India: Key Statistics

Population 133crore
Population growth rate 1.19%
$2.848 trillion
GDP (nominal)
Global Rank 6 (2018)
$10.385 trillion
GDP (PPP)
Global Rank 3 (2018)
GDP growth rate 8.1% (Q1 2018-19)

GDP Per capita nominal $2134 (2018) Rank 139

GDP Per capita PPP $7783 (2018) Rank 122

 India: Key Statistics
Inflation CPI 3.58% (Oct 2018)
HDI Rank 130

Life expectancy 68.56 (2016)

Fertility Rate 2.33 births per women (2016)

Working Age Population 62%

Unemployment 8.8% (Dec 2017)

Population Below Poverty Line 5.3% (May 2018)

Sectors of Economy
 Primary
 Agriculture, Horticulture, Forestry, Fishery,
Sericulture, Animal husbandry

 Secondary
 Power, Textile, Steel, Petro-chemicals, Automobile
Pharmaceuticals & other manufacturing industries

 Tertiary
 Transport, Trade, Communication, Banking & other
services
 Agriculture:
 India ranks second worldwide in farm output.
 accounts for 17.32% of the GDP; Employs 47% of the total
workforce

 Manufacturing:
 Industry accounts for 29.02% of GDP and employs 22% of the
total workforce.
 India is 9th in the world in terms of nominal factory output.

 Services:
 India is 13th in services output.
 Accounts for 53.66% of GDP; Employs 31% of the work force
Workforce Distribution

MANUFACTURING
22%

AGRICULTURE
SERVICES
47%
31%
GDP - Sector Composition

AGRICULTURE
17.32%

SERVICES
53.66%
MANUFACTURING
29.02%
 Total economic output of a country, i.e., the
amount of money a country makes from the
factors lying within its boundaries.

 The total market value of all final goods

and services produced in an economy in a
year or a given time period within a
country’s borders (domestic output).
 "Gross" signifies that no deduction has been made
for the depreciation of machinery, buildings and
other capital products used in production.

 "Domestic" means that it is production by the

resident institutional units of the country.
 “Product” refers to final goods and services, i.e. those
that are purchased, imputed or otherwise, as: final
consumption of households, non-profit institutions
serving households and government; fixed assets; and
exports (minus imports).

 Data are internationally comparable by following the

System of National Accounts.
 The total income earned by a country’s factors of
production in a year or a given time period, regardless
of where assets are located (nations' output).

 GNP is calculated by taking

GDP + Net Factor Income from Abroad (NFIA)

The Term GNI (Gross National Income) is used for

GNP.
 GDP can be determined in three ways
- the production (or output) approach
- the income approach
- the expenditure approach
 GDP is most commonly calculated by the expenditure
method.
 It is done by adding

consumer expenditure (C) + firm’s investments (I) +

government spending (G) + exports minus imports (X-
M).
 A fully equivalent definition is that GDP (Y) is the
sum of final consumption expenditure (FCE), gross
capital formation (GCF), and net exports (X – M).

 Y = FCE + GCF+ (X − M)
 FCE can then be further broken down by three sectors
(households, governments and non-profit institutions
serving households) and..

 GCF by five sectors (non-financial corporations,

financial corporations, households, governments and
non-profit institutions serving households
 GDP per capita is the total output divided
by the number of people in the population.
 GDP Nominal
 GDP PPP (Purchasing Power Parity)
 Comparisons of national wealth are frequently made
on the basis of nominal GDP and savings (not just
income), which do not reflect differences in the cost of
living in different countries

 Hence, using a PPP basis is arguably more useful when

comparing generalized differences in living standards
between nations because PPP takes into account the
relative cost of living and the inflation rates of the
countries, rather than using only exchange rates, which
may distort the real differences in income.
 This is why GDP (PPP) per capita is often considered
one of the indicators of a country's standard of living..

 Although this can be problematic because GDP per

capita is not a measure of personal income.
 A composite statistic of life expectancy, education, and
per capita income indicators; used to rank countries
into four tiers of human development.

 Developed by Pakistani economist Mahbub ul Haq, &

anchored in the Indian Nobel laureate Amartya Sen’s
work on human capabilities,

 Often framed in terms of whether people are able to

"do" desirable things in their life, and was published
by the United Nations Development Programme.
 New method (2010 Report onwards)
 Published on 4 November 2010 (and updated on 10
June 2011)
 The 2010 Human Development Report(HDI) combines
three dimensions:

- A long and healthy life: Life expectancy at birth

- Education index: Mean years of schooling and
Expected years of schooling
- A decent standard of living: GNI per capita (PPP US$)
Financial Market

 ‘A transmission mechanism between investors (or

lenders) and the borrowers (or users) through

which transfer of funds is facilitated’.

Financial Market

 Consists of individual investors, financial institutions &

other intermediaries (who are linked by a formal trading

rules and communication network for trading the various

financial assets and credit instruments).

 It deals in financial instruments (like bills of exchange,

shares, debentures, bonds, etc).

 Provides the ability to transfer income
through time
◦ Borrowing sacrifices
future income to increase
current income.
◦ Saving, or investing, sacrifices
current income in exchange
for greater expected income
in the future.
 1. Direct Transfer
◦ business sells its stock directly to investors
 2. Indirect Transfer through Investment
Bankers
◦ investment banker acts as middleman and
facilitates issuance of securities by reselling the
securities to savers
 3. Indirect Transfer through financial
intermediary
◦ bank or mutual fund obtains funds
from savers and uses
the money to lend
or purchase securities
A. Money versus Capital
B. Primary versus secondary markets
C. Spot versus futures markets
D. World, national, regional, and local markets

Assets Claims
Cash Accounts payable
Accounts receivable Notes payable
Inventories Bonds
Plant Common equity
Regulator Regulator:
RBI SEBI
 Money Markets
◦ instruments traded mature in one year or less
 Capital Markets
◦ includes instruments with maturities greater than
one year
 Debt Markets
◦ treasury, corporate, mortgage-backed, money
market, municipal, etc...

 Equity Markets
◦ stock markets
Money Market: Credit
instruments

 Call Money

 Treasury Bill

 Commercial Paper

 Certificate of Deposit
Capital Market: Credit
instruments
Securities Market
Primary Market : IPOs, Book Building, Private Placements.
Secondary Market : Equity Market, Debt Market,
Commodity Market, Futures and Options Market.

(Secondary Market can be basically divided into two – spot

market and forward market. Forward market has two
divisions – futures and options/derivatives. Again, there are
two types of options – put option and call option.)
Non-Securities Market
Mutual Funds.
Fixed Deposits, Savings Deposits, Post Office savings.
Insurance.
Call Money

 money loaned by a bank or other institution which is

repayable on demand.
Treasury Bill
 Treasury bills (T-bills) offer short-term investment

opportunities, generally up to one year. They are thus useful

in managing short-term liquidity.

 At present, the GoI issues three types of treasury bills

through auctions, namely, 91-day, 182-day and 364-day.

There are no treasury bills issued by State Governments.

 Minimum: 25000
Commercial Paper

 An unsecured money market instrument issued in the form of

a promissory note.

 Corporates, primary dealers (PDs) and the All-India Financial

Institutions (FIs) are eligible to issue CP.

 Minimum: 5 Lakh

 Maturity: 7 to 364 days

Certificate of Deposits

 A negotiable money market instrument and issued in

dematerialised form or as a Usance Promissory Note

against funds deposited at a bank or other eligible

financial institution for a specified time period.

 Minimum: 1 lakh

 Maturity: 7 to 364 days

1. Initial Public Offering (IPO)
◦ privately held company offers stock to the
public for the first time called “going public”

2. Primary market
◦ existing firm issues additional shares

3. Secondary market
◦ trading existing stocks
IPO
 A type of public offering in which shares of stock in a

company usually are sold to institutional investors that in

turn, sell to the general public, on a securities exchange, for

the first time.

Book Building
 a systematic process of generating, capturing, and recording investor

demand for shares during an initial public offering (IPO), or other

securities during their issuance process, in order to support efficient price

discovery.

 Usually, the issuer appoints a major investment bank to act as a

major securities underwriter or bookrunner.

Private Placements

 Private placement (or non-public offering) is a

funding round of securities which are sold not

through a public offering, but rather through a

private offering, mostly to a small number of chosen

investors
A. Commercial & Cooperative Banks
B. NBFIs
C. Development Banks (DFIs)
D. Life Insurance Companies
E. Mutual funds
F. Investment Banks/ Payments
 Cash Reserve Ratio

 The share of a bank’s total deposit that is mandated by RBI to be

maintained with the latter in the form liquid cash.

 This percentage of the total bank deposits has to be kept in the

current account with RBI which means commercial banks do not

have access to that much amount for any economic activity or

commercial activity.
 Cash Reserve Ratio: purpose

 This is to ensure that a part of the bank’s deposit is with the

Central Bank, and hence is safe

 The second and a very important reason is for the purpose of

combating inflation. To keep the liquidity in check, RBI resorts to

increasing and decreasing CRR

 Statutory Liquidity Ratio

 The ratio of liquid assets to net demand and time liabilities

(NDTL) is called statutory liquidity ratio (SLR).

 Apart from CRR, commercial banks have to maintain a stipulated

proportion of their net demand and time liabilities in the form of

liquid assets like cash, gold and unencumbered securities.

 SLR: purpose
 Treasury bills, dated securities issued under market borrowing

programme and market stabilisation schemes (MSS), etc also

form part of SLR.

 Banks have to report to RBI every alternate Friday their SLR

maintenance, and pay penalties for failing to maintain SLR as

mandated.
Bank Rate

 The rate charged by the central bank for lending funds to

commercial banks.

 It influences lending rates of commercial banks.

 Repo Rate

 Repo rate is the rate at which RBI lends money to commercial

banks in the event of any shortfall of funds.

 Repo Rate: purpose

 Repo rate is used by monetary authorities to control inflation.

 In the event of inflation, RBI increase repo rate as this acts as a

disincentive for banks to borrow from the central bank. This

ultimately reduces the money supply in the economy and thus

helps in arresting inflation.

 Reverse Repo Rate

 The rate at which the central bank of RBI borrows money from

commercial banks.
 Reverse Repo Rate: purpose

 It is a monetary policy instrument used to control the money

supply in the country.

 An increase in RRR will decrease the money supply and vice-

versa. An increase in RRR means that commercial banks will get

more incentives to park their funds with RBI, thereby decreasing

the supply of money in the market.

 Current Rates

Repo Rate 6.50%

Reverse Repo Rate 6.25%

Policy Rates
Marginal Standing Facility Rate 6.75%

Bank Rate 6.75%

Cash Reserve Ratio 4%

Reserve Ratios
Statutory Liquidity Ratio 19.50%