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Key Economic Indicators in Indian Economy

In India, we say that, our banking system is one of the robust and rugged systems. Do we have to believe that or not that’s later part of discourse? But before that, we need to comprehend some economic vitals to gain an insight into what actually is going around us. For that matter, we don’t need to be an expertise in number crunching rather general knowledge would do a way better.
gdp


So, what are these key economic indicators?

Economic indicators are statistical tools to understand the economic activity of an entity. What entity? Entity could be any organisation, a firm, an industry of some kind or on a larger context a country. These indicators are handy when one needs to seize the economic health of an entity. These furnish a basis to do analysis of economic performance and of future performance of an organisation.

So, if a firm is in red or doing slack business then these indicators would show the same i.e. unsatisfactory figures. Economic indicators include various indices, earnings reports, and economic summaries. So, what do these economic indicators constitute?


These are unemployment rate, attrition or quits rate (quit rate in U.S. English), consumer price index and wholesale price index (a measure for inflation), consumer leverage ratio, industrial production, bankruptcies, gross domestic product(Nominal and PPP), broadband internet penetration, stock market prices, money supply changes, Foreign exchange reserve (One of the most paramount indicators for India).


Unemployment Rate:-

The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate.

In country like USA, Federal employees' job security is so great that workers in many agencies are more likely to die of natural causes than get laid off  or fired. According to a vetted report, the federal government fired 0.55% of its workers in the budget year 11,668 employees in its 2.1 million workforces. Research shows that the private sector fires about 3% of workers annually for poor performance. At present, USA has 5.3 percent unemployment rate.

India has presently 3.6 pc unemployment rate reckoned annually. Unemployment Rate in India decreased to 4.90 percent in 2013 from 5.20 percent in 2012 and then to 3.6 percent in 2014. Unemployment Rate in India averaged 7.32 percent from 1983 until 2013, reaching an all time high of 9.40 percent in 2009 and a record low of 4.90 percent in 2013. Unemployment Rate in India is reported by the Ministry of Labour and Employment, India. Everyone knows what is GDP and GNP but still let’s get a small walk through those two vital indicators.

GDP

Gross Domestic Product is calculated either by measuring all income earned within a country, or by measuring all expenditures within the country, which should approximately be the same.


GNP

Gross National Product uses GDP, but adds income from foreign sources, less income paid to foreign citizens and entities. 

GNP can be either higher or lower than GDP, depending on whether or not a country has a positive or negative result from net foreign inflows and outgo.

Though GNP is still calculated, the United States shifted to GDP as its primary economic measure in 1991, in part because most countries in the world use GDP to measure the size and direction of their economies. As a result, GNP numbers are less common than GDP figures. Those definitions aforementioned can be learned upon getting by heart and can be blurted out when an interview would ask. But, if we are economically sound then we should intent on comprehending the subtle part of GDP and GNP.

Now, what is that?

GDP and GNP are calculated based on very specific time periods. But not all the information is available at the same time. This forces the Bureau of Labor Statistics (the agency that reports official GDP in the US) to rely on estimates, resulting in revisions after the fact. Unreported income is another flaw, and one that is not easily remedied. Individuals may under-report income to minimize income tax liability, which will understate the GDP. This can be a problem between countries as well, since under-reporting of income is more prevalent in some countries than in others. Still another problem — given that GDP and GNP is often used to measure economic strength from one country to another — is that reporting tends to be less reliable in some countries than in others. This is especially likely in less developed countries, leading to under-estimates of true national economic output. The lack of comparable reporting from one country to another has given rise to two methods of computing either GDP or GNP, nominal and purchasing power parity, or PPP.

Nominal is measuring the size of a nation’s economy on the basis of its economy in local currency, converted to dollars (typically). The conversion is based on currency exchange rates in the currency market. PPP ignores currency exchange rates, and measures the economy of countries based on the cost of a common basket of goods and services. For example, housing costs more in the US than it does in India, so housing in India will get a boost in compiling GDP or GNP on the basis of PPP.
As a rule, PPP will result in a relatively higher GDP or GNP in a country where costs are lower. PPP adjusts for the fact that a house in the US may cost $200,000, while a similar home in India may be only $50,000. It attempts to even out price variations between countries.


As an example, under nominal, in 2015, India’s GDP 2,067,501 millions of USD or $ 2.04 trillion and using PPP, India’s GDP is $ 7,375,900,000,000 — or
about 3.6 times higher


Herein below are some figures pertaining to economy of India.

Markets ast Reference Frequency
Currency 65.43 Oct/2015 Daily
Stock Market (Sensex) 26933 Oct/2015 Daily
GDP 26933 Oct/2015 Yearly
GDP 2067 USD Billion Oct/2015 Yearly
GDP Growth rate 7 % Dec/2014 Quarterly
GNP 56739 INR Billion Dec/2014 Yearly
GDP Per Capita 1263 USD Dec/2014 Yearly
GDP Per Capita PPP 5565 USD Dec/2014 Yearly


Foreign Exchange Reserves:-

Foreign Exchange Reserves in India decreased to 349980 USD Million in September 25 from 352020 USD Million in the previous week. Foreign Exchange Reserves in India averaged 188027.95 USD Million from 1998 until 2015, reaching an all time high of 383643 USD Million in December of 2009 and a record low of 29048 USD Million in September of 1998. Foreign Exchange Reserves in India is reported by the Reserve Bank of India.


Before summing all these up, let’s get back to the question which was mooted earlier in the beginning of this very article. Is our banking system robust and rugged? Well, answer is perplexing. We can’t say “YES” emphatically or also “NO” either. Reasons are quiet apparent, MUDRA, a heap-praised scheme, has just started operating. But this scheme is going to create an insurmountable problem in long run. How? Providing loans to weaker sections of society without any collateral is a giant blunder. Economically backward people without proper skill set would never use that money to do wonders in their life and at the same time would flunk to repay the loan to bank. That’s a desperate attempt to woo people for vote bank but in long run we can’t bank on these schemes as this is going create a big hole in bank’s pocket. NPA and all, I think I should leave it to the wisdom of readers.


==>> Must red - 7 Monetary Policy Tools in hands of RBI

Written and compiled by:-

Rohan Anand



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