Introduction of India economic environment--National-zone--V-Next

Introduction of India economic environment

India is the world's largest democracy and second-most populous country. The total population of India was 1.3 billion, of which 29.2% of the population are 0-14 years old, 65.3% of the population are 15-64 years old and 5.5% of the population are over 65 years old. According to UN estimates, its population is expected to overtake China's in 2028 to become the world's most populous nation. The economy of India is a developing mixed economy. It is the world's sixth-largest economy by nominal GDP ($2.439 trillion). In 1991, India government initiated a program of economic liberalization and reform, opening up the economy to global trade and investment. In the first 10 years of the twenty-first Century, the average growth rate of GDP in India reached 8.5%. After the international financial crisis in 2009, India's economy had a strong recovery. The GDP growth rate remained above 7%. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. India ranks second worldwide in farm output. Slightly less than half of the workforce is in agriculture but contributes to a declining share of its GDP (17.4% in 2016). India has one of the fastest growing service sectors in the world with an annual growth rate above 9% since 2001. India has become a major exporter of IT services, Business Process Outsourcing (BPO) services, and software services with $154 billion revenue in FY 2017. This is the fastest-growing part of the economy. The IT industry continues to be the largest private-sector employer in India. India is the third-largest start-up hub in the world with over 3,100 technology start-ups in 2014–2015. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services, business outsourcing services, and software workers. The industry sector has held a steady share of its economic contribution (28.8% of GDP in 2016). The Indian automobile industry is one of the largest in the world with an annual production of 21.48 million vehicles (mostly two and three-wheelers) in 2013–14. India had $600 billion worth of retail market in 2015 and one of the world's fastest growing e-commerce markets. In the short term, India's economy is under the pressure of high financial deficits, high inflation, high interest rates, and devaluation caused by capital outflows. However, the long-term growth prospective of the Indian economy is positive due to its young population, corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy.

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India to hold top spot for economic growth but oil poses risk: Poll


The over $2 trillion economy, which surpassed France recently to become the world's sixth-largest economy, is expected to grow 7.4 percent in the fiscal year ending in March 2019 and 7.6 percent next, according to average forecasts in the latest poll of nearly 70 economists, taken July 19-24. India will remain the fastest-growing major economy this year supported by increased government spending ahead of next year's general election, but rising oil prices pose the biggest downside risk, a Reuters poll of economists showed. The over $2 trillion economy, which surpassed France recently to become the world's sixth-largest economy, is expected to grow 7.4 percent in the fiscal year ending in March 2019 and 7.6 percent next, according to average forecasts in the latest poll of nearly 70 economists, taken July 19-24. In contrast, analysts in the most recent Reuters poll expect China's economy, the world's second largest, to grow 6.6 percent this year. But record high costs of diesel and petrol - which are the biggest items on India's import bill - at a time when the rupee is weakening and close to a record low has become a major burden, posing a risk to those forecasts. Over 60 percent of 41 economists who answered an additional question on risks to the outlook said the recent rise in oil prices was the biggest threat, as that would increase the prospect for more interest rate hikes by the Reserve Bank of India. "We think that for every 10 dollar rise in oil prices, India growth declines by 30-40 basis points. This impacts growth by lowering consumption and raising input costs," said Shashank Mendiratta, economist at ANZ. India's economy has started to recover after a slowdown caused by a ban on high-value currency notes in November 2016, followed by the hasty implementation of a goods and services tax (GST) in July last year. Indeed, growth has been accelerating over the past year from a low of 5.6 percent to above 7 percent in recent quarters. But, while the quarterly growth outlook for India is relatively steady through to the end of next year, it is not expected to match or surpass the 7.7 percent rate reported for the latest quarter. "Relatively higher interest rates, high oil prices, uncertainties on the exchange rate, gradually building up political risks from the 2019 elections “ are all headwinds that can slow down the growth momentum," noted Samiran Chakraborty, senior economist at Citi. "Much will depend on the extent of (government) spending in fiscal year 2019 and its multiplier effect on the rural economy." The consensus for growth has remained largely unchanged for almost a year in Reuters polls, despite worries about escalating trade disputes, which has dented confidence among economists surveyed on most other major economies. Indeed, the Reuters poll growth forecast for India this fiscal year is now a touch higher than the International Monetary Fund's projection, at 7.3 percent. Some respondents also said the trade dispute between the United States and its trading partners will have only a minimal impact on the Indian economy, compared to others in the region.
"The big concern for many economies in Asia at the moment is the growing protectionist threat from the U.S. It is difficult to know how events will unfold, but the key point for India is that it doesn't look particularly exposed to a more protectionist U.S.," noted Shilan Shah, senior India economist at Capital Economics.


TWO CONSECUTIVE HIKES
The latest Reuters consensus was for India retail inflation to average 4.9 percent in the year ending March 2019, up from 4.7 percent predicted just three months ago. While inflation has been above the RBI's medium-term target of 4 percent for eight months and is expected to stay that way through to the end of 2019, economists in the poll were almost evenly split over the next rate hike. Thirty-seven of 63 economists said the RBI will raise rates again in August and 22 respondents said the next rate hike would come by end-2018 or in the January-March quarter next year. While one economist still expects a hike in the third quarter of next year, the remaining three respondents do not expect any change until end-2019. That suggests, several economists have merely brought forward their expectations for tightening compared to the poll taken ahead of the central bank's June meeting, when the median consensus was for a hike in the last quarter of this year, followed up by an increase in early 2020. "We had previously expected the start of the rate hike cycle in Q4 2018. However, reflecting this earlier than expected move (in June), we now expect the rate hikes to be front-loaded," noted Morgan Stanley. If the RBI does raise rates next month, it would be the first time since October 2013 that the central bank has hiked borrowing costs at two consecutive policy meetings.

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NEW DELHI: Prime Minister Narendra Modi has called a meeting to discuss and set targets for infrastructure ministries, as his government enters the last year of its term. “The Prime Minister’s Office has called a meeting on August 2 to fix targets for housing and infrastructure ministries. The ministries will share their plans in the presence of the Prime Minister,” an aviation ministry official said, speaking on the condition of anonymity. The meeting is taking place at a time when airlines are complaining about infrastructure constraints at airports that they claim are hurting their growth plans. The aviation ministry, which has also been called for the meeting, is likely to share plans that include building and upgrading airports through public and private funding across the country to increase their capacity. The plans include upgrading airports in a manner that leads to improvement in efficiency of the existing infrastructure. The ministry is also likely to share details of the Airports Authority of India’s (AAI) proposal to invest Rs 20,000 crore to build and upgrade airports over a period of four years. “We are already working on our plan to build and upgrade airport infrastructure. Infrastructure development takes time and results of the plan will start showing in a couple of years,” said a senior AAI official, who did not want to be identified. AAI is also considering building 375 new parking bays at airports based on the aircraft induction plans of Indian airlines. The airport capacity creation is not just limited to investments by the AAI. A substantial part of the investments is to come from the private sector, which is set to build new airports in Greater Noida, Navi Mumbai, Goa and Pune, among others. Plans are also to build a second airport in Kolkata and in Chennai. Local airlines complain that they were unable to add new flights due to infrastructure deficit at airports. Key airports of Mumbai and Delhi are only offering slots between 11pm and 5 am for new services. Pune and Goa are not offering slots for any new flights in the daytime. Bengaluru, Chennai and Kolkata do not have any new slots at peak timings — 6-10 am and 5-9 pm. Airports in towns and small cities such as Jaipur, Jammu, Srinagar and Patna are also not offering desirable slots.

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India said on Wednesday that the “blue economy” is the foundation of an alternative economic model for sustainable development and that this ocean should be the focus of the center. In the keynote speech at the 2nd ASEAN-India Blue Economy Symposium, the Secretary of the Ministry of Foreign Affairs (Sreeti Saran) said: "The blue economy is certainly one of the most important and important areas of cooperation. By using marine resources Promoting economic and social development in a sustainable manner is imperative without destroying these limited natural resources. She said that ASEAN and India have a wide range of cooperation in the blue economy and reiterated that the Indian government is committed to promoting the blue economy. "Our Prime Minister Narendra Modi has spoken this many times at the national and international levels. He observed: "For me, the blue chakras or the wheels of the Indian flag represent the potential of the blue revolution or the ocean economy. This is the importance of the ocean economy to us," she stressed. Ms. Saran also said that the seabed currently accounts for the global supply of hydrocarbons from the Vietnamese Ministry of Foreign Affairs, the Research and Information System (RIS) of the developing countries, the senior officials of the ASA's ASEAN-India Center and the National Maritime Foundation of India. With 32% of the volume, the ocean has great potential to produce renewable energy. “Emerging technologies are opening up new areas of marine resource development, including the exploitation of seabed mineral resources,” she said. “The ocean is the key to the fate of a rapidly evolving global order. Covering 72% of the Earth's surface, which constitutes more than 95% of the biosphere, the ocean provides a large amount of food and livelihoods for the world's population. Part of the global trade in goods travels by sea, ocean and coast. The environment is also a big tourist attraction," she said.

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India has become the world's sixth-biggest economy, pushing France into seventh place, according to updated World Bank figures for 2017. India's gross domestic product (GDP) amounted to $2.597 trillion at the end of last year, against $2.582 trillion for France. India's economy rebounded strongly from July 2017, after several quarters of slowdown blamed on economic policies pursued by Prime Minister Narendra Modi's government. India, with around 1.34 billion inhabitants, is poised to become the world's most populous nation, whereas the French population stands at 67 million. This means that India's per capita GDP continues to amount to just a fraction of that of France which is still roughly 20 times higher, according to World Bank figures. India has doubled its GDP within a decade and is expected to power ahead as a key economic engine in Asia, even as China slows down. According to the International Monetary Fund, India is projected to generate growth of 7.4 percent this year and 7.8 percent in 2019, boosted by household spending and a tax reform. This compares to the world's expected average growth of 3.9 percent. The London-based Centre for Economics and Business Research, a consultancy, said at the end of last year that India would overtake both Britain and France this year in terms of GDP, and had a good chance to become the world's third-biggest economy by 2032. At the end of 2017, Britain was still the world's fifth-biggest economy with a GDP of $2.622 trillion. The US is the world's top economy, followed by China, Japan and Germany.

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