The economy is the overall economic environment in which all firms operate. The key variables used to describe the state of economy are:
• World economy
• Asian economy
• Indian economy
1. Growth rate of GDP 2. Industry growth rate 3. Agriculture and monsoons 4. Savings and investment 5. Inflation
6. Interest rates
7. Balance of payments 8. Infrastructure
World economy
According to the recent statistics, the world GDP (comprising 180 economies) has reached at a sum of US $ 46,747 Billions. Top 15 contributors to the world GDP are USA, Japan, Germany, China, UK, France, Italy, Canada, Spain, Brazil, Russia, Korea, India, Mexico
and Australia.
Percentage share of USA to the total world GDP is 28.3. While both the emerging economies such as India and China have a share of 1.82 and 5.41 respectively.
Find next page the top 15 contributors to the world GDP.
Asian Economy
Asian Economies have brought tremendous success in the recent years. Economic growth rate in China crossed a two-digit number, while economic growth in India’s Economy is near to 10 percent. Apart from those two emerging Asian Economic giants, economies such as Philippines, Indonesia and Malaysia are growing at a faster pace. Find below various economic indicators on the Asian Economies.
GDP growth projections among various Asian Economies over years are as follows:
GDP Growth Projection on Asian Economies
Country Name 2007 2008
Japan 2.3 1.9
Hong Kong SAR 5.5 5
Korea 4.4 4.4
Singapore 5.5 5.7
China 10 9.5
India 8.4 7.8
Indonesia 6 6.3
Malaysia 5.5 5.8
Philippines 5.8 5.8
Thailand 4.5 4.8
The output over the world increased by 4.4% in the year 2005. The largest contributors of the world output were India, China and Russia. The Gross World Product (in purchasing
power parity) as to the 2005 estimated data has reached at $ 60.71 trillions with a real growth rate of 4.7%.
The services sector contributes a largest share to the world GDP. As to the 2004 estimated data, the services sector accounted for 64% followed by industries at 32% and Agriculture 4%.
The level of exports and imports over the world has reached at $10.33 trillion and 10.3 trillions f.o.b. as to 2004 estimation.
World inflation:
Inflation, which can be simply stated to be a state of economic activities with rising price level and falling purchasing power of money, has become global phenomenon. Fast rising oil prices over the world has pressurized the general price level in countries of the world.
Present world economy is experiencing higher economic growth with some inflationary pressure.
The stabilized countries have the inflation level ranging between 1-3% and the developing countries have inflation between 3-6%.
Indian economy:
Indian primary sector
Agriculture is the mainstay of Indian economy because of its high share in employment and livelihood creation notwithstanding its reduced contribution to the nation’s GDP. The share of agriculture in the gross domestic product has registered a steady decline from 36.4 per cent in 1982-83 to 17 per cent in 2007-08. Yet this sector continues to support more than half a billion people providing employment to 52 per cent of the workforce. It is also an important source of raw material and demand for many industrial products, particularly fertilizers, pesticides, agricultural implements and a variety of consumer goods. This is first time after green revolution that the India has become dependent in satisfying its own food need. Growth pattern of Indian agriculture has been so irregular, because of over dependency on the monsoon. This year we could achieve dismal growth of 2.5%.India is expecting its agriculture to grow at least 4% (CAGR) in the 11th plan to have sustainable and consistent growth of overall GDP.
Industrial sector (secondary sector)
Industrial growth in India has been inspired by the LPG in 1991. in the 10th plan we could achive growth rate of 8-9%. At present industry sector is contributing 28% to country’s GDP. Though at present India is experiencing slowdown in growth of industry production, the long term growth of 8-10% is still intact. The first eight months of the current fiscal, till November 2007, witnessed a moderate slowdown in the growth of the industrial sector. The slowdown has mainly been on account of the manufacturing sector. The mining and quarrying sector grew at a faster pace, while the growth in electricity remained unchanged from November 2006. Nonetheless, the 9.2 per cent growth achieved during April-November 2007 by the industrial sector, when seen against the backdrop of the robust growth during the preceding four years, suggests that the buoyancy in this sector has continued, albeit with a degree of moderation. Two important changes have occurred in the growth pattern of the use-based industrial categories:
First, capital goods have grown at an accelerated pace, over a high base attained in the previous years, which augurs well for the required industria capacity addition. Secondly, the consumer durables basket that forms part of the Index of Industrial Production (IIP) showed a negative growth during the period, thereby forcing a visible decline in the growth of the total consumer goods basket, despite reasonable growth in the non-durables.
Dimension of Indian Economy
Gross domestic product: measure of the total production of final goods and services in the economy during a specified period usually a year. Higher the growth rate, the other things being equal, the more favorable it is for the stock market.