2. Introduction
History of the Indian Economy
The Liberalization Process: The 80s and
the 90s
Beneficial Effects of the Reform Process
We are the Fourth Largest Growing Economy in
terms of PPP with a GDP of US $3.36 trillion
In Exchange terms, we are the Tenth Largest in
the world with a GDP of US $ 691.87 billion
(2004)
Second Fastest Growing Major Economy of the
3. Introduction
The increasing importance of the Indian
Economy has led to a need to Forecast
the Performance of the of the Indian
Economy
Monitoring of the Indian Economic Cycle
has become an increasingly attractive
option for this
Dua et. al. initially propounded an index
based on concurrent indicators but using
an index based on leading indicators is
4. The Indicator Approach
The Indicator Approach exploits the fact
that different time-series do have different
cyclical periods
Time-series can be classified into
Coincident, Leading and Lagging
Indicators
Coincident: Measures of Output, Income,
Employment and Sales
Leading: Placement of New Orders,
Intention to Build and Changes in
Profitability
5. The Ideal Indicator
It would cover half a century or longer,
thus showing its relation to the economic
cycles over a variety of conditions
It would lead the month, around which
cyclical revival centers, by an invariable
interval of say, three months or even
better, six months. It would also lead the
central month of every cyclical recession
by an invariable time interval, which
might differ from the lead at revival.
6. The Ideal Indicator
It would show no erratic movements, that
is, it would sweep smoothly up from each
cyclical trough to cyclical peak and then
sweep smoothly down to the next trough,
so that every change in its direction
would herald the coming or recession in
the general economy or business.
The cyclical movements would be
pronounced enough to be readily
recognized, and give some indication of
the coming change
8. List of Leading Indicators
Trends in Gross Domestic Product (GDP): Contribution of Agriculture, Industry and
Services
Purchasing Power Parity (PPP) Index
Fiscal Deficit
Trends in Inflation Rate
Interest Rates
Credit Off-take
Balance of Payment
Foreign Exchange Reserves
Crude Oil Rates
Foreign Direct Investment (FDI) Trends
Rain fall Index
Sensex
Exchange Rate
Savings/GDP Ratio
Human Development Index
Electric Power Generation
9. Gross Domestic Product
GDP = consumption + investment +
government
spending + (exports − imports)
Consumption, Investment: Final
Expenditure on Goods and Services
Export-Import: Balance of Trade
Consumption: Private and Public
Significance of GDP
12. GDP: Indian Scenario
The GDP growth trend for the last three
years appears to indicate the beginning of
a new phase of cyclical upswing in the
economy from 2003-04
The initial momentum to this new phase
of expansion, in 2003-04, was provided
by agriculture
Industry and services have acted as the
twin engines propelling overall growth of
the economy
14. Human Development Index
HDI is a measure of poverty, literacy,
education, life expectancy, childbirth, and
other factors.
It is a standard means of measuring well
being, especially child welfare.
HDI stresses the importance of the quality
of life.
15. Human Development Index
The three basic dimensions of HDI :
1) Life expectancy at birth
2) Knowledge (as measured from adult
literacy rate)
3) Standard of living
16. Human Development Index
EMPLOYMENT:
India’s labour force has reached 375
million approximately in 2002, and it will
continue to expand over the next two
decades.
The actual rate of that expansion will
depend on several factors including
population growth, growth of the working
age population, labour force participation
rates, educational enrolment at higher
levels and school drop-out rates.
17. Human Development Index
EDUCATION :
Literacy rates in India have arisen
dramatically from 18% in 1951 to 65% in
2001, but these rates are still far from the
UMI reference level of 95%.
Literacy among males is nearly 50% higher
than females, and it is about 50% higher in
urban areas as compared to the rural
areas.
Literacy rates range from as high as 96%
in some districts of Kerala to below 30% in
18. Human Development Index
In terms of total investment in R&D, India’s
expenditure is 1/60th of that of Korea,
1/250th of that of the USA, and 1/340th of
that of Japan.
More significantly, atomic energy, space
and defense research account for 71% of
all central spending on science and
technology, which means that relatively
little is left for investment in agriculture,
energy, telecommunications and other
crucial sectors within the sphere of science
19. Human Development Index
R&D expenditure even in India’s fast-
growing IT sector has been averaging
around 3% of sales turnover (STO), which
is much lower as compared to the 14-19%
expended by internationally reputed
software firms.
These low figures reflect on our R&D
performance. India’s share of global
scientific output in 1998 was only 1.58 per
cent of the world’s total.
Out of 500,000 new patent applications
20. Human Development Index
HEALTH :
Like population growth and economic growth, the health
of a nation is a product of many factors and forces that
combine and interact with each other.
Economic growth, per capita income, employment, levels
of literacy and education—especially among females—
age of marriage, birth rates, availability of information
regarding health care and nutrition, access to safe
drinking water, public and private health care
infrastructure, access to preventive health care and
medical care, health insurance, public hygiene, road
safety, and environmental pollution are among the
factors that contribute directly to the health of the
nation.
24. MONSOON AND ITS IMPACT ON AGRICULTURE
58% of country's population depends on
agriculture
27% of India ’s GDP comes from its
agricultural production.
13-18% of India ’s total annual exports are
agricultural products.
25. MONSOON AND ITS IMPACT ON AGRICULTURE
IMD predicts the onset date and rainfall
potential of the monsoon
Output growth severely affected by
rainfall, especially in earlier years when
share of agriculture was 40 – 50 %
data crucial for proper estimates of
production function, tfpg etc.
26. MONSOON AND ITS IMPACT ON AGRICULTURE
Construction of Rainfall Index
For each year, only rainfall for four
months, June through
September, are considered.
Area of each state =As
(Mean) Rainfall for each rainfall station,
1871-2003: μs
Standard deviation for each rainfall
27.
28.
29. FDI in India
FDI is investment made by a foreign
individual or company in productive
capacity of another country. It is the
movement of capital across national
frontiers in a manner that grants the
investor control over the acquired asset.
India is considered a stable country for
investing in by corporate overseas.
India has displaced US as the second-
most favored destination for (FDI) in the
30. FDI in India
FDI has an impact on
2. Country's trade balance
3. Increasing labour standards and skills
4. Transfer of new technology and innovative ideas
5. Improving infrastructure, skills and the general
business climate.
US INVESTMENT IN INDIA
U.S. is one of the largest foreign direct investors in
India.
The stock of actual FDI Inflow increased from U.S.
$11.3 million in 1991 to US $4132.8 million as on
August 2004 recording an increase at a compound rate
31. Top sectors attracting FDI from USA are
Fuels (Power & Oil Ref.) (35.93%)
Telecommunications (radio paging,
cellular mobile & basic telephone
services) (10.56%)
Electrical Equipment (including Computer
Software & Electronics) (9.50%)
Food Processing Industries (Food
32. India's English-speaking population is highly valued by
American, Canadian and British investors.
India received investments from GE Capital, American
Express, Citibank, Conseco, British Airways, Dell
Computers and Reuters.
This FDI resulted in the development of call centres,
back office support and facilities to handle knowledge-
intensive activities.
From software giant Microsoft to telecom biggies Nokia
and Samsung to auto majors Honda and Toyota, global
players now eye India as the most attractive destination
36. Definition
Sensitivity Index
Base Year 1978 – 79, Base = 100
Basket of 30 constituent stocks
representing a sample of large, liquid and
representative companies from diverse
sectors.
37. Significance
Barometer of Business climate.
Facilitates capital formation.
Domestic Market/ Institutions.
FIIs.
FDIs.
Likely to lead to boom in other asset
classes as the profits get ploughed.
41. CONCLUSION
Leading Indicators relative to the
objective.
Choice.
Standardization.
Construction of Ideal Leading Indicators –
not easy.
Forecast based on Leading Indicators – a
useful planning tool.