INDIAN ECONOMY VERSUS GLOBAL ECONOMY

India’s share of the global economy at present is less than half of what it had at the time of
independence. India is growing at a steady pace. Even though the economy of India is
expanding rapidly, the trade conducted is still less than one percentage of the whole world’s
trade. This is the similar case in the case of foreign investments also. The Indian Economy was
hit by demonetization in 2016 and introduction of Goods and Service Tax in 2017. Nearly 60%
of the country’s Gross Domestic Product is from private consumption of domestic people. India
is the 6th largest country in the consumer market. The Gross Domestic Product of India is $9.45
trillion. The country is the fastest growing trillion economy in the world. India strives to
become the fifth largest economy overtaking United Kingdom by the end of 2019.

United States is the largest economy. Despite facing challenges at domestic levels and
transforming the global landscape in a rapid manner, the U.S. economy is still the largest in the
world with a nominal GDP of forecast to exceed USD 21 trillion in 2019. Below are the
World’s largest economies:

1. USA
2. China
3. Japan
4. Germany
5. U.K.
6. India
7. France
8. Italy
9. Brazil
10. Canada
India has entered in global market since few decades. The Indian economy had broken free of
the low-growth trap from the early 1980s. By the mid-1990s the economic reforms of 1991-3,
India had a significance in the global economy. Then, the East Asian crisis of the late 1990s,
and from the first years of the first decade of the 21st century there was no looking back. India’s
exports began to climb, its foreign exchange reserves, which for decades had hovered around
5 billion dollars, rose exponentially after the economic reforms and in little more than a decade
had risen to 300 billion dollars. Indian corporations that rarely ventured out of India were
suddenly investing all over the world and even in some industrialized countries. When, in 2009,
the Group of 20 (G-20) was raised to the level of a forum for leaders, India was a significant
member of this global policy group.

Developments for the global economies few years before was not upto the mark. Every time
there is a major financial crisis anywhere in the world, there is need to take brace position. And,
in turn, the rise and fall of India’s growth rate has an impact on global growth and there is need
for India to take this responsibility seriously. Unemployment situation in advanced economies
in general, and the peripheral economies of the Eurozone in particular, which had deteriorated
in the wake of global crisis has not improved.

According to the Human Development Report (HDR), India ranks 130 out of
188 countries. India's HDI of 0.609 is below the average of countries in the medium
human development group (of 0.630). However, it is marginally higher than the HDI average
of the South Asian countries (0.607). India's per capita income (nominal) was $1670 per year
in 2016, ranked at 112th out of 164 countries by the World Bank, while its per capita income on
purchasing power parity (PPP) basis was US$5,350, and ranked 106th. Democratic republic of
Congo, Liberia, Niger etc. are those countries which are having low per capita income. Central
African Republic is the poorest country in the world. The main source of income for India is
from service sector. Indian population is growing at a rate of 1.8 percent per annum. In order
to achieve a given rate of increase in per capita income, larger investment is needed. This
adversely affects the growth rate of the economy. In India, annual growth rate of population is
1.8 percent and capital output ratio is 4:1. Population growth helps in economic development.
South Sudan, Angola, Malawi, Burundi, Uganda are the countries which are having high
population growth. A large population has great chance for economic improvement of growth.
A developed country with low population density and a low percentage of employable people
needs an increase in population in order to keep up with economic development. An increase
in GDP per capita does not necessarily imply an increase in the well-being of the population.
The UK population is expected to increase by 9.7 million by the next 25 years.
During 1975–2010, the population doubled to 1.2 billion. The Indian population reached the
billion mark in 1998. India is projected to be the world's most populous country by 2024,
surpassing the population of China. Its population growth rate is 1.13%, ranking 112th in the
world in 2017.

India has a population of 16.5% of the world’s total population against 6055 million (census
2001). If we look at the area of the major countries of the world, Russian Federation is more
than five times, Canada is over three times, the USA is 2.8 times, Brazil is 2.6 times and
Australia is 2.3 times as large as India. But their combined population is only 63 per cent of
the total population of India. The birth rate in India is very high but the fertility rate is low.

Population of USA is only one-fourth of India. Population of Canada is very small as compared
to India.

News Article: UN News, June 17, 2019

UNDP, the sponsor of Human Development Index methodology since 1990,

reported India's HDI to be 0.554 for 2012, an 18% increase over its 2008 HDI. ... As for the
year 2018, HDI for India stood at 0.647. HDI is composite index that takes into consideration
(1) Life expectancy, (2) Education and (3) Per capita income. The current levels of human
development in India are extremely low for many reasons. India has always had a low level
of human development due problems many major problems such as finance, education, gender
inequality and many more. These have caused many detrimental and concerning effects
on India's society. People are moving from developing to developed countries. China started
with the implementation of Deng Xiaoping's economic reform policy in 1979. Since
then, China has been the world's fastest-growing economy. The main premise of the human
development approach is that expanding peoples' freedoms is both the main aim of, and the
principal means for sustainable development. If inequalities in human development persist and
grow, the aspirations of the 2030 Agenda for Sustainable Development will remain unfulfilled.
In Russia, The main premise of the human development approach is that expanding peoples’
freedoms is both the main aim of, and the principal means for sustainable development.
Inequalities in human development are not just about disparities in income and wealth. The
2019 Human Development Report (HDR) explores inequalities in human development by
going beyond income, beyond averages, and beyond today. Canada's HDI value for 2018 is
0.922— which put the country in the very high human development category—positioning it
at 13 out of 189 countries and territories. Between 1990 and 2018, Canada's HDI value
increased from 0.850 to 0.922, an increase of 8.5 percent. In Canada, the main premise of
the human development approach is that expanding peoples' freedoms is both the main aim of,
and the principal means for sustainable development. If inequalities in human
development persist and grow, the aspirations of the 2030 Agenda for
Sustainable Development will remain unfulfilled.

Article: Nation Master

R&D market in India is estimated to grow at a CAGR of 14 per cent to reach US$ 42 billion
by 2020. Within South Asia, India's human development index (HDI) value is above the
average of 0.638 for the region, with Bangladesh and Pakistan, countries with similar
population size, being ranked 136 and 150 respectively. Overall India achieved considerable
success in improving its HDI indicators, but it still lags behind many smaller neighbour such
as Srilanka and Maldives in many social indicators. India was ranked 130 of 188 countries
world-wide on the HDI, which is below Iran (69), Sri Lanka (73) and Maldives (104) in South
Asia in 2018. Smaller nation performed well in HDI not only in South Asia but around the
world. Norway, Switzerland, Australia and Ireland lead the world while Srilanka Maldives lead
the ranking in South Asia. The reasons are large investment in social sector, education, stable
political and social condition. India has low income due to lack of industrial development, lack
of quality education, inequality and discrimination.
The Indian industries will receive equity inflows at least Rs One lakh crores in 2019-2020.
Various investors have given high retail participation that will lead to more production, more
revenue and profit for the companies thus increasing the GDP of India. Domestic investors buy
foreign stock thinking that they will get high returns. When all investors have logarithmic
utility, foreign investors are less well informed than domestic investors and there are barriers
to international investment, unexpectedly high worldwide or local stock returns lead to net
equity inflows in small countries. Capital flows are generally more responsive to past U.S.
market performance than to local returns. Firms from less developed countries use the cross
listing to bond to higher legal and other standards. Listing abroad is associated with an increase
in sales growth, higher valuation and return on assets, and lower leverage, although these
effects diminish following listing. Firms with high growth and in high-tech industries are more
likely to list in the U.S.

Mutual Fund- News Article: Market Wrap, February 9, 2019

Merchandise trade (% of GDP) in India was 27.57 as of 2016. Its highest value over the past
56 years was 43.46 in 2008, while its lowest value was 6.62 in 1972. Exports and imports in
India have both shown an increase from 2014 to 2018 along with trade deficit as imports have
always grown faster than exports for this period. The main reason behind this is the import
basket, which mainly consists of intermediate goods and raw material goods though latter’s
share has declined in 2018 indicating a positive sign for the economy. During 2014-18, exports
have increased to USA, Singapore and China and declined with UAE and Hong Kong, whereas
India’s imports have increased to China, USA and Iraq with decline in UAE and Saudi Arabia.
The continuous maintenance of trade deficit indicates that India’s import have always been
higher than export. Saudi Arabia and Iraq are the main countries from which India is importing
oil i.e. raw material product group, whereas, India is dependent on China for electrical and
machinery and organic chemicals.

India’s trade balance with major trading partners

Partners 2014 2015 2016 2017 2018

World -141.82 -126.36 -96.38 -148.21 -184.52

United States of 22.25 19.85 21.60 21.96 18.96

America
United Arab 5.63 9.71 10.80 6.92 2.22
Emirates

China -44.80 -52.03 -51.57 -59.48 -57.33

Hong Kong, 7.27 6.19 6.09 4.01 -2.69

China

Singapore 2.61 0.41 0.64 4.35 -3.90

Saudi Arabia -19.64 -14.38 -13.42 -15.84 -22.86

Iraq -15.28 -10.16 -9.00 -14.05 -21.21

Source: ITC Trade Map, Data is in US$ billion.

Developed countries are the main players in international trade. China is becoming an important
partner for many developing countries. Fuels represent the largest value in terms of trade done. The
integration of other regions into international trade of manufacturing is very limited. Latin
American countries remains in production of agricultural goods and mining. Sub-Saharan counties
mainly trade with energy products and other commodities.

Volume of world merchandise trade, 2015Q1-2018Q4