Economic Growth Rate in IndiaIssues and Concerns

Dr. C. MuthurajaDean, Curriculum Development & Research &

Head, Research Department of EconomicsThe American College, Madurai - 625 002

(cmuthuraja@gmail.com) - (M-09486373765)

(Presented in One Day Workshop on ‘Economic Growth Rate in India’ on 30.03.2016 organized by Department of Economics, Mannar Thirumalai Naicker College, Madurai)

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CONTENTS INTRODUCTION Economic Growth Rate Background & Importance Economic Growth Rate Since 1950 Method of Calculation How Is The GDP Of India Calculated? Issues GDP CANNOT BE SOLE CRITERIA TO MEASURE !

Concerns APPEAL

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Introduction Importance of Economic Growth Economic Growth vs Total Growth IE expanded 7.3 % , slowing from an upwardly

revised 7.7 percent growth in the previous quarter GDP Annual Growth Rate in India averaged 6.04

percent from 1951 until 2015 Trade, hotels, transport and communication,

financing, insurance, real estate and business and community, social and personal services : 60 % +

Agriculture, forestry and fishing constitute around 12% - Employs more than 50% of the labor force

Manufacturing: 15%, construction : 8% and mining, quarrying, electricity, gas and water supply:5%

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Economic Growth Rate – Since 1950

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GDP – 2010- 2020 ?

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India vs China GDP

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How is the GDP of India Calculated?

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GDP- Single standard indicator used across the globe to indicate the health of an economy

Policy makers, investors, economists, businesses, bankers, politicians, and even the media keep a close watch on GDP estimates

GDP provides one single number that represents the monetary value of all the finished goods and services produced within a country's borders in a specific time period

GDP may be easy to define but it is complex to calculate, and countries across the globe have different methods to arrive at their country's GDP

GDP of India

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The Data Collection Process : CSO-MOSPI is responsible for macroeconomic data gathering & statistical record keeping- processes- conducting an annual survey of industries and compilation of various indexes like the Index of Industrial Production, Consumer Price Index, etc

GDP Calculation Process : First method is based on economic activity (at factor cost), Second is based on expenditure (at market prices)

Eight industry sectors: Agriculture, forestry and fishing; Mining and quarrying; Manufacturing; Electricity, gas and water supply; Construction; Trade, hotels, transport and communication; Financing, insurance, real estate and business services; Community, social and personal services

Timelines: Each quarter’s data released with a lag of 2 months The Bottom Line: To assess Performance- factor cost GDP &

expenditure-based GDP calculations

Issues on Economic Growth Rate

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Inflation Poor educational standards Poor Infrastructure Balance of Payments deterioration. High levels of private debt Inequality has risen rather than decreased Large Budget Deficit Rigid labour Laws Inefficient agriculture Slowdown in growth

GDP CANNOT BE SOLE CRITERIA TO MEASURE OVERALL GROWTH

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Economic Planner must work on

Is spatial disparity a binding constraint to growth and poverty reduction?

Have spatial disparities in opportunities been a serious constrains to achieving an equitable growth?

Do people have access to primary education and affordable health services?

Is the pattern of government budget allocation equitable across regions and income groups?

 

Concerns: World Bank keeps faith in India story

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Low inflation - Current account deficit to inch up to 1.4% of GDP

States now responsible for 57% of spending (16% of GDP) against 46%

Direct tax base narrow, contributes 5.7% of GDP against 11.2% - Indirect tax base reasonable, contributing 11.4% of GDP against 16.4%

Suggests bringing in alcohol, electricity, and real estate under proposed GST

Joining bigger regional trade agreement such as Regional Comprehensive Economic Partnership to serve India’s interests

Both manufacturing and services need to create jobs

CONCERNS…

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India's prospects relatively robust; to grow at 7.2%: OECD

Optimistic About India Growth Prospects: IMF

Big Infrastructure Plan Ease of Doing Business Focus on Agriculture Focus on Skill Development Enhanced Savings

APPEAL

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INDIAN / ECONOMICS EDUCATIONPLEASE

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QUESTIONS PLEASE

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QUESTIONABLE QUESTIONS

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