Macroeconomic Indicators of Factors Affecting the Indian Economy
FACTORS AFFECTING INDIAN ECONOMY
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Gross Domestic Product
The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. GDP = C + G + I + NX
Where:
"C" is equal to all private consumption, or consumer spending, in a nation's economy
"G" is the sum of government spending
"I" is the sum of all the country's businesses spending on capital
"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports Imports)
Inference:
In 1970’s, the government led by Morarji Desai eased restrictions on capacity expansion for incumbent companies, removed price controls, reduced corporate taxes and promoted the creation of small scale industries in large numbers.
In 1990’s, the collapse of the Soviet Union, which was India's major trading partner, and the Gulf
War, which caused a spike in oil prices, resulted in a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans.
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Prime Minister Narasimha Rao, along with his Finance Minister Manmohan Singh, initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.
While the credit rating of India was hit by its nuclear weapons tests in 1998, it has since been raised to investment level in 2003 by S&P and Moody's.
Starting in 2012, India entered a period of more anemic growth, with growth slowing down to 4.4%.
Other economic problems also became apparent: a plunging Indian rupee, a persistent high current account deficit and slow industrial
1|Page
Gross Domestic Product
The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. GDP = C + G + I + NX
Where:
"C" is equal to all private consumption, or consumer spending, in a nation's economy
"G" is the sum of government spending
"I" is the sum of all the country's businesses spending on capital
"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports Imports)
Inference:
In 1970’s, the government led by Morarji Desai eased restrictions on capacity expansion for incumbent companies, removed price controls, reduced corporate taxes and promoted the creation of small scale industries in large numbers.
In 1990’s, the collapse of the Soviet Union, which was India's major trading partner, and the Gulf
War, which caused a spike in oil prices, resulted in a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans.
2|Page
Prime Minister Narasimha Rao, along with his Finance Minister Manmohan Singh, initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.
While the credit rating of India was hit by its nuclear weapons tests in 1998, it has since been raised to investment level in 2003 by S&P and Moody's.
Starting in 2012, India entered a period of more anemic growth, with growth slowing down to 4.4%.
Other economic problems also became apparent: a plunging Indian rupee, a persistent high current account deficit and slow industrial