The growth and performance of the Indian economy in the world market is explained in terms of statistical information provided by the various economic parameters. For example, Gross National Product (GNP), Gross Domestic product (GDP), Net National Product (NNP), per capita income, Gross Domestic Capital Formation (GDCF), etc. are the various indicators relating to the national income sector of the economy. They provide a wide view of the economy including its productive power for satisfaction of human wants.
In the industrial sector, the Index of Industrial Production (IIP) is a single representative figure to measure the general level of industrial activity in the economy. It measures the absolute level and percentage growth of industrial production.
The four main monetary aggregates of measures of money supply which reflect the state of the monetary sector are:- (i) M1 (Narrow money)= Currency with the public + demand deposits of the public; (ii) M2= M1 + Post Office Savings deposits; (iii) M3 (Broad money)= M1 + time deposits of the public with banks; and (iv) M4= M3 + Total post office deposits.
Price movement in the country is reflected by the wholesale price index (WPI) and the consumer price index (CPI). WPI is used to measure the change in the average price level of goods traded in the wholesale market, while the Consumer Price Index (CPI) captures the retail price movement for different sections of consumers. There are at present four consumer price indices covering different socio-economic groups in the economy. These four indices are Consumer Price Index for Industrial Workers (CPI-IW); Consumer Price Index for Agricultural Labourers (CPI-AL); Consumer Price Index for Rural Labourers (CPI -RL) and Consumer Price Index for Urban Non-Manual Employees (CPI-UNME).
All such economic indicators not only measure/analyse the present performance of an economy but also help in predicting and forecasting its future growth prospects.
Economic Indicators from 1991:
The Indian economy has undergone substantial changes since the introduction of economic reforms in 1991. These reforms were a comprehensive effort consisting of three main components namely, liberalisation, privatisation and globalisation. They included various measures like deregulating the markets and encouraging private participation; trade liberalisation; dismantling the restrictions on domestic and foreign investments; reforming the financial sector and the tax system, etc. All such policy initiatives radically changed the economic set-up of the country and integrated it with the rest of the world. Thus, India was placed in a globally competitive position so as to fully utilise its potentials and opportunities for rapid growth of the economy.
Net National Product (NNP) at factor cost (at 1993-94 prices) increased from 0.5 per cent in 1991-92 to 6.3 per cent in 1999-2000. It increased to 8.8 percent in 2003-04 at 1999-2000 prices. Similarly, per capita NNP increased from -1.5 per cent to 4.4 percent and then to 7.0 percent during the same period. Gross National Product (GNP) at factor cost (at 1993-94 prices) increased from 1.1 per cent in 1991-92 to 6.2 percent in 1999-2000. It increased to 8.7 percent in 2003-04 at 1999-2000 prices. Gross Domestic Product (GDP) at factor cost ( at 1999-2000 prices) has increased from 4.4 percent in 2000-01 to 7.5 per cent in 2004-05.
The industrial sector has been going through a process of restructuring and consolidation after liberalisation. The industries have responded to the reforms through mergers and acquisitions, adoption of cost cutting measures, foreign collaboration, technology upgradation and outward orientation in sectors such as cement, steel, aluminium, pharmaceuticals, and automobiles. Industrial growth increased sharply in the first five years after the reforms, but then slowed to an annual rate of 4.5 percent in the next five years. From low growth rate of 2.7 per cent in 2001-02, the industry sector grew at a rate of 7.1 per cent in 2002-03 and further to 9.8 per cent in 2004-05.
There has been steady and continuous rise in supply of money in the economy since initiation of reforms. Reserve Money(Mo) has increased from Rs. 99,505 crores in 1991-92 to Rs. 573066 crores (Provisional) in 2005-06. Narrow money (M1) has increased from Rs. 114406 crores to Rs. 825245 crores (Provisional), while, broad money (M3) has increased from Rs. 317049 crores to Rs. 2729535 crores (Provisional) during the same period.
Low and volatile growth rates in Indian agriculture and allied sectors was reflected in the average annual growth rate of value added in the sector declining from 4.7 per cent during the Eighth Plan (1992-1997) to 2.1 per cent during the Ninth Plan (1997-2002). From negative growth rate of -7.2 percent in 2002-03, the agriculture sector grew at a rate of 10.0 per cent in 2003-04 and at a rate of 6.0 per cent in 2005-06.
As a proportion of GDP, the share of exports, which had grown from 5.8 per cent in 1990-91 to 12.2 per cent in 2004-05, grew further to 13.1 per cent in 2005-06. The corresponding rise in imports was from 8.8 per cent in 1990-91 to 17.1 per cent in 2004-05 and further to 19.5 per cent in 2005-06. Thus, trade deficit as a proportion of GDP, which had declined from 3.0 per cent in 1990-91 to 2.1 per cent in 2002-03, widened to 4.9 per cent in 2004-05 and further to 6.4 per cent in 2005-06.
Performance of the Indian economy on the inflation front, with price stability as one of the prime objectives of the reform process has been satisfactory, particularly after the mid 1990s. The annual average inflation rate based on Wholesale Price Index (WPI) was 10.6 per cent between 1991-96, which fell down to 5.1 per cent in the period 1996-2001 and then to 4.7 per cent in 2001-06.
There are various economic indicators which highlight the performance of the economy since 1991
Current State of the Indian Economy:
The current scenario of Indian economy has been characterised by optimistic growth and strong macro-economic fundamentals, particularly with tangible progress towards fiscal consolidation and a strong balance of payments position. Gross Domestic Product (GDP), at current market prices, is projected at Rs. 46,93,602 crore in 2007-08 by the Central Statistical Organisation (CSO) in its advance estimates (AE) of GDP. While, the GDP at factor cost, at constant 1999-2000 prices, is projected to grow at 8.7 per cent in 2007-08.
The industrial sector has witnessed a moderate slowdown in the growth during the first eight months of the current fiscal, till November 2007. The growth achieved, during April-November 2007, by the industrial sectors has been 9.2 per cent. The capital goods have grown at an accelerated pace, over a high base attained in the previous years, which augurs well for the required industrial capacity addition. While, the consumer durables showed a negative growth during the period, thereby forcing a visible decline in the growth of the total consumer goods basket, despite reasonable growth in the non-durables.
India's telecom sector has been one of the biggest success stories of market oriented reforms. With more than 270 million connections, India's telecommunication network is the third largest in the world and the second largest among the emerging economies of Asia. The total number of telephones has increased from 76.53 million on March 31, 2004 to 272.88 million on December 31, 2007. While 63.8 million telephone connections were added during the 12 months of 2006-07, more than 7 million telephone connections are being added every month during the current year. The tele-density has also increased from 12.7 per cent in March 2006 to 23.9 per cent in December 2007. Further, the share of wireless phones has also increased from 24.3 per cent in March 2003 to 85.6 per cent in December 2007.
The infrastructure sector has been expanding on a massive scale. The Index of Six core-infrastructure industries, having a direct bearing on infrastructure, stood at 243.0 (provisional) in December 2007 and registered a growth of 4.0 per cent (provisional) compared to a growth of 9.0 per cent in December 2006. During April-December 2007-08, six core-infrastructure industries registered a growth of 5.7 per cent (provisional) as against 8.9 per cent during the corresponding period of the previous year. Coal production grew by 4.9 per cent (provisional) as compared to an increase of 4.6 per cent during the same period of 2006-07. While, electricity generation grew by 6.6 per cent (provisional) as compared to 7.5 per cent during the same period of 2006-07.
In terms of the Wholesale Price Index (WPI), inflation was 3.9 per cent as on January 19, 2008, as compared to 6.3 per cent a year ago. In primary articles, there was a sharp deceleration in inflation to 3.8 per cent as on January 19, 2008, as compared to 10.2 per cent a year ago. They contributed 22 per cent to overall inflation as against 35.4 per cent in the previous year. Similarly, in case of manufactured products, year-on-year inflation as on January 19, 2008, was 3.9 per cent compared to 5.9 per cent in the corresponding period of 2006-07. They contributed 55.2 per cent of the year-on-year inflation. Further, fuel, power, light and lubricants, with a inflation rate of 4.5 per cent, contributed 30.4 per cent, which is more than twice its weight of 14.2 per cent in the index.
The monetary sector also continues to be growing at a sustainable rate during 2007-08 to serve the twin objectives of managing the transition to a higher growth path and containing inflationary pressures. The cumulative increase in the stock of M3 in 2007-08 has remained above the cumulative growth in 2006-07 and was 13.3 per cent on January 4, 2008, as compared to 12.2 per cent on January 5, 2006. Similarly, net foreign exchange assets (NFA) of the RBI, on year-on-year basis as on January 4, 2008, expanded by 39.1 per cent as against 26.1 per cent on the corresponding date of the previous year.
In the secondary market segment, the market activity expanded further during 2007-08 with BSE and NSE indices scaling new peaks of 21,000 and 6,300, respectively, in January 2008. The main reasons being the larger inflows from Foreign Institutional Investors (FIIs) and wider participation of domestic investors, particularly the institutional investors. During 2007, on a point-to-point basis, Sensex and Nifty Indices rose by 47.1 and 54.8 per cent, respectively. While the climb of BSE Sensex during
2007-08 so far was the fastest ever, the journey of BSE Sensex from 18,000 to 19,000 mark was achieved in just four trading sessions during October 2007. It further crossed the 20,000 mark in December 2007 and 21,000 in an intra-day trading in January 2008.
Progress in fiscal consolidation has been satisfactory in the post-Fiscal Reforms and Budget Management Act (FRBMA) period. The fiscal deficit of the Centre, as a proportion of GDP, came down from 5.9 per cent in 2002-03 to 3.4 per cent in 2006-07 and is estimated to further decline to 3.3 per cent in 2007-08 [Budget Estimate (BE)] (3.2 per cent based on revised GDP estimates). Similarly, the revenue deficit declined from 4.4 per cent in 2002-03 to 1.9 per cent in 2006-07 and is estimated to further decline to 1.5 per cent in 2007-08 (BE).
India's external economic environment continued to be supportive with the invisible account remaining strong and stable capital flows. As a proportion of total capital flows and on a net basis, foreign investment has shown a mixed trend in the current year. In 2006-07, the proportion stood at 33.5 per cent, while it rose to 43.4 per cent in the first half of 2007-08. Foreign direct investment (FDI) grew appreciably on both gross and net basis. On a gross basis, FDI inflow into India was at US$ 11.2 billion in the first six months of 2007-08. FDI inflows were broad-based and spread across a range of economic activities like financial services, manufacturing, banking services, information technology services and construction. While, net portfolio investment inflow was US$ 18.3 billion in April-September 2007, more than double the inflow during 2006-07.
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