PGDM 2018-20

Macroeconomic Theories & Policies

Project Report
A Comparative Study of India & USA

Submitted to: - Submitted By:

Prof .Ramakrushna Panigrahi
Aayushi Pandey – 001
Ashima Chatrath- 018
Kirti Jaiswal- 035
Shreya Mill- 070
Tanya Gupta- 089

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 ACKNOWLEDGMENT

We wish to express our sincere gratitude to Prof. Ramakrushna

Panigrahi, faculty of Macroeconomic Theory & Policies at International
Management Institute, Bhubaneswar for providing us an opportunity to
do a report on “A Comparative Study of India & USA”.
We sincerely thank Prof. Ramakrushna Panigrahi for his guidance and
encouragement in carrying on this report. We also wish to express our
gratitude to the staff members of IMI, Bhubaneswar for rendering their
help and support during our report.
We also thank our team members for their coordination and efforts.

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 1. Indian economy overview
The economy of India is a creating blended economy. It is the world's 6th biggest economy by
ostensible GDP and the third-biggest by buying power equality (PPP). The nation positions 139th
in per capita GDP (ostensible) with $2,134 and 122nd in per capita GDP (PPP) with $7,783 starting
at 2018. After the 1991 monetary advancement, India accomplished 6-7% normal GDP
development every year. Since 2014 aside from 2017, India's economy has been the world's
quickest developing economy, outperforming China.
The long-haul development prospects of the Indian economy is certain because of its young
populace, relating low reliance proportion, solid reserve funds and speculation rates, and
expanding combination into the worldwide economy. India beat the World Bank's development
standpoint without precedent for the financial year 2015– 16, amid which the economy became
7.6%. Regardless of past changes, monetary development is still altogether moderated by
organization, poor foundation, and unbendable work laws (particularly the failure to lay off
laborers in a business lull).
India has one of the quickest developing administration divisions on the planet with a yearly
development rate above 9% since 2001, which added to 57% of GDP in 2012– 13.] India has
turned into a noteworthy exporter of IT administrations, Business Process Outsourcing (BPO)
administrations, and programming administrations with $154 billion income in FY 2017. This is
the quickest developing piece of the economy. The IT business keeps on being the biggest private-
area manager in India. India is the third-biggest start-up center point on the planet with more
than 3,100 innovation new companies in 2014– 15. The agrarian division is the biggest manager
in India's economy however adds to a declining offer of its GDP (17% in 2013– 14). India positions
second worldwide in ranch yield. The business (fabricating) area has held a consistent offer of its
financial commitment (26% of GDP in 2013– 14). The Indian car industry is one of the biggest on
the planet with a yearly creation of 21.48 million vehicles (for the most part two and three-
wheelers) in 2013– 14. India had $600 billion worth of retail advertise in 2015 and one of the
world's quickest developing internet business markets.

2. USA economy overview

The economy of the United States is an exceedingly created blended economy. It is the world's
biggest economy by ostensible GDP and the second-biggest by acquiring power equality (PPP). It
additionally has the world's seventh-most noteworthy per capita GDP (ostensible) and the
eleventh-most noteworthy per capita GDP (PPP) in 2016. The US has an exceptionally
differentiated, world-driving modern sector. It is likewise a high-innovation trailblazer with the
second-biggest mechanical yield in the world. The U.S. dollar is the money most utilized in
worldwide exchanges and is the world's chief hold cash, upheld by its science and innovation, its
military, the full confidence of the U.S. government to repay its obligations, its focal job in a scope

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of worldwide organizations since World War II, and the petrodollar system. Several nations use
it as their official cash, and in numerous others, it is the accepted currency. The biggest exporting
& importing are China, Canada, Mexico, Japan, Germany, South Korea, United Kingdom, France,
India, and Taiwan.
The country's economy is filled by plentiful regular assets, a very much created foundation, and
high productivity. It has the second-most elevated aggregate evaluated estimation of normal
assets, esteemed at $45 trillion in 2016. Americans have the most noteworthy normal family unit
and worker pay among OECD countries, and in 2010, they had the fourth-most astounding middle
family unit salary, down from second-most elevated in 2007. The United States has held the
world's biggest national economy (excluding pilgrim realms) since in any event the 1890s. The
country is the biggest producer of oil & common gas. In 2016, it was the world's biggest
exchanging nation [46] and in addition its second-biggest producer, speaking to a fifth of the
worldwide assembling output. The U.S. additionally has both the biggest economy and the
biggest mechanical area, at 2005 costs as indicated by the UNCTAD. The U.S. not just has the
biggest inner market for merchandise, yet additionally commands the exchange administrations.
U.S. add up to exchange added up to $4.92 trillion in 2016. Out of all the biggest 500 organization
in the world, 134 companies have their headquarters in the US.
The U.S. has one of the world's biggest and most persuasive budgetary markets. The New York
Stock Exchange is by a long shot the world's biggest stock trade by market capitalization. Foreign
speculations made in the U.S. add up to nearly $2.4 trillion while American interests in remote
nations aggregate to over $3.3 trillion. The U.S. economy is positioned first in universal
positioning on endeavor capital and Global Research and Development funding. Consumer
spending contained 71% of the U.S. economy in 2013. The U.S. has the world's biggest shopper
showcase, with a family unit last utilization expenditure five times bigger than that of Japan. The
country's work advertise has pulled in migrants from everywhere throughout the world and its
net relocation rate is among the most elevated in the world. The U.S. is one of the best
performing country in terms of its economic conditions that concentrates on the Ease of Doing
Business Index, the Global Competitiveness Report, and others.
The U.S. economy encountered a genuine financial downturn amid the Great Recession which in
fact kept going from December 2007 – June 2009. Nonetheless, genuine GDP recovered its pre-
emergency (late 2007) top by 2011, family unit total assets by Q2 2012, non-cultivate finance
occupations by May 2014, and the joblessness rate by September 2015. Each of these factors
proceeded into post-subsidence record an area following those dates, with the U.S. recuperation
turning into the second-longest on record in April 2018. Debt held by general society, a
proportion of national obligation, was roughly 77% of GDP in 2017, positioned the 43rd most
astounding out of 207 countries. Income imbalance positioned 41st most elevated among 156
nations in 2017, and positions among the most astounding in pay disparity contrasted with other
Western nations.

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3. TRENDS
3.1. Literacy in India
Literacy in India is a key for socio-financial development, and the Indian literacy rate has grown
to 74% (2011 Census determine), with latest reports of eighty% literacy drawing close the
sector common fee of eighty four%. The literacy charge at the quit of British rule in 1947
became around 12%. Notwithstanding authority’s programs, India's literacy rate extended only
"sluggishly". The 2011 census, indicated a 2001–2011 decadal literacy increase of 9.2%, that's
slower than the boom visible during the preceding decade. A vintage 1990 take a look at
envisioned that it'd take till 2060 for India to gain commonplace literacy at then-modern rate of
development.
There may be a wide gender disparity inside the literacy price in India: effective literacy costs
(age 7 and above) in 2011 were eighty.9% for guys and sixty four.60% for ladies. The census
provided a advantageous indication that growth in lady literacy prices (eleven.8%) became
appreciably quicker than in male literacy fees (6.Nine %) within the 2001–2011 decadal length,
which means the gender gap appears to be narrowing.

Literacy rate over the years:

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 Year Male% Female% Combined%
1971 45.96 21.97 34.45
1981 56.38 29.76 43.57
1991 64.13 39.29 52.21
2001 75.26 53.67 64.83
2011 82.14 65.46 74.04

3.2 Literacy in USA:

Prices of literacy in the US rely on which of the numerous definitions of literacy is used.
Governments might also label as literate the ones folks that can read multiple thousand easy
phrases they learned by means of sight in the first four grades in faculty. Other sources can also
term such individuals functionally illiterate if they may be unable to use basic resources of
written facts like warning labels and driving instructions. The CIA international Fact book makes
use of the commonplace definition of literacy as "age 15 and over can examine and write" but

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notes that the Fact book is used for US comparisons, no longer targeted standards, that is
beyond the scope of the Fact book.
In 1988, the U.S. Branch of training become asked by means of Congress to undertake a
countrywide literacy survey of yank adults. The national person Literacy Survey undertaken in
1992, changed into the primary literacy survey that provided "correct and detailed information
on the competencies of the grownup populace as a whole." The U. S. Has participated in
cyclical, massive-scale assessment packages undertaken by the national assessment of person
Literacy (NAAL) and sponsored by means of the countrywide Centre for schooling records
(NCES) on the grounds that 1992. The survey revealed that the literacy competence of about 40
million adults turned into restricted to the lowest degree, level 1 which intended they might
most effective apprehend the simplest written instructions.

3.3. Morality in India:

Mortality fee, or demise price, is a degree of the variety of deaths (in standard, or due to a
particular motive) in a selected population, scaled to the size of that populace, consistent with
unit of time. Mortality charge is typically expressed in gadgets of deaths in step with 1,000
people per year; hence, a mortality price of nine.5 (out of one, 000) in a population of 1,000
would mean 9.5 deaths in keeping with year in that whole populace, or zero. 95% out of the
full. Its miles awesome from "morbidity", that is either the prevalence or occurrence of a
sickness, and additionally from the incidence charge (the number of newly performing
instances of the disorder according to unit of time).

Population growth of India per decade:

Years Population Change %

1951 361,088,000 -
1961 439,235,000 21.6
1971 548,160,000 24.8
1981 683,329,000 24.7
1991 846,387,888 23.9
2001 1,028,737,436 21.5
2011 1,210,726,932 17.7

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3.4. Morality Rate in US
The US has enjoyed greater than a century of almost uninterrupted declines in mortality and
rising toughness. In 1900, one in 40 Americans died yearly. With the aid of 2013, that price was
kind of one in one hundred forty, a cumulative development of extra than thirds. Lifestyles
expectancy at birth rose by way of extra than 30 years over this era, from forty seven to 79.
Key points:
• The USA skilled an unprecedented decline in mortality in the course of the twentieth century,
way to upgrades in public fitness, scientific advances, and behavioral adjustments.

• But mortality and lifestyles expectancy improvements have been uneven throughout age and
socioeconomic fame.

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• Density modifications in mortality will affect the federal finances outlook. However, projections
of mortality and lifestyles expectancy are highly uncertain. This uncertainty creates extra threat for the
state’s transfer applications to the elderly, which already account for half of presidency outlays.

4. GDP

Gross domestic product (GDP) is the monetary value of all the finished goods and services
produced within a country's borders in a specific time period. Though GDP is usually calculated
on an annual basis, it can be calculated on a quarterly basis as well. GDP includes all private and
public consumption, government outlays, investments and exports minus imports that occur
within a defined territory. Put simply, GDP is a broad measurement of nation’s overall economic
activity.

Gross domestic product can be calculated using the following formula:

GDP = C + G + I + NX

Where, C is equal to all private consumption, or consumer spending, in a nation's economy, G is

the sum of government spending, I is the sum of all the country's investment, including
businesses capital expenditure and NX is the nation's total net exports, calculated as total exports
minus total imports (NX = Exports - Imports).

4.1 Trends in GDP growth- India

YEAR

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India has emerged as the fastest growing major economy in the world as per the Central Statistics
Organizations and IMF and it is expected to be one of the top 3 economic power of the world
over the next 10-15 years. India’s GDP was increased 7.1% in 2016-17 and now in the third
quarter of the current year i.e. 2018 it is 7.1 %,well below 8.2 percent in the previous period
whereas the market expectations is 7.4 percent. Despite all this statistics and predictions the
Indian economy has faced the lowest growth rate in three quarters, mainly due to a slowdown in
consumer spending amid high oil prices and a weaker rupee. Also, inventories, financial services,
manufacturing and the farm sector rose less and where the export which was showing growth of
10.3% in Q4 in 2016 has come down to 1.2% in 2017.NPA’s also slowdown the growth rate of
economy as banking sector became weak.
By studying the data and research it also states that GDP Annual Growth Rate in India averaged
6.17 percent from 1951 until 2018, rand its reach all-time high in the first quarter of 2010 which
is 11.40% whereas it record low of -5.20 percent in the fourth quarter of 1979.

4.2 Trends in GDP growth- USA

YEAR

The Gross Domestic Product (GDP) in the United States was value of 19390.60 billion US dollars
in 2017. The GDP value of America represents 31.28 percent of the globe economy. GDP in the

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America averaged 6991.52 USD Billion from 1960 until 2017, reaching an all-times high of
19390.60 USD Billion in 2017 and a record low of 543.30 USD Billion in 1960.
And also USA’S GDP growth has been steadily declining since the 1950’s where the average
growth rate was above 4%. We haven’t seen anything near 5% annual GDP growth since the
beginning of this century –over 14 year ago.
It is going be very difficult for a country like America to prosper and maintain our standard of
living when the average annual GDP over the last 10 year has been below 2% per year.

4.3 COMPARISON

YEAR

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YEAR

India is developing into associate open-market economy, nevertheless traces of its

past autarkical policies stay. Economic relief measures, as well as industrial deregulating,
privatization of state-owned enterprises, and reduced controls on foreign trade and
investment, began within the early 1990s and have served to accelerate the country's
growth, that averaged below seven-membered p.a. since 1997. India's various economy
encompasses ancient village farming, fashionable agriculture, handicrafts, a good vary of
recent industries, and a mess of services. Slightly quite half the men is in
agriculture, however services area unit the main supply of economic process, accounting for
nearly simple fraction of India's output, with one third of its labor class, whereas
the US has the most important and most technologically powerful economy within
the world, with a per capita gross domestic product of $49,800. During this market-oriented
economy, personal people and business corporations create most of the choices, and also
the federal and state governments obtain required product and
services preponderantly withinthe personal marketplace. US business corporations
fancy larger flexibility than their counterparts in Western Europe and Japan in choices to
expand capital plant, to put off surplus staff, and to develop new merchandise.

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5. Inflation- Trends & Future Directions.
5.1. Inflation rate in India
When the price level generally rises, each unit of currency buys fewer goods and services. Consequently,
inflation also reflects degradation in the purchasing power of money - a loss of real value of money in the
internal medium of exchange. A vital measure of price inflation is the inflation rate which is the annualized
percentage change in a general price index over years. The inflation rate is determined by evaluating the
difference between price levels for the current year and previous year. To measure the price level, variety
of goods is selected, and a price index is constructed which is the consumer price index (CPI). Through CPI,
which measures the price changes, the inflation rate can be calculated. This is done by dividing the CPI by
the previous price level and then multiplying the result by 100.

Inflation in India is calculated based on the Consumer Prices Index (CPI). Consumer Prices are representing
the prices that the end consumer must pay for the product or service together with all taxes and fees.
Monthly inflation rate in India was 0.36% in October 2016. That is 0.72 more than it was in September
2016 and 0.77 less than in October 2015. At the same time, 2016 year to date inflation rate is 3.35% and
year over year inflation rate is 3.35%. In 2016 India ranks #12 in the world by yearly inflation rate.

The average inflation of India in 2017: 4%

5.2. Trends in Inflation- India

India is facing inflation since 1950's, but it started showing its harmful symptoms and ill effects since 1991.
Starting from the financial crises of 1991, marked by deficits in government finances and devaluation of
rupee, a whooping inflation of 13.9% took its toll on the Indian economy. Though later controlled, average
inflation had been recorded as 9.3% per year till the end of 19th century.

The nonstop high costs for creature items (eggs, meat and fish), the ascent in the costs of oats and
vegetables, alongside the ascent in worldwide costs of composts (non-urea) and the expansion in
managed costs of diesel have added to swelling to varying degrees after some time.

The Consumer Price inflation for major indices followed a similar trend. The CPI inflation in 2012-13 (April-
December) averaged 10.0 per cent as compared to 8.82 per cent in the same period last year. The Central
Statistics Office (CSO) launched a new series of Consumer Price indices from January 2011. All India
general inflation for CPI-NS averaged 10.04 per cent in 2012-13 (April-December) and was placed at 10.56
per cent in December 2012. Inflation based on other CPIs (CPI for Agricultural Labourers and CPI for Rural
Labourers) also remained in double digit in December 2012. While part of the higher CPI expansion mirrors
the high weight of nourishment in the utilization crate (46 – 69%), value weights have continued in
administrations and lodging, which are incorporated into the CPI bushel.

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Forecast of Inflation- India

The RBI has made itself the prime sentinel of inflation rates and is not likely to let it gallop too high. The
EIU projects India’s inflation to hover around 4.6 percent by 2020. The IMF forecasts a slightly higher 5
per cent by 2020.

5.3. Inflation rate- U.S.A

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In the United States, Consumer Price Index for each and every Urban Consumer relies upon the expenses
of a market bushel of: sustenance (14% of total weight), essentialness (9.3 %), and things less sustenance
and imperative items (19.4%) and organizations less imperative organizations (57.3%). The last
arrangement is apportioned by: shield (32.1%), restorative thought organizations (5.8%) and
transportation organizations (5.5 %). United States Inflation Rate - certified characteristics, evident data,
guess, outline, estimations, money related date-book and news. Joined States Inflation Rate - certifiable
data, bona fide chart and timetable of releases - was propping up invigorated on December of 2016.

Consumer prices in the United States went up 1.6% year-on-year in October of 2016, up from a 1.5 percent
rise in September and in line with market expectations. It is the most noteworthy expansion rate since
October of 2014, supported by rising sanctuary and vitality cost while sustenance costs declined for the
second month. Extension Rate in the United States landed at the midpoint of 3.29% from 1914 until 2016,
accomplishing a fantastic high of 23.70% in June of 1920 and a record low of 15.80% in June of 1921.

5.4. Trends in Inflation- USA

The general pattern since 1990 has been down with a couple of brief times of higher swelling. The diagram
demonstrates the yearly expansion rate from 1989. The rate crested in October 1990 at 6.29% from that
point it slanted down until the point that it bottomed simply above 1% in 2002. Expansion expanded from
that point to crest at 5.6%in 2008 just before the accident which brought it down to a deflationary - 2.10%.
A year ago, i.e. 2015, there was emptying rate which was recorded as - 0.47%.

5.5. Forecast of Inflation- U.S.A

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The International Monetary Fud sees U.S. buyer value swelling outperforming the Federal Reserve's 2%
focus in 2017, one year in front of the national bank's very own gauge, and the global office trust the
purchaser value expansion would achieve 2.3% one year from now.

In the most recent projections by IMF, they estimate that the individual utilization consumption list, the
national bank's most loved proportion of swelling, would not hit the 2% focus until 2018.

The IMF said that the pickup of expansion would originate from a "fast facilitating of past disinflationary
powers the dollar desire in 2015 and drop in fuel costs and additionally tied down medium-term swelling
desires".

6. PUBLIC FINANCE
Talking about the public finances between the two countries India and U.S.A. plays a vital role in
the comparison. Government expenditure and deficit financing, public borrowing in the economy
comprises the subject matter of public finance. It is the study of the effects of budgets on the
economy, particularly the effect on the achievement of the major economic objects—growth,
stability, equity and efficiency. Before the period of known great depression in Western
industrialized countries during the thirties, role of public finance was said to be raising sufficient
resources for carrying out the functions of civil administration & defense in foreign countries.
Later they realized that government’s taxing and spending policies could go a long way in
mitigating economic fluctuations in economy. In developing countries like India and many other,
public finance has to fulfill another important role. Whereas, in the developed countries, the
basic problem in the is to ensure stability at full employment and in the long run to secure steady
rate of economic growth, that is the growth without fluctuation, the developing countries taking
example of India faces a more tough problem of how to develop a higher rate of economic growth
so it can handle the problems of poverty and unemployment.

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Hence, public finance has to play a vital role in enhancing economic growth in the developing
countries and maintaining price stability. For developing countries slide economic growth is not
sufficient; the composition of growing output and distribution of extras incomes considered to
be such as will ensure removal of poverty and unemployment in the developing countries

6.1. Public Finance in India

The government deficit has declined; share of revenue expenditure in total expenditure,
including that of subsidies, has declined; and the share of capital expenditure, though small as
percent of GDP, has been maintained. Fiscal federalism has been strengthened, as the states’
share in tax revenue has increased, a great percentage of which they receive in the form of
“untied transfers” from the Center. General government debt has declined, largely due to high
economic growth and some fiscal consolidation by the central government, and is generally
considered sustainable. General government fiscal deficit has declined. The general government
fiscal deficit has steadily declined since 2011-12 (except in 2015-16). Within the consolidated
deficit of the Center and the States, Center’s fiscal deficit has declined consistently since 2011-
12 and held stable in 2017-18, while there has been a modest increase in the States fiscal deficit
over the same period.
Quality of expenditure has improved. Much of the observed consolidation for the general
government is attributed to decline in current expenditures between 2011-12 and 2015-16; and
to an increase in revenue in the last two years. In particular, subsidies by the central government
have declined, while the level of capital expenditure, as percent of GDP has increased in the last
two years. Due to the implementation of UDAY in several states, and higher interest payments
on absorbed contingent liabilities, current expenditures have increased since 2015-16. Similarly,
capital expenditures increased due to increase in loans to electricity distribution companies.
Revenue collections have increased. The increase in revenue is because of higher indirect tax
revenue and non-tax revenue, including receipts from disinvestments. Direct tax collection
remained low at the center and state levels. At the subnational level, property tax is the most
significant avenue for collecting direct taxes, however it remains underexploited at less than 1
percent of GDP due to narrow coverage, low collection efficiency, and lack of indexation of
property values.

6.2. Central government finances

Central government’s fiscal deficit has declined since 2011-12 and stabilized in 2017-18. Center’s
fiscal deficit declined steadily from an average of 5.7 percent of GDP during 2008-09 to 2012-13
to 3.8 percent in 2015-16; and further to 3.5 percent in 2016-17 due to the rationalization of
subsidies and increase in indirect tax collections. The pace of consolidation moderated in 2017-

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18 as the central government incurred additional expenses on compensation to the states for
GST revenue shortfall. Center’s gross tax collection increased to 11.6 percent of GDP during 2017-
18 - a 2 percentage point of GDP increase since 2015-16.81 Indirect tax revenues have increased
over the last decade. During the last decade, several policies have affected the prevailing tax
system. Direct tax system was streamlined by reducing the prevailing corporate tax rates which
when compared to other countries were amongst the highest in India. Evidence suggests that
economic development tends to lead to a relative shift in the composition of revenue from
indirect taxes (such as consumption or import taxes) to direct taxes (such as income tax).
Non-tax revenues have increased over the past two years.86 Non-tax revenues, including interest
receipts, dividends, user fees, spectrum auctions, etc., and capital receipts from disinvestments,
increased from 1.6 percent of GDP in 2014-15 to 2.2 percent of GDP in 2016-17. Non-tax current
revenues have increased over the years, with specific spurts in 2015-16 and 2016-17 due to
auctions of cellular spectrums with an average collection of 0.5 percent of GDP in each year.
Divestment of public sector enterprises has contributed nearly an average of 0.3 percent of GDP
a year to non-tax revenue in the last five years. However, disinvestment receipts have remained
below the budgeted amount, and averaged at about 60 percent of the budgeted amount. In
2017-18, disinvestment receipts exceeded budget estimates for the first time in recent history.
Expenditure on subsidies has been rationalized. Fuel subsidies have declined from their peak of
1 percent of GDP in 2012-13 to approximately 0.1 percent of GDP by 2016-17. Decline in fuel
subsidies can be attributed to a decline in global oil prices and the government using the
opportunity to deregulate retail fuel prices in India. As compared to revenue expenditure, capital
expenditure is rather small, at less than 2 percent of GDP.
Central government’s realized fiscal deficit is estimated to be 3.5 percent of GDP during 2017-18,
higher than the budgeted target of 3.2 percent. This marks a deviation from the government’s
previously announced glide path of fiscal consolidation. The higher than expected deficit in 2017-
18 was realized due to compensation to the states for GST revenue shortfalls: with the
implementation of GST, states were compensated for lost revenues from the abolishment of
state-level indirect taxes, which resulted in an increase in the central government’s current
expenditures by 0.4 percent of GDP compared to the budgeted target.

6.3. State government finance

Public finances have been realigned in India in recent years with increasing revenue and
expenditure responsibilities being shifted to the states. Along with greater autonomy on
spending, the burden of fiscal deficits has thus shifted from the Center to the states. State
government deficit has risen in recent years. State government deficit has increased in recent
years despite the increase in their own revenue and transfers from the Center. The main reason

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for wider deficit is a one-time expense upon realization of contingent liabilities. Some of the
larger states in which fiscal deficit increased include Rajasthan, Uttar Pradesh, Bihar, Tamil Nadu,
and Madhya Pradesh.
Some of the expenditures are excluded on power that would be related with UDAY, capital
expenditures have rose since 2014-15. In particular, expenditures on roads and highways have
also rose. Whereas, the current expenditures have also rose, including on education and health.
An analysis of the fiscal performance of 19 states during the first seven months of 2017-18, shows
that fiscal outcomes are on track.

6.4. Public finance of USA

As per the budget and accounting act of 1921, it says that the president is duly responsible for
maintaining the federal government budget. The budget is prepared by the Office of
Management and Budget, based on requests from the heads of all federal departments and
agencies and takes decisions advice from the Board of Governors of the Federal Reserve System.
After improving for a few years early in the decade, the imbalance in the U.S. federal
government’s finances has started to worsen again. The deficit reached US$665B at the end of
fiscal 2017, and the situation should keep eroding in the coming years, according to the
Congressional Budget Office’s (CBO) latest projections. At this point in the economic cycle,
growth should put a balanced budget within reach, but Washington’s latest decisions will instead
make deficits and the debt balloon in the coming years. The situation could put some upside
pressure on interest rates, as well as become a problematic issue if the economy suffers another
setback.
In fiscal 2009, 1 the economic and financial crisis drove the federal budget deficit to a peak of
US$1,412.7B (9.8% of GDP). The situation then improved thanks to the better economic situation,
some tax increases, and measures to restrict federal spending. In this cycle, the smallest deficit,
US$438.5B or 2.4% of GDP, came in 2015. In the next two fiscal years, however, public finances
deteriorated again, with deficits of US$584.7B (3.2% of GDP) in 2016, and US$665.4B (3.5% of
GDP) in 2017.

6.5. Changes in revenue of US Government

Talking about revenues the U.S. federal government’s biggest revenue stream comes from
personal income tax, which totaled US$1,587B in 2017. It is followed by payroll tax, which
primarily goes to social programs and unemployment insurance. Employees and employers pay
equal shares of the payroll tax, which totaled US$1,162B in 2017. These two tax sources
accounted for 82.9% of the government’s revenue in 2017. The amounts derived from the tax on
corporate profits are much smaller, at US$297B last year, representing just 8.9% of revenue. The

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surpluses from the Federal Reserve (Fed) are one of the other revenue sources, representing
US$81B in 2017, down from the peak of US$155.6B in 2016.

6.6. Changes in expenditure of US Government

Social programs account for a very large proportion of the U.S. federal government’s spending.
The main programs are, by far, Social Security (old age pensions), Medicare (health insurance for
the elderly) and Medicaid (health insurance for people with very low incomes). Together, the
three programs cost US$2,016B in 2017, or 50.6% of federal spending (graph 2). The other non-
discretionary expenditures (i.e. expenditures that are not dependent on an annual budget) and
debt service from the tax on corporate profits are much smaller, at US$297B last year,
representing just 8.9% of revenue. The surpluses from the Federal Reserve (Fed) are one of the
other revenue sources, representing US$81B in 2017, down from the peak of US$155.6B in 2016.
The CBO, a non-partisan congressional agency whose role is to assess the budget outlook and
costs of various bills, 2 recently released its forecasts for the 2018–2028 horizon. It is quickly clear
that the recent trend of eroding public finances will persist in the coming years. The federal
government’s budget balance will go from -US$665.4B in 2017 to -US$804B in fiscal 2018, which
will end on September 30. The deficit will keep ballooning in the next few years, and should go
above US$1,000B as of fiscal 2020. The deficits also represent increases in terms of the
proportion of GDP. 3.5% in 2017, in comparison now the percentage has gone to 4.0% as of 2018,
then keeps rising toward 4.5% in 2019.
An Even Tougher Public Finance Challenge With its latest decisions on tax cuts and higher
spending, the U.S. federal government has put itself in a critical situation in public finances. The
advantage is that it increases economic activity in the short range, as can be seen in the
widespread increase in growth forecasts for 2018 and 2019. Now the matter is what remains to
be seen is whether the gamble is justified or not, or whether the erosion of public finances will
come back to haunt the economy later. At this stage in the economic cycle, the aim should be to
capitalize on economic growth to decrease budgetary shortfalls; this would help deal with
eventual cyclical shocks. If the situation eventually has to be cleaned up, it will be hard to
reconcile the choices of the various U.S. political factions. Low tax rates, financing defence, the
sanctity of social programs: all have their staunch defenders. Market pressures, the needs
resulting from economic conditions.

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7. Employment
7.1 Employment Trends- India
Employment is a very important item within the development agenda in India. Employment rate
has varied in several periods throughout the last over fifty years. The percent indicates the
proportion of individuals within the labor force seeking work however unable to seek out any.
Within the initial years of development designing, state wasn't expected to emerge as a
significant drawback however it had been clearly recognized that ‘considerations of size and
technology must not put aside to stress employment. State was calculable to be comparatively
low, as was conjointly the expansion rate of labor force, and a targeted economic process rate of
5 percent with some stress on labor intensive trade goods sectors, was expected to come up with
giant enough employment over the years to stop any increase in state. These assumptions and
expectations continued from one 5 year decide to another throughout to a different throughout
the 1950’s and 1960’s. Then rate and magnitude of state raised considerably. Economy grew at
a rate of around 3.5 as against the planned rate of five per cent every year and employment grew
at a comparatively high rate of two per cent every year. Since labor force growth was abundant
higher at a pair of 0.5 per cent as against but a pair of per cent every year assumed, the result
was a rise in state. Magnitude of state had virtually doubled throughout 1956-1972, from around
five to ten million and percent from a pair of 0.6 to 3.8 percent this means the trends throughout
the primary 20 years of planned development in India.
Employment and state for 1972-73 that discovered high incidence of poorness (54% rural and
41% urban) and high state rates (8.4% on current daily standing and 4.3 you decide on presently
weekly standing basis), the official approach to employment drawback underwent a modification
in middle 1970’s. The Fifth 5 year set up (1974-79) wanted to handle the use issue by reorienting
the pattern of growth in favor of employment intensive sectors. At identical time, a robust
opinion was rising to counsel that growth alone cannot solve the issues of poorness in state, and
so, variety of special employment and poorness alleviation programmes were launched. They
were largely of 2 kinds: providing money and alternative help for productive self-employment,
and providing supplementary wage employment to the part-time. Over the years, these
programmes are continued in one type or the opposite, are changed or integrated, new ones are
started whereas some previous ones are discontinued.
While these programmes appear to possess been able to scale back the degree of
underemployment to an exact extent, the open state rates haven't declined over the years.
Throughout the amount 1993-94 to 1999-2000 those supported current daily standing, have
raised. Viewing totally different rates of state, it's clear that under-employment may be a
drawback of abundant larger magnitude then open state.

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Unemployment rate in India

Unemployment Rate in India increased to 3.52 percent in 2017 from 3.51 percent in 2016.
Unemployment Rate in India averaged 4.05 percent from 1983 until 2017, reaching an all-time
high of 8.30 percent in 1983 and a record low of 3.41 percent in 2014.

Slow growth of employment within the union sector has been a significant think about the
stagnancy within the proportion of standard wage and wage earners. This sector consisting of
public services and enterprises and huge personal companies, is that the one that provides
regular jobs. Employment growth during this sector has been with regards to zero.5 % throughout
1994-2000. Within the post 2000 amount, union sector employment has, in fact, shown associate
degree absolute decline; it declined by concerning a million from 28 million to 27 million
throughout 2000-2003, (GOI, 2005a). Of around 21 million new employment opportunities
generated throughout 1994-2000 solely concerning four-dimensional has been within the union
sector, and therefore the rest 96 per cent within the unorganized sector (Planning Commission,
2002). As a result, the share of the unorganized sector in total employment has raised from
around 92 per cent to 93 per cent. The high and increasing preponderance of the unorganized
sector has been a matter of hysteria from the perspective of quality of employment as staff
during this sector suffer from poor conditions of labor, low earnings and lack of employment and
social insurance.

7.2. Future Directions- India

The Government of India has taken many steps to decrease the state rates like launching the
Mahatma Gandhi National Rural Employment Guarantee theme that guarantees a 100-day
employment to associate degree non worker in a very year. It’s enforced it in two hundred of the
districts and more are going to be enlarged to 600 districts. In exchange for operating below this
theme the person is paid an Rs.150 per day.
Apart from Employment Exchange, the government of India publishes a weekly newspaper titled
Employment News. It comes out each Saturday evening and offers elaborate data concerning

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vacancies for state jobs across India. Together with the list of vacancies, it conjointly has the
notifications for varied government exams and achievement procedures for state jobs.
Agriculture is that the most labor engrossing sector of the economy. In recent years, there has
been a decline within the dependence of population on agriculture part attributable to disguised
state. A number of the excess labor in agriculture has emotional to either secondary or the
tertiary sector. Within the secondary sector, little scale producing is that the most labor
engrossing. Just in case of the tertiary sector, varied new services area unit currently showing like
biotechnology, data technology and then on. The government has taken steps in these sectors
for the disguised at leisure folks in these strategies.

7.3. Employment Trends- U.S.A

Employed persons carries with it all persons WHO did any work for pay or profit throughout the
survey reference week, all persons WHO did a minimum of fifteen hours of unpaid add a family-
owned enterprise operated by somebody in their house, all persons WHO were quickly absent
from their regular jobs, whether or not they were paid or not. Full-time utilized persons work 35
hours or a lot of, considering all jobs, whereas part-time utilized persons work but 35 hours.
Unemployment within the U.S. discusses the causes and measures of U.S. state and methods for
reducing it. Job creation and state area unit stricken by factors like economic conditions,
international competition, education, automation, and demographics. These factors will have an
effect on the amount of staff, the period of state, and wage levels. State typically falls during
times of economic prosperity and rises throughout recessions, making important pressure on
public finances as tax income falls and social safety internet prices increase. As an example,
employment enlarged systematically throughout the 90’s, however has been inconsistent since
thanks to recessions in 2001 and 2007-2009. As of could 2016, the use recovery relative to the
Gregorian calendar month 2007 (pre-recession) level was mixed.[3] Variables like the per centum
(U-3) and range of utilized have improved on the far side their pre-recession levels. State will be
measured in many ways in which. An individual is at leisure if they're idle however trying to find
employment and offered for work. Those who area unit neither utilized nor at leisure don't seem
to be within the labor. As an example, as of Gregorian calendar month 2015, the per centum
within the US, was 5.0% [10] or 7.9 million folks, [11] whereas the government's broader U-6 per
centum, which has the part-time was 9.9% [12] or close to sixteen.4 million folks. [13] These
figures were calculated with a civilian labor of roughly 157.8 million folks, [14] relative to a U.S.
population of roughly 323 million folks.
The U.S. two-faced the subprime mortgage crisis and ensuing recession of 2007-2009, that
considerably raised the per centum to a peak of 100 percent in Oct 2009. The per centum fell
steady thenceforth, returning to five by Gregorian calendar month 2015 as economic conditions
improved.

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The U.S. has aging population that is moving a lot of persons out of the labor relative to the
civilian population. This has resulted in a very long downward trend within the labor participation
rate that began around 2000, because the boomer generation began to retire.

7.4. Unemployment rate in USA

The US unemployment rate was unchanged at 3.7 percent in October 2018, unchanged from the
previous month's 49-year low and in line with market expectations. The number of unemployed
increased by 111 thousand to 6.08 million and employment rose by 600 thousand to 156.56
million. Unemployment Rate in the United States averaged 5.77 percent from 1948 until 2018,
reaching an all-time high of 10.80 percent in November of 1982 and a record low of 2.50 percent
in May of 1953.

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Historically, as academic attainment rises, the per centum falls. As an example, the per centum
for school graduates was a pair of.4% in could 2016, versus 7.1% for those while not a high school
sheepskin. The central bank conducts financial policy, adjusting interest rates to maneuver the
economy towards an economic condition target of around a five-hitter per centum and a pair of
rate of inflation.
The Federal bank has maintained near-zero interest rates since the 2007-2009 recession, in
efforts to spice up employment. It conjointly injected a large quantity of cash into the economy
via quantitative easing to spice up the economy. In December 2015, it raised interest rates for
the primary time moderately, with steerage that it meant to continue doing if economic
conditions were favorable.
A trend towards a lot of staff within the "gig" or access economy, in different (part-time or
contract) work arrangements instead of full-time; the proportion of staff in such arrangements
rose from 10.1% in 2005 to 15.8% in late 2015. This suggests all of World Wide Web employment
growth within the U.S. economy (about nine million jobs between 2005 and 2015) occurred in
different work arrangements, whereas the amount in ancient jobs slightly declined.

7.5. Future Directions- USA

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Many consultants advocate infrastructure investment, like building roads and bridges and
upgrading the electricity grid. Such investments have traditionally created or sustained
voluminous jobs, with the offset to higher state and federal budget deficits.
Lowering the prices of staff conjointly encourages employers to rent a lot of. This may be done
via reducing existing social insurance or Medicare payroll taxes or by specific tax incentives for
hiring further staff.
Business area unit two-faced with paying the numerous and rising health care prices of their
workers. Several alternative countries don't burden businesses, however instead tax staff WHO
pay the government for his or her health care. This considerably reduces the value of hiring and
maintaining the hands.
Various studies place the value of environmental rules within the thousands of greenbacks per
worker. Americans are split on whether or not to protect the atmosphere or economic process
may be a higher priority. Regulations that add prices to crude oil and coal may slow the economy,
though they might offer incentives for clean energy investment by addressing regulative
uncertainty relating to the worth of carbon
Raising the pay would offer households with more cash to pay, in associate degree era with
record company profits and a reluctance of companies to take a position. Critics argue raising
employment prices deters hiring. Increasing the pay, will increase employee productivity and
buying power for shoppers which can conjointly facilitate the economy.
Education policy reform might build teaching cheaper and a lot of attuned to job desires. State is
significantly lower for those with a school education.
Income difference, expressed by wage stagnation for middle- and lower-income families as well
as a shift in financial gain growth to the highest earners, will adversely have an effect on economic
process.

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Comparison between US and India Unemployment Rate

8. INTERNATIONAL TRADE
International Trade is exchange of goods, services & capital across international borders or
territories. International trade has been present in the history throughout like Silk Road, Amber
Road, and Salt roads etc. but its significance has been at rise in recent centuries in terms of
economic, social & political scenarios. These import and export activities represents a significant
share of Gross Domestic Product (GDP). This type of trade gives rise to a world economy, in which
prices, supply and demand affects and such kind of trade are affected by global events. There are
many factors that international trade such as economy, government policies, markets, laws,
judicial system, currency, politics etc.

8.1. International Trade in India

8.1.1 The Export Scenario
The export in India averaged $5365 million from the year 1957 until 2018. The export had its all-
time high in March 2013, $30541.44 million and record low in June 1958, $59.01. The exports in
India has increased up to 17.9% year on year to $26.98 billion in October 2018. The sales rose for
Petroleum products (49.4%), Chemicals (34%), Drugs & Pharmaceuticals (12.8%), Engineering
Goods (8.9%) & Gems & Jewelry (5.5%). According to the statistics of the trendeconomics
website, the Indian export is projected to be around $28900.00 million in the year 2020.

Figure: The increasing export trend in India from January-October 2018

Source: www.treneconomics.com

8.1.2. Export by Category

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In recent years the majority of Indian exports consisted of pearls, precious and semi-precious
stones and jewelry (16% of the total shipment), mineral fuels, oils and waxes and bituminous
substances (12%), vehicles, parts and accessories (5%), nuclear reactors, boilers, machinery and
mechanical appliances (5%), pharmaceutical products (5%), & organic chemicals (4%).

Export from India

5% 4%
5% 16%

12%

5%

53%

Pearls & Stones Minerals Vehicles & Accessories

Others Nuclear & Mechanical appliances Pharmaceutical Products
Organic Chemicals

Major Products exported from India

8.1.3 Export by Country

India’s main export partners are: United States (15% of the total exports), United Arab Emirates
(11%), Hong Kong (5%), China (4%), Singapore (4%) & United Kingdom (3%).

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 Major Export Partners

15%

11%

58% 5%
4%
4%
3%

United States United Arab Emirates Hong Kong China Singapore United Kingdom Others

Major Export Partners of India

8.2. The Import Scenario

The imports in India averaged $7860.31 million from the year 1957 until 2018. The export had its
all-time high in May 2011, $45281.90 million and record low in August 1958, $117.40. The
imports in India has increased up to 17.6% year-on-year to $44.1 billion in October 2018. The
import is boosted by purchase of Petroleum & Crude (52.6%), Electronic goods (31.9%),
Chemicals (26.6%), Machinery, electrical and non-electrical (12.5%), and Coal, coke and
briquettes (12.4%). The gold purchases declined to 42.9% for the year 2017-18. According to the
statistics of the trendeconomics website, the Indian import is projected to be around $266584.00
million in the year 2020.

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 Figure: The increasing import trend in India from January-October 2018

Source: www.treneconomics.com

8.2.1. Import by Category

India is main importer of Mineral fuels, oils and waxes and bituminous substances (27% of total
imports), Pearls, precious and semi-precious stones and jewelry (14%), Electrical machinery and
equipment (10%), Nuclear reactors, boilers, machinery and mechanical appliances (8%), &
Organic chemicals (4%).

Import from India

27%
37%

14%

8% 10%
4%

Mineral fuels, Oils & Waxes Pearls & Precious stones

Electrical machinery & Equipments Nuclear reactors & Mechanical Appliances
Organic chemicals Others

Major Products Imported by India

8.2.2 Import by Country

India’s major import partners are China (16% of total imports), the United States (6%), United
Arab Emirates (6%), Saudi Arabia (5%) & Switzerland (5%).

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 Major Import Partners

16%

6%
6%

62% 5%

5%

China United States United Arab Emirates Saudi Arabia Switzerland Others

Major Import Partners of India

8.3. International Trade in USA

8.3.1 The Export Scenario
The exports of goods and services in the US rose from $3.1 billion from August 2018 to $212.6
billion in September 2018. The goods exports increased from $2.9 billion to $141.9 billion. The
main driving factor of this increase is by the sale of industrial supplies and materials ($2.8 billion),
& other petroleum products and nonmonetary gold. Also the sales of civilian aircraft advanced
$1.2 billion, while those of soybeans dropped $0.7 billion. The exports of services particularly in
transport increased from $0.3 billion to $70.7 billion in September 2018. The exports rose for the
following countries: the EU (6.0%), China (5.3%) and Japan (1.6%) but fell to Mexico (-4.3%) &
Canada (-3.3%). The exports in the US averaged $54813.37 million from 1950 until 2018, reaching
an all-time high in May 2018 to $214668 million & record low of $772 million in March 1950.

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 Figure: The increasing export trend in the US from October 2017-October 2018

Source: www.treneconomics.com

8.3.2 Export by Category

The United States is the third biggest exporter in the world, yet exports account only for 13% of
the GDP. The main exports products are Capital goods (39% of total exports) & industrial supplies
(28%). Other export products include Consumer goods (12%), automotive vehicles, parts and
engines (10.5%), Foods, feeds and beverages (7%).

Main Export Products

7%

10.50%
39%
12%

28%

Capital Goods Industrial Supplies Consumer Goods

Automotive Vehicles & parts Foods & Beverages Others

Major Export Products

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8.3. 3 Export by Country
In 2017, main exports partners were Canada (18% of total exports), Mexico (16%), China (8.5%),
Japan (4%), Germany (3%) & the United Kingdom (3%).

Major Importing Partners

18%

47.50%
16%

8.50%

4%
3% 3%

Canada Mexico China Japan Germany United Kingdom Other

Major Export Partners

8.3.4. The Import Scenario

The imports of goods & services to the US increased to $3.8 billion from August 2018 to an all-time
high of $266.6 billion in September 2018. The goods imports rose from $3.5 billion to $219.1 billion,
due to the purchases of capital goods (up $2.4 billion), such as telecommunications equipment, civilian
aircraft engines, computer accessories and computers. In addition to this, imports of consumer goods
advanced $2.0 billion, driven by the purchases of other textile apparels & household goods toys; games,
& sporting goods; and cell phones & other household goods. Into the contrast, imports of trucks, buses,
and special purpose vehicles fell by $0.6 billion. The imports of services, such as transport, increased
from $0.4 billion to $47.5 billion. The imports from China rose to 4.5%, while a decline was seen in
the imports from Japan (-16%), the EU (-8.5%), Mexico (-6.3%) & Canada (-5.8%). The imports in
the United States averaged $69257.84 million from 1950 until 2018, reaching an all-time high in
September of 2018, $266584 million & a record low in March 1950, $577 million.

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 Figure: The increasing import trend in the US from October 2017-October 2018

Source: www.treneconomics.com

8.3.5 Import by Category

The US is the second biggest importing country in the world. The main imported products are:
Capital goods (29%) & consumer goods (26%). Other products include: Industrial Supplies (24%),
automotive vehicles, parts and engines (15%), Foods, feeds & beverages (5%).

Major Imported Products

5%
15% 29%

24%
26%

Capital Goods Consumer Goods Industrial Supplies

Automotive Vehicles & Engines Food & Beverages Others

Major Importing Products

8.3.6 Import by Country

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Looking up on the country wise imports, the shipments from China represent 19% of the total
imports followed by Canada (14.5%), Mexico (12%), Japan (6%), & Germany (5%).

Major Import Partners

19%

43%
14.50%

12%
5% 6%

China Canada Mexico Japan Germany Others

Major Import Partners

9. Conclusion & Recommendation

The reason why we have to compare economic condition is because of the economic policies of
different countries are different. No economic system is pure because of the role of state and
another factor. So according to the data comparison in the major factors such as Trends, GDP,
Inflation, Employment & Trade, the data shows India is weaker than U.S in almost every point.
Then after making an overall assessment between India and U.S, the physical capital i.e., saving
and investment of both the countries remain struggling but U.S seem to be more prosper while
India is trying to increasing saving and investment. About Education and healthcare that refer to
human capital, India still face with many challenges about this factor, as healthcare system is low
that leads to weak education. As we know human capital is very vital for economic growth, U.S
citizen can access high quality of healthcare system and reach good education, which shows that
economic condition of US is better than India. And foreign capital which refer to export and
import, we can see how different two of the discussed countries are. Last but not least, our group
hopes that this term paper of comparison of economic system can help some reader who wants
to clarify the differences of India and U.S for some reasons.

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