India Country Gdp

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The government currently runs a series of plans around the country in the infrastructure space. They are based on the ability to use unskilled manual labour to build something useful. When someone is unemployed, they register with the local scheme. This is readily available within 5km of every residential suburb. Once they are registered, they will gain a place on such a development scheme. Failing that the government must pay them unemployment pay.

4.0 Price Level Analysis

4.1 Inflation Trend

Inflation will be a major problem in a Country’s economy in the event that there is an increase in demand, but the supply of goods is constant. This is because, if there is a lot of customers, but very little suppliers, then the suppliers can do anything. This is because there will be an increase in income but delivery of goods is constant.

In terms of market, the producer would not be able to control the cost of labour and raw materials. This can and will result in less profit or no profit.

For India, the trend for inflation has been on the rise since the 1950s. In Summary, it was at 2% from 1950-1960. Between 1960 to 1970, it increased to 7.2%. It further increased to 8.5% between 1970-1980 (CEIC Data).

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4.2 Causes of Inflation

There are several causes that attribute to Inflation.

In the Indian economy, we can attribute inflation to 7 causes. They are as follows :-

- An increase in the supply of money

The output for national, over the past years, increased to an annual rate of 4% annually, whereas the increase in the supply of money ranged between 15 to 18%. As such, the output’s increased rate is not enough to sustain and absorb the increase in the economy’s money quantity, hence resulting as inflation as the most probably result.

- Finance deficit

The government will resort to deficit finance, when they are not able to raise sufficient revenue for the economy.

- Increase of expenditure for the government

In the past years, the expenditure of the government of India has been going up rapidly. The expenditure under non-development does not attribute to genuine goods, it creates the power for purchasing which leads to inflation. Apart from the inflation caused by demand, there are factors on the supply side that contributes to inflation overall.

- Not enough growth in the industrial and agricultural sector

The growth of the industrial and the agricultural sector in India, never met the target. This is attributed to the many years of crop failure as a result of heavy rainfall and droughts. With that, it resulted in unavailability of grains, which inadvertently increased the price of food, causing the general prices to go higher overall.

The performance index for the industrial sector has not been good during the years 1965 to 1985. However, during the years 1970 to 1985, the production increased at a very slow rate at 4.7% per annum.

- Rise in administered prices

A huge portion of the market is regulated by the actions of the government in India’s economy. The price for some important commodities for both the industrial and agricultural sector is mandated by the government.

In order to cover their losses, the government keeps on raising the prices which leads to inflation on cost-push

- Prices of Import rising

Inflation in India has been a fact globally. Inflation from other countries also affects India through their major imports.

- Rise in taxes

The government of India is heavily dependent on the indirect taxes such as tax and excise duties, in order to raise extra financial support. The price level goes up with this 2 taxes.

4.3 Government Measures - Inflation

Since then, the government has introduced some fiscal measures to increase production, national wage policy, rationing, price control and other types of economic crises.

In Indian economy, it affects inflation when the global food trade systems stop its delivery and the meagre pay the price for several years heading towards a catastrophe.

Consumer prices in India has increased to 1.54% year on year in June 2017. It is gradually slowing from a 2.18% rise in May and below market expectation of 1.7%. The inflation rate fell to a fresh record low for the 3rd month in the row as it saw decline in food prices amidst a favourable monsoon.

From 2012 to 2017, the inflation rate for India averaged to a total of 6.9%. During that time, it reached 12.17% in Nov 2013, which was a high record. However, on the low side, it recorded as 1.54% in June 2017 (WorldBank).

5.0 Conclusion

In Summary, in the last 10 years, the growth of India has been strong. The tax reform of the country could make the growth more inclusive. The introduction of the policy reforms at both the state and the municipal levels will definitely increase the productivity and inadvertently reduce the rate inflation and unemployment.

The strong growth has definitely raised incomes and reduced poverty in India, but inequalities still remain.

However, under Modi’s legislation, the government has introduced other measures that will have a long term bearing on the country’s economy. The bankruptcy and insolvency code for instance, will make it easier to do business in India. It also makes it easier for the financial sector to address loan recovery.

I believe India’s economy and Real GDP will increase in the next decade.

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References

- Statisticstimes.com. (2017). GDP Growth of India | India GDP Growth 2017 - StatisticsTimes.com. [online] Available at: http://statisticstimes.com/economy/gdp-growth-of-india.php

- Firstpost. (2017). 25 years of liberalisation: A glimpse of India’s growth in 14 charts. [online] Available at: http://www.firstpost.com/business/25-years-of-liberalisation-a-glimpse-of-indias-growth-in-14-charts-2877654.html