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Features of Indian economy, Indicators like

Inflation
Inflation is such a situation when too many people chase too few goods
and too few services, which automatically makes the prices of the goods
and services high because of the high demand. At the same time, when
inflation falls below the desired mark (in the negative territory), then too
few people chase too many goods and too many services, making the
prices of the goods and services under-priced.
In India inflation is actually measured by the Y-o-Y variation in the
Wholesale Price Index. While the inflation as measured by WPI is at
present at a very low level, the inflation measured by the Consumer Price
Index is at elevated levels of 9 to 10%.
Inflation rate is the rate at which prices of goods and services increase in
its economy. It is an indication of the rise in the general level of prices
over time. Since it's practically impossible to find out the average change
in prices of all the goods and services traded in an economy due to the
sheer number of goods and services present, a sample set or a basket of
goods and services is used to get an indicative figure of the change in
prices, which we call the inflation rate.

Mathematically, inflation or inflation rate is calculated as the percentage


rate of change of a certain price index.
If P0 is the current average price level and P − 1 is the price level a year
ago, the rate of inflation during the year might be measured as follows:

After the year the purchasing power of a unit of money is multiplied


by a factor 1 / ( 1 + inflation rate ).

India has been the cynosure for the past few years in the global economic
arena owing to its changing inflation patterns. Between the fiscal year
2004-05 and 2007-2008, India had experienced an average growth rate of
more than 9%, but the global crunch pinched the economy so hard that
the economy gave in to the adverse external shocks and few sectors
experienced a slump. Inflation in India 2009 stands at 11.49% Y-o-Y. The
inflation rate is referred to the general rise in prices, taking into
consideration the common man's purchasing power. Inflation is mostly
measured in CPI.
In 2008 industry bodies, policy makers were all worried with the steadily-
mounting inflation. The middle of the year augmented the tension as the
majority of the population was wary of a double-digit inflation but things
changed within few months. Inflation in India actually fell below 1% during
the third week of March, 2009. The moderate inflation is the desirable of
all too much of it or too less of it, in every way worries the policy makers.
Unemployment rate

In Unemployment rate is By
India 07.2% 2009

The unemployment rate measures the percentage of employable people


in a country's workforce who are over the age of 16 and who have either
lost their jobs or have unsuccessfully sought jobs in the last month and
are still actively seeking work.

The formula for unemployment rate is:


Unemployment Rate = Number of Unemployed / Total Labor Force
Economists distinguish between various types of unemployment,
including cyclical unemployment, frictional unemployment, structural
unemployment and classical unemployment.[4] Some additional types of
unemployment that are occasionally mentioned are seasonal
unemployment, hardcore unemployment, and hidden unemployment.
Real-world unemployment may combine different types. The magnitude
of each of these is difficult to measure, partly because they overlap

Poverty line
The poverty line, is the minimum level of income deemed necessary to
achieve an adequate standard of living in a given country.[citation
needed]In practice, like the definition of poverty, the official or common
understanding of the poverty line is significantly higher in developed
countries than in developing countries.
The common international poverty line has been roughly $1 a day, or
more precisely $1.08 at 1993 purchasing-power parity (PPP). World Bank
has done extensive work in this field.
Determining the poverty line is usually done by finding the total cost of all
the essential resources that an average human adult consumes in one
year.[citation needed] This approach is needs-based in that an
assessment is made of the minimum expenditure needed to maintain a
tolerable life. This was the original basis of the poverty line in the United
States, whose calculation was simplified to be based solely on the cost of
food and is updated each year.[citation needed] In developing countries,
the most expensive of these resources is typically the cost of housing.
Economists thus pay particular attention to the real estate market and
housing prices because of their strong influence on the poverty threshold.
[citation needed]
Individual factors are often used to account for various circumstances,
such as whether one is a parent, elderly, a child, married, etc. The
poverty threshold may be adjusted each year.
The poverty threshold is useful as an economic tool with which to
measure such people and consider socioeconomic reforms such as
welfare and unemployment insurance[citation needed] to reduce poverty.

The World Bank's definition of the poverty line, for under developed
countries, like India, is US$ 1/day/person or US $365 per year. As per this
definition, more than 75% of all Indians are, probably, below the poverty
line!
As per the Government of India, poverty line for the urban areas is Rs.
296 per month and for rural areas Rs. 276 per month, i.e. people in India
who earn less than Rs. 10 per day. As per GOI, this amount will buy food
equivalent to 2200 calories per day, medically enough, to prevent death.
At this level of earning, even in a poor country like India, survival on Rs.
10 per day is a nightmare! This actually translates to Rs. 3650 per year or
US $ 75 per year.
On what basis have our planners decided this definition of "Poverty Line"?
Does it mean that the person will get enough food to stay alive? How and
where is he or she supposed to cook it? What about the minimum needs
in education, housing, health services, clothing,and other basic
necessities? Are we supposed to live on pavements and sleep under trees
from birth till death? YOU BE THE JUDGE!
The minimum wages in India, vary from state to state and city to city, and
average Rs. 1000 - 1250/month or Rs. 12,000 - 15,000/yr. Or US $ 250 -
US $ 300/yr. India's per capita is US $ 440 per year. (China's is US $ 990).
If India could provide Roads, Electricity, TV's and Telephones in every
village, it would improve, education, health, family planning, agriculture,
animal husbandry, GDP and reduce migration from vllages to cities.

*Cost of employee = salary & wages + all allowances including housing +


perks + retirement benefits.

**1 million = 1,000,000 or 10 lacs. 1 lac = 1,00,000. 1 crore = 10 million


= 1,00,00,000.

Literacy rate
Literacy rate is the percentage of a population that can read and write.
Literacy in India is key for socio-economic progress, and the Indian
literacy rate grew to 66% in 2007 from 12% at the end of British rule in
1947. Although this was a greater than fivefold improvement, the level is
well below the world average literacy rate of 84%, and India currently has
the largest illiterate population of any nation on earth. Despite
government programs, India's literacy rate increased only "sluggishly,"
and a 1990 study estimated that it would take until 2060 for India to
achieve universal literacy at then-current rate of progress. The 2001
census, however, indicated a 1991-2001 decadal literacy growth of
12.63%, which is the fastest-ever on record.[8]
For the purpose of census 2001, a person aged seven and above, who can
both read and write with understanding in any language, is treated as
literate. A person, who can only read but cannot write, is not literate. In
the censuses prior to 1991, children below five years of age were
necessarily treated as illiterates.
The results of 2001 census reveal that there has been an increase in
literacy in the country. The literacy rate in the country is 64.84 per cent,
75.26 for males and 53.67 for females. Kerala retained its position by
being on top with a 90.86 per cent literacy rate, closely followed by
Mizoram (88.80 per cent) and Lakshadweep (86.66 per cent).
Bihar with a literacy rate of 47.00 per cent ranks last in the country
preceded by Jharkhand (53.56 per cent) and Jammu and Kashmir (55.52
per cent). Kerala also occupies the top spot in the country both in male
literacy with 94.24 per cent and female literacy with 87.72 per cent. On
the contrary, Bihar has recorded the lowest literacy rates both in case of
males (59.68 per cent) and females (33.12 per cent).

Ranking of States/UTs by Literacy Rate Among Persons, Males and


Females, 2001 Census
Persons Male Female
Ran Literac Literac Literacy
State/UTs State/UTs State/UTs
k y Rate y Rate Rate
1. Kerala 90.86 Kerala 94.24 Kerala 87.72
2. Mizoram 88.80 Lakshadweep 92.53 Mizoram 86.75
3. Lakshadweep 86.66 Mizoram 90.72 Lakshadweep 80.47
4. Goa 82.01 Puducherry 88.62 Chandigarh 76.47
5. Chandigarh 81.94 Goa 88.42 Goa 75.37
Andaman &
6. Delhi 81.67 Delhi 87.33 Nicobar 75.24
Islands
Andaman &
7. Nicobar 81.30 Daman & Diu 86.76 Delhi 74.71
Islands
Andaman &
8. Puducherry 81.24 Nicobar 86.33 Puducherry 73.90
Islands
Himachal
9. Daman & Diu 78.18 Chandigarh 86.14 67.42
Pradesh
10. Maharashtra 76.88 Maharashtra 85.97 Maharashtra 67.03
Himachal Himachal
11. 76.48 85.35 Daman & Diu 65.61
Pradesh Pradesh
12. Tamilnadu 73.45 Uttarakhand 83.28 Tripura 64.91
13. Tripura 73.19 Tamilnadu 82.42 Tamilnadu 64.33
14. Uttarakhand 71.62 Tripura 81.02 Punjab 63.36
15. Manipur1 70.53 Manipur1 80.33 Nagaland 61.46
16. Punjab 69.65 Gujarat 79.66 Manipur1 60.53
17. Gujarat 69.14 Haryana 78.49 Sikkim 60.40
18. Sikkim 68.81 Chhattisgarh 77.38 Uttarakhand 59.63
19. West Bengal 68.64 West Bengal 77.02 West Bengal 59.61
20. Haryana 67.91 Karnataka 76.10 Meghalaya 59.61
Madhya
21. Karnataka 66.64 76.06 Gujarat 57.80
Pradesh
22. Nagaland 66.59 Sikkim 76.04 Karnataka 56.87
23. Chhattisgarh 64.66 Rajasthan 75.70 Haryana 55.73
Madhya
24. 63.74 Orissa 75.35 Assam 54.61
Pradesh
25. Assam 63.25 Punjab 75.23 Chhattisgarh 51.85
26. Orissa 63.08 Assam 71.28 Orissa 50.51
Dadra & Andhra
27. Meghalaya 62.56 71.18 50.43
Nagar Haveli Pradesh
Andhra Madhya
28. 60.47 Nagaland 71.16 50.29
Pradesh Pradesh
Andhra
29. Rajasthan 60.41 70.32 Rajasthan 43.85
Pradesh
Dadra & Arunachal
30. 57.63 Uttar Pradesh 68.82 43.53
Nagar Haveli Pradesh
Jammu &
31. Uttar Pradesh 56.27 Jharkhand 67.30 43.00
Kashmir
Jammu & Jammu &
32. 55.52 66.60 Uttar Pradesh 42.22
Kashmir Kashmir
Arunachal Dadra &
33. 54.34 Meghalaya 65.43 40.23
Pradesh Nagar Haveli
Arunachal
34. Jharkhand 53.56 63.83 Jharkhand 38.87
Pradesh
35. Bihar 47.00 Bihar 59.68 Bihar 33.12
Notes : Manipur figures exclude those of the three sub-divisions, viz., Mao
Maram, Paomata and Purul of Senapati district of Manipur as census
results of 2001 in these three sub-divisions were cancelled due to
technical and administrative reasons. Literacy rates relate to the
population aged seven years and above.

Fiscal deficit
The difference between total revenue and total expenditure of the
government is termed as fiscal deficit. It is an indication of the total
borrowings needed by the government. While calculating the total
revenue, borrowings are not included. Generally fiscal deficit takes place
due to either revenue deficit or a major hike in capital expenditure.
Capital expenditure is incurred to create long-term assets such as
factories, buildings and other development. A deficit is usually financed
through borrowing from either the central bank of the country or raising
money from capital markets by issuing different instruments like treasury
bills and bonds.
India's fiscal deficit is estimated at 6.8 percent of gross domestic product
for 2009/10 (April-March), higher than 6.2 percent in the previous year as
the government cut tax rates and boosted spending.
The economy grew 6.7 percent in 2008/09, slower than 9 percent or more
in the previous three years.
As for the outlook for the economy, the agricultural production during
2009-10 hinges critically on the performance of the North East monsoon
and rabi production. The agricultural sector is also expected to derive
support from the 'allied sector' comprising horticulture, livestock and
fisheries that has been growing at above 5 per cent during last few years,
she said.
With the manufacturing PMI (purchase managers index) for October and
November at 54.5 and 53.0, respectively demonstrate continued
expansion of the sector although lower than September 2009.

As for global economist prospects, Ms Gopinath noted that excessive


dependence on policy stimulus operates is a key risk to sustainability of
recovery, and hence the generalised preference has been for the policy
stance to err on the side of caution.

The compulsion of exit for different countries, thus, could arise at


different points of time, depending on the risks to inflation, extent of
recovery in relation to the potential growth path and the policy
assessment of risk to sustainable recovery from errors in exit.

Balance of payment deficits


Balance of Payments is the difference between the money coming into a country
and the money leaving the same country. In economics, the balance of
payments, (or BOP) measures the payments that flow between any individual
country and all other countries. It is used to summarize all international
economic transactions for that country during a specific time period, usually a
year. The BOP is determined by the country's exports and imports of goods,
services, and financial capital, as well as financial transfers. It reflects all
payments and liabilities to foreigners (debits) and all payments and obligations
received from foreigners (credits). Balance of payments is one of the major
indicators of a country's status in international trade, with net capital outflow.
[citation needed]
The balance, like other accounting statements, is prepared in a single currency,
usually the domestic. Foreign assets and flows are valued at the exchange rate
of the time of transaction.
"Balance of Payments is a statistical statement that summarizes transactions
between residents and non-residents during a period." The balance of payments
comprises the current account and the capital account (or the financial account).
"Together, these accounts balance in the sense that the sum of the entries is
conceptually zero."
The current account consists of the goods and services account, the primary
income account and the secondary income account.
The capital account is much smaller than the other two and consists primarily of
debt forgiveness and assets from migrants coming to or leaving the country.
The financial account consists of asset inflows and outflows, such as
international purchases of stocks, bonds and real estate.
Balance of payments identity
The balance of payments identity states that:
Current Account = Capital Account + Financial Account + Statistical Discrepancy
This is a convention of double entry accounting, where all debit entries must be
booked along with corresponding credit entries such that the net of the Current
Account will have a corresponding net of the Capital and Financial Accounts:

Where:
X = exports
M = imports
Ki = capital inflows
Ko = capital outflows
Rearranging, we have:

Yielding the BOP identity.


The basic principle behind the identity is that a country can only consume more
than it can produce (a current account deficit) if it is supplied capital from
abroad (a capital account surplus).[2]
Mercantile thought prefers a so-called balance of payments surplus where the
net current account is in surplus or, more specifically, a positive balance of
trade.
A balance of payments equilibrium is defined as a condition where the sum of
debits and credits from the current account and the capital and financial
accounts equal to zero; in other words, equilibrium is where

This is a condition where there are no changes in Official Reserves.[3] When


there is no change in Official Reserves, the balance of payments may also be
stated as follows:

or:

Canada's Balance of Payments currently satisfies this criterion. It is the only


large monetary authority with no Changes in Reserves.[4

GDP
The gross domestic product (GDP) is a basic measure of a country's overall
economic output. It is the market value of all final goods and services made
within the borders of a country in a year. It is often positively correlated with the
standard of living,
GDP can be determined in three ways, all of which should in principle give the
same result. They are the product (or output) approach, the income approach,
and the expenditure approach.
Calculating GDP is extremely important has the performance of the economy is
fixed by means of this method. The results would help the country to forecast
the economic progress, determine the demand and supply, understand the
buying power of the people, the per capita income, the position of the economy
in the global arena. The Indian GDP is calculated by the expenditure method.

By Calculating GDP the performance of the Indian economy can be determined.


The GDP of the country states the number of goods and services produced in a
financial year. It is the yardstick of measuring the functioning of the economy.
Calculating India GDP has to be done cautiously pertaining to the diversity of
the Indian Economy.
There are different sectors contributing to the GDP in India such as agriculture,
textile, manufacturing, information technology, telecommunication, petroleum,
etc.
The different sectors contributing to the India GDP are classified into three
segments, such as primary or agriculture sector, secondary sector or
manufacturing sector, and tertiary or service sector.
With the introduction of the digital era, Indian economy has huge scopes in the
future to become one of the leading economies in the world.
India has become one of the most favored destinations for outsourcing activities.
India at present is one of the biggest exporter of highly skilled labor to different
countries
The new sectors such as pharmaceuticals, nanotechnology, biotechnology,
telecommunication, aviation, manufacturing, shipbuilding, and tourism would
experience very high rate of growth
How to calculate GDP-

The method of Calculating India GDP is the expenditure method, which is,
GDP = consumption + investment + (government spending) + (exports-imports)
and the formula is
GDP = C + I + G + (X-M)

Where,
C = stands for consumption which includes personal expenditures pertaining to
food, households, medical expenses, rent, etc
I = stands for business investment as capital which includes construction of a
new mine, purchase of machinery and equipment for a factory, purchase of
software, expenditure on new houses, buying goods and services but
investments on financial products is not included as it falls under savings
G = stands for the total government expenditures on final goods and services
which includes investment expenditure by the government, purchase of
weapons for the military, and salaries of public servants
X = stands for gross exports which includes all goods and services produced for
overseas consumption
M = stands for gross imports which includes any goods or services imported for
consumption and it should be deducted to prevent from calculating foreign
supply as domestic supply

Product Method
Gross Value Added = Sum of values added by all enterprises = Sales of goods -
purchase of intermediate goods to produce the goods sold
Expenditure method:
GDP = private consumption + gross investment + government spending +
(exports − imports)
Income Method:
GDP = compensation of employees + gross operating surplus + gross mixed
income + taxes less subsidies on production and imports
GDP = COE + GOS + GMI + TP & M - SP & M

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