write a essay on " ECONOMIC GROWTH OF INDIA. "
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In the last seven years or so (i.e., since 2004) India has emerged as one of the fastest growing economy of the world. In fact, next to China, India’s growth rate since 2004 is the highest in the world. This is often referred to as India’s growth miracle.
Before Eighties of the last century India’s average growth rate stuck around 3.6 per cent per annum which Late Prof. Raj Krishna called Hindu rate of growth. In the eighties India’s average rate of economic growth rose to 5.6 per cent per annum and further in the nineteenth and up till 2002-03 (i.e. in 12 years period). India’s average growth rate went up to 6.2% per annum under liberalisation and globalisation of the Indian economy.
But since 2004 to FY 2007-08 India’s average annual growth rate of GDP rose above 9 per cent per annum. In 2008-09 while the advanced developed countries were experiencing recession (i.e. negative growth), India succeeded in achieving 6.7 per cent growth in 2008-09 which further rose to 8.4 per cent in 2009-10 and 2010-11. However, for the reasons explained later, estimated rate of growth of GDP in 2011-12 fell to 6.5 per cent and for 2012-13 also India’s growth rate is again estimated by Reserve Bank of India to be 6.5 per cent. Rate of Domestic Saving and Fixed Capital FormationNow the question is how do we account for such a high growth in GDP from 2004-05 to 2010-11. Growth depends mainly on rate of saving and investment (or, in other words, on rate of capital formation), and improvement in technology or capital output ratio. In India such as other emerging economies, China, Indonesia and South Korea, it is increase in rate of saving and investment (i.e., rate of capital formation) that brought about a sharp growth in GDP since 2004.
Rates of saving and capital formation and GDP growth are given in Table 42.3 Prior to 2003-04 rate of saving in India since 1991 when economic reforms were initiated was in the range of 24 to 26% of GDP. But, as will be seen from the Table 42.3, from 2003-04 to 2007- 08 (that is, prior to global financial crisis) average rate of saving rose to 33.3 per cent of GDP which pulled up the rate of investment or capital formation. As a result, average growth rate of GDP for the five years period (2003-08) rose to 9 per cent. With this India became the second fastest growing economy of the world, next only to China.
In keeping with the higher saving rate from 2004-05 onwards, average rate of fixed capital formation (FCF) rose to 33 per cent of GDP in 2007-08 (see 5th row in the Table 42.3) and is still around 32.0% in 2010-11 and 2011-12.
This higher growth rate of fixed capital formation caused 9 per cent average growth in GDP during 2004-05 to 2007-08. In 2008-09 and 2009-10 global financial crisis (2007-09) and consequently global meltdown caused fall in saving rate to 32.0% and 30.8% of GDP respectively.
This was due to the substantial increase in consumption expenditure under the fiscal stimulus measures to keep the growth momentum which caused drop in public saving rate to 1.0 per cent of GDP as compared to 5.0 per cent in 2007-08. This financial crisis which caused negative growth of India’s exports in 2008-09 slowed down rate of economic growth in 2008- 09 to 6.7 per cent.
Once inflation is brought under control, RBI will cut its interest rates which will give push to investment that will boost industrial growth. If investment in physical infrastructure such as construction of roads and ports and in expansion in power facilities increases, as is now planned, will lead to the demand for capital goods.
This will ensure around 8 per cent growth in future years. It is important to note that fundamentals of the Indian economy are quite strong to ensure 8 per cent growth. Our high saving and investment rates even at present (2011-12) are still 32.5 and 35.0 per cent of GDP respectively. Besides, on the demand side our domestic market is expanding due to rise in rural incomes which will boost industrial growth.
Hope it helps
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In the last seven years or so (i.e., since 2004) India has emerged as one of the fastest growing economy of the world. In fact, next to China, India’s growth rate since 2004 is the highest in the world. This is often referred to as India’s growth miracle.
Before Eighties of the last century India’s average growth rate stuck around 3.6 per cent per annum which Late Prof. Raj Krishna called Hindu rate of growth. In the eighties India’s average rate of economic growth rose to 5.6 per cent per annum and further in the nineteenth and up till 2002-03 (i.e. in 12 years period). India’s average growth rate went up to 6.2% per annum under liberalisation and globalisation of the Indian economy.
But since 2004 to FY 2007-08 India’s average annual growth rate of GDP rose above 9 per cent per annum. In 2008-09 while the advanced developed countries were experiencing recession (i.e. negative growth), India succeeded in achieving 6.7 per cent growth in 2008-09 which further rose to 8.4 per cent in 2009-10 and 2010-11. However, for the reasons explained later, estimated rate of growth of GDP in 2011-12 fell to 6.5 per cent and for 2012-13 also India’s growth rate is again estimated by Reserve Bank of India to be 6.5 per cent. Rate of Domestic Saving and Fixed Capital FormationNow the question is how do we account for such a high growth in GDP from 2004-05 to 2010-11. Growth depends mainly on rate of saving and investment (or, in other words, on rate of capital formation), and improvement in technology or capital output ratio. In India such as other emerging economies, China, Indonesia and South Korea, it is increase in rate of saving and investment (i.e., rate of capital formation) that brought about a sharp growth in GDP since 2004.
Rates of saving and capital formation and GDP growth are given in Table 42.3 Prior to 2003-04 rate of saving in India since 1991 when economic reforms were initiated was in the range of 24 to 26% of GDP. But, as will be seen from the Table 42.3, from 2003-04 to 2007- 08 (that is, prior to global financial crisis) average rate of saving rose to 33.3 per cent of GDP which pulled up the rate of investment or capital formation. As a result, average growth rate of GDP for the five years period (2003-08) rose to 9 per cent. With this India became the second fastest growing economy of the world, next only to China.
In keeping with the higher saving rate from 2004-05 onwards, average rate of fixed capital formation (FCF) rose to 33 per cent of GDP in 2007-08 (see 5th row in the Table 42.3) and is still around 32.0% in 2010-11 and 2011-12.
This higher growth rate of fixed capital formation caused 9 per cent average growth in GDP during 2004-05 to 2007-08. In 2008-09 and 2009-10 global financial crisis (2007-09) and consequently global meltdown caused fall in saving rate to 32.0% and 30.8% of GDP respectively.
This was due to the substantial increase in consumption expenditure under the fiscal stimulus measures to keep the growth momentum which caused drop in public saving rate to 1.0 per cent of GDP as compared to 5.0 per cent in 2007-08. This financial crisis which caused negative growth of India’s exports in 2008-09 slowed down rate of economic growth in 2008- 09 to 6.7 per cent.
Once inflation is brought under control, RBI will cut its interest rates which will give push to investment that will boost industrial growth. If investment in physical infrastructure such as construction of roads and ports and in expansion in power facilities increases, as is now planned, will lead to the demand for capital goods.
This will ensure around 8 per cent growth in future years. It is important to note that fundamentals of the Indian economy are quite strong to ensure 8 per cent growth. Our high saving and investment rates even at present (2011-12) are still 32.5 and 35.0 per cent of GDP respectively. Besides, on the demand side our domestic market is expanding due to rise in rural incomes which will boost industrial growth.
Hope it helps
nandanmurthy3125:
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nope its absolutely perfect. :) :)
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