BSE Forum: Indian Economy on Cross roads

My third article in BSE Forum, Mumbai

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The Indian stock markets  has been scaling new heights in the past few months and touching 31500 levels on various positive triggers  taking place in the economy. Post demonetization the economy saw GDP touching 7.1 % which makes Indian Economy the fastest growing economy in the world.  The world economy is likely to grow at GDP of 3.1 %.  The impact of GST will be seen in the coming few months but it is no doubt the most bold economic reform in the history of India.  The monsoon has set on time and even the rainfall in the country is decent and hence there is huge possibility of bumper crop production. This would increase the income of the agriculture sector and thus rural India would have more cash to spend in the festive season. The demand and consumption in the economy is likely to pick up very well and thus GDP will also rise. Strategically the lower oil prices has resulted into saving of Rs. 3 lakh crore for the government which can be used for strategic purpose like infrastructure, defense for long term benefits.

At the global front, the US which is the key to all development is at 2.1 % GDP which is more or less near its average. European Union is also struggling with its challenges of High Debt to GDP ratio of 92 % while its member nations like Greece has Debt to GDP ratio of 177%, Spain 120% and Italy 160%.  China GDP has drastically slowed down to 6.5 % which makes the Dragon grow slow due to idle capacity which has happened due to over expansion. Japan economy is having -0.8% GDP which is due to poor demand and consumption.

The Indian economy has 3 unique selling propositions which are as under:-

  1. Demographic Dividend:- 70% of the working population is less than 35 years of age which means that there is huge demographic dividend advantage to the economy. There is huge disposable income which leads to a consumption driven economy. The average age of Indian is 25 years while that of Chinese is 37 years, American 38 years, European Union 47 years and Japan 50 years.
  2. Domestic Consumption:- Out of the total production, India consumes 80 % of the production in India itself and only 20 % is exported and thus we are not an export oriented economy. Indian is not an export oriented economy and thus its dependency is not there on the world other countries. Though we need to have strong exports to fund imports of gold and oil. Last year we achieved exports worth $ 312 billion as against target of $ 325 billion.
  3. High Saving Rate:- India’s saving rate is 31 % while the global average is 24 %. Saving results into capital formation which has provided shield during the weak economic times. Saving returns into capital formation which results into investment and then ultimately capital formation.

Thus Indian economy is poised with unique growth features and has huge potential to grow. The resilient feature in the economy was evident from the fact that world economy grew at 1 to 2 % GDP during Global Financial crisis while Indian Economy was able to make growth of 6.3 % GDP growth. The future of Indian economy is surely going to be much better with schemes like Make In India, Digital India, Start Up India, Skill India would make India Super Economic power since these programme would create more skilled manpower, create more entrepreneurs, reduce imports and thus create more jobs in the manufacturing segment etc.

Thank You

Neysa Sanghavi – ‘Pura Vida’ Pure Life

Student IBDP 12, Singapore International School

+91 98202 26117

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