ecomic situation in india

India economic situation in India.

India’s growth and economic situation improved due to increased industrial activity ( increased exports ) and bumper agriculture production during last one year.

India’s  foreign exchange reserves are 305, 477 million dollars as on 31.03.2011 as compared to China’s foreign exchange reserves 2,622,000 million dollars as December 2010 and United States foreign exchange reserves 142,925 million dollars as on April 2011.

The strategy to be followed to  promote export policy and to improve balance payment situation. India’s more imports, higher growth of G.D. P., the performance in industrial sectors seems to be clear bearing on imports. Grater industrial activity is seen to be associated with high growth in imports in country.

India’s industrial out put registered a sharp rise in March beating analysis estimates and alloying for more concern  of growth. Exports also maintained the growth tempo surging more than expected.

Factory out put as measured by index of industrial production (IIP) rose 7.3 per cent in March from year earlier almost double the revised 3.7 per cent expansion in February according to data.

Economists cautioned that  growth at best would remain at this level in near future because of rising borrowing costs would dampen demand.

“ We remain hesitant in accepting current industrial print  as sign of consistent strength in near future “ a financial analyst said. Improved growth in manufacturing sector in March is more an indicator of continued volatility in growth sector for last few months .” another financial analyst said.

Capital goods out put recovered in March  after contracting  for three straight months rising an annual  12.9 per cent. But experts said reading should not be interpreted as rise in investments.  “ the face and extent of investment pull up seems over stated “ said Deepali Bhargva chief economist with ING Vysya Bank. She attributed the revival in production capital goods to “ lax growth in first half year which needed to be made up in last quarter.

Amidst the middle east turmoil and series of natural disasters in Japan, India has still managed to perform fairing well at export front.

In 2010-2011 India’s exports went up by 37.5 percent which is fastest growth they have seen since they gained their independence from U.K. in 1947. Due to nations efforts to diversify their markets and increase trade within its region it shipped 245.9 billion dollars goods to other countries. This number went beyond the government  initial goal for year 200 billion dollars. With the strength of past year behind then government set an even higher goals of 450 billion  dollars for 2013-2014 which will be rise 25 % rise in export. In March alone the nation set out 29.I billion dollars worth goods which is highest amount for any single month performance. This is a great news for India after their exports fell by 3.5 % in 2009-2010 because of international financial crises.

Globalization of Indian economy

The process of globalization of Indian economy is irreversible and opening  of India economy has to be managed in a manner so as to derive maximum benefits from world markets. The process should be to strengthen the potential Indian industry to compete efficiently in world markets.

In this context it is suggested there is need to bring about a phased reduction in import tariff to bring them in line with developing countries so that our industry more competitive on world markets. It is further suggested that this with realistic market determined exchange could be helpful in reducing cost of production and give incentive to modernize industry. Simultaneously steps will have to be taken to strengthen  the anti dumping machinery to ensure that domestic industry is not subject to unfair competition.
 It is obvious from above that maintenance of balance payments stability is paramount important that  and this will require achieving high rates of export growth. Exchange rate is one important determinant  of export performance and it is essential to ensure that exchange rate remains supportive of export effort and development process simultaneously.

RBI pegged gross domestic growth (G.D.P. ) at 8 per cent for current financial year- lower than government projection of 9 per cent “ perhaps the threshold for inflation is 5%” RBI Governor Subbara Rao said.

India priority sector for public and private partnership

In the budget 2011-2012 finance minister Pranab  Mukherji had announced setting up the funds through special purpose vehicles for attracting foreign investment in infrastructure sector “ to attract foreign funds for financing of infrastructure, I propose to create special vehicles in the form of notified infrastructure funds

The plan is to invest 1 trillion dollars in ports, highways, power utilities and telecoms infrastructure in next five years. A comprehensive policy frame work for public private partnership in building of physical infrastructure and social sections such as health and education is also on the anvil. Mukherji said “ I will lay down guide lines for entry of private players and implementation of infrastructure projects. 

The union budget 2011-12 has given major attention to infrastructure and real estate sector. Finance minister is giving due important to the second largest employment generating sector of Indian economy real estate  sector. The market has welcomed the reduction of fiscal deficit target. For  the real estate sector  & infra sector, there are six major factors.

1. Priority of house loan limit raised.
This will certainly help the lower income group of buyers who plan to buy a home through bank loans. As last budget it was directed that every bank has to maintain 20%  of the loans to this priority sector, this is definitely a boost for sector as it will increase demand.
2. Interest subvention of 1 per cent on housing loans raised to 15 lakhs
Interest subvention is basically an interest subsidy given by government on loans. Here subsidy of 1%  for loans up to 15 lakhs on housing costing not more than 25 lakhs is definitely a giant leap so as to boost the demand for affordable housing.

Allocation of 58,000 crores   to Bharat Nirman  projects

This is a very good move by union government towards rural development of our country. As the project also for employment generation includes development of rural housing, this allocation is going to help developers in developing quality housing projects in rural parts of India.

Creation of infra debt fund to boost infra funding
It has become a very tough task to get loan from banks for infrastructure projects. Also after latest scams, banks are now reluctant to lend this sectors. This infrastructure debt fund will certainly ease entire procedure and will help us securing regular inflow of funds for our on going new projects. Plan to allow limit infra bonds up to 25 billion dollars for entire infrastructure sector, I think this is the most important step taken by honorable finance minister. This will solve the funding problem on the entire sector up to great extent.

India’ s defense expenditure

India plans to reduce defense import bill from present 40,000 crores (8.938 billion dollars) to 20,000 crores (4.69 billion dollars) minister for defense M.M. Pallam Raju  said recently. Presently the defense import bill constitutes around 65 per cent of total defense budget. The total budget for defense is around 6o,ooo crores (  13.4 billion dollars). Of this we import 60 to 65 percent equipment and 35 to 40 percent is made indigenous only. The ground is being created to reverse the percentage over a period. This is not possible to achieve through PSU though we need private sector to achieve this. 

During 2012-2017 five year plan India aim to generate 100,000 MW of electricity from all energy sources including nuclear power.

No doubt that creation infrastructure debt fund and investing ports , high ways, power utilities including high voltage transmission lines and telecoms infrastructure in next five years will generate employment and improve foreign investment in India.

But India’s challenging problem for government is poverty, and creation of employment  to educated youth including providing employment to uneducated agriculture lab our. However national rural employment scheme of Government of India providing work for agriculture lab-our though its benefits are not visible.

Government should invest in the following sector to improve economic conditions of people in India and this improve India’s  growth .

. Provision of liberalized loans and development of small scale industries in rural areas like China which investing heavily on small scale industries for growth of country.

. Technology development and assisting qualified engineers to explore research and development for catering necessary engineering equipment and machinery spares to defense as a import substitution as this sector is not received enough encouragement from government of India.

. It is essential government to improve  and invest massive capital for building adequate railway lines which improve travel and moment of goods and also help creation employment for educated youth.

Government should invest on job oriented technical education  which will reduce un employment.

Government should take loans from world bank and Asian development bank for improving agriculture yields by research and development to increase agriculture production and good agriculture practices overall to reduce cost of food which will benefit poor..