery or routine, to a sizable pool of highly educated scientists, technicians, and engineers, capable of working anywhere in the world. A substantial number of skilled people have left India to work abroad; the country has suffered a brain drain since independence. Nonetheless, many remain in India working alongside a trained industrial and commercial work force. Administrative skills, particularly necessary in large projects or programs, are in short supply, however. In the mid-1990s, salaries for top administrators and technical staff rose sharply, partly in response to the arrival of foreign companies in India.<br />Labour Relations<br />The Trade Unions Act of 1926 provided recognition and protection for a nascent Indian labour union movement. The number of unions grew considerably after independence, but most unions are small and usually active in only one firm. Union membership is concentrated in the organized sector, and in the early 1990s total membership was about 9 million. Many unions are affiliated with regional or national federations, the most important of which are the Indian National Trade Union Congress, the All India Trade Union Congress, the Centre of Indian Trade Unions, the Hind Mazdoor Sabha, and the Bharatiya Mazdoor Sangh. Politicians have often been union leaders, and some analysts believe that strikes and other labour protests are called primarily to further the interests of political parties rather than to promote the interests of the work force.<br />The government recorded 1,825 strikes and lockouts in 1990. As a result, 24.1 million workdays were lost, 10.6 million to strikes and 13.5 million to lockouts. More than 1.3 million workers were involved in these labour disputes. The number and seriousness of strikes and lockouts have varied from year to year. However, the figures for 1990 and preliminary data from 1991 indicate declines from levels reached in the 1980s, when in some years as many as 35 million workdays were lost because of labour disputes.<br />The isolated, insecure, and exploited labourers in rural areas and in the urban unorganized sectors present a stark contrast to the position of unionized workers in many modern enterprises. In the early 1990s, there were estimates that between 10 per cent and 20 per cent of agricultural workers were bonded labourers. The International Commission of Jurists, studying India's bonded labour, defines such a person as one who works for a creditor or someone in the creditor's family against nominal wages in cash or kind until the creditor, who keeps the books and sets the prices, declares the loan repaid, often with usurious rates of interest. The system sometimes extends to a debtor's wife and children, who are employed in appalling working conditions and exposed to sexual abuse. The constitution, as interpreted by India's Supreme Court, and a 1976 law prohibit bonded labour. Implementation of the prohibition, however, has been inconsistent in many rural areas.<br />Many in the urban unorganized sector are self-employed labourers, street vendors, petty traders, and other services providers who receive little income. Along with the unemployed, they have no unemployment insurance or other benefits.<br />Recent trends<br />The total number of persons in the labour force is unknown. According to official figures, from 1981 to 2001 the total number of workers grew more than 50 per cent from approximately 245 million to 402 million persons. These figures count only those who are considered to have “engaged in economically productive activity for 183 days or more.” The actual number of persons in the labour force is likely to be much higher. From 1983 to 1994, the nation’s unemployment rate declined from 8.3 per cent to 6 per cent and then increased to 7.3 per cent by 2000. Unemployment rates have historically been higher in urban areas, but rural and urban unemployment rates became nearly equal by 2000 (7.2 and 7.7 per cent, respectively).<br />