Blog - 7 : India - An Emerging Economic Power

India ranks among the well known emerging markets in the global economic scenario. It is a country of amazing physical, social and economic diversity. It is exhausting in the sheer pace of its living and working, surviving  and striving since the economic liberalization policies were undertaken in this 1990s, emerging market India has really prospered which has helped to boost the Indian economy to a great extent.   India is home to an economy, which is big, active and growing. The Indian market is made up of various important sectors and industries including the pharmaceutical industry, IT/Software, Foreign Investment, Telecommunication, Stock Market, Manufacturing and Construction, Hospitality Industry, Bond Market, Loan Market, Pharmaceutical Sector, Real Estate, Aviation and Automobile Industry. The growth of all these industries has helped India become a major economy in the world.

Factors behind the favorable emerging market in India:

In simple terms, emerging market is used to evaluate the social economic scenario of the country in terms of the growth of the market and industrial development. According to the recent survey, there are around 28 emerging markets in the world out of which India ranks in the second place.

The main factors behind this booming emerging market are the economic liberalization and the perfectly competitive market, the high standard of living and per capita income, the development of medical facilities and infrastructure, the increase in foreign investments and so on. Over the few years, there has been a significant growth of the Indian market which has resulted in the highest Gross Domestic Product (GDP). The average annual growth rate ranges between 6 to 7 %. The growth rate of GDP was around 6.7 % during the financial year 2008-09.

To boost the emerging market India, the government is also taking some positive steps. The main aim is to increase the growth rate to around 9 %.  Due to the favorable emerging market, more and more industries are being set up and the customer base is also increasing. Currently, India is the 4th largest economic system in the world in terms of the purchasing power parity.

The recent economic development has also put a positive impact on the various sectors. There has been a significant development in the agricultural, service and industrial sector in the country. Today, to complement the rapid pace of economic growth, the service sector contributes around 54 % of the annual Gross Domestic Product.

The increase in foreign investment has also cast a favorable effect on the emerging market in India. Due to the increase in demand, well known global companies are investing in the Indian market. The foreign institutional investments (FII) amount has reached around US$ 10 billion marks. In case of the Foreign direct investments (FDI, there has been a significant increase of around 85.1 % from US$ 25.1 billion to US$ 46.5 billion.

Trends:

• All the trends suggest India will become the world's biggest consumer economy after the U.S.A
• India has a population of over 1.2 billions, 50% of the population are below 25 years of age
• India is the home to 700 million mobile phones.
• India has recorded a compound double-digit grow rates throughout the last decade.
• In 2010, India became the 3rd largest country globally in Spot Matching - after UK and U.S.A

Present and Future Economic Projection:

POLITICS:   Present government i.e. The Indian National Congress-led United Progressive Alliance (UPA) coalition is expected to serve a full second term that will run until 2014. This means the economic policies for the forecast period will be consistent.

GDP GROW:  The economy is expected to have grown 8.5 percent in fiscal year 2010-2011 that ended in March 2011, in its monetary policy in 2011-12, released in May 2011, RBI (Reserve Bank of India) projected the economy to grow by 8%  this fiscal.

INFLATION:  India’s headline inflation is not easing as fast as the central bank would like it to and upside risk remains.

INTEREST RATE: The RBI has raised its policy rate nine times by a total of 250 basis points since March 2010. Most economists in a recent poll expect the RBI to raise rates by at least another 75 basis points in 2011.

Policies:

Foreign Investment Policy:

Foreign Investment in India or more precisely Foreign Direct Investment (FDI) in India is one of the most talked about issues in the entire world economy in recent times. Rated among the top emerging nations, India's liberalization policies are paying rich dividends to the economy as a whole.

Foreign Direct Investment (FDI) is defined as "investment made to acquire lasting interest in enterprises operating outside of the economy of the investor." The FDI relationship, consists of a parent enterprise and a foreign affiliate which together form a Transnational Corporation (TNC).

India, post liberalization, has not only opened its doors to foreign investors but also made investing easier for them

Software industry policy:

The India Software Industry has brought about a tremendous success for the emerging economy. The software industry is the main component of the Information Technology in India. India's pool of young aged manpower is the key behind this success story. Presently there are more than 500 software firms in the country which shows the monumental advancement that the India Software Industry has experienced.

The Indian Software Industry has grown from a mere US $ 150 million in 1991-92 to a staggering US $ 5.7 billion in 1999-2000. No other Indian industry has performed so well against the global competition. According to statistics, India's software exports reached total revenues of  46100 crores. The total share of India's exports in the global market rose from 4.9 percent in 1997 to 20.4 percent in 2002-03.

It is expected that the India Software Industry will generate a total employment of around four million people, which accounts for 7 per cent of India's total GDP, in the year 2008. Today, the Software Industry in India exports software and services to nearly 95 countries around the world. The share of North America (U.S. & Canada) in India's software exports is about 61 per cent. In 1999-2000, more than one third of Fortune 500 companies outsourced their software requirements to India.

Economic Policy:

India embarked on economic reforms in 1991, in the wake of a balance of payments crisis. Issues concerning economic policy, the impact of the reforms on poverty, sectoral issues relating to agriculture, industry and infrastructure. To become a major player in the world economy, a comprehensive approach was taken through India Economic Policy