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A Report on / Lenovo

A Report on / Lenovo

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Published by Ali Raza Sahni

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Published by: Ali Raza Sahni on Feb 01, 2011
Copyright:Attribution Non-commercial


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1.1Indian Economy Overview:
India has been one of the best performers in the world economy in recent years, butrapidly rising inflation and the complexities of running the world’s biggest democracy are proving challenging.
India’s economy has been one of the stars of global economics in recent years, growing9.2% in 2007 and 9.6% in 2006. Growth had been supported by markets reforms, hugeinflows of FDI, rising foreign exchange reserves, both an IT and real estate boom, and aflourishing capital market.Like most of the world, however, India is facing testing economic times in 2008. TheReserve Bank of India had set an inflation target of 4%, but by the middle of the year itwas running at 11%, the highest level seen for a decade. The rising costs of oil, food andthe resources needed for India’s construction boom are all playing a part.India has to compete ever harder in the energy market place in particular and has not beenas adept at securing new fossil fuel sources as the Chinese. The Indian Government islooking at alternatives, and has signed a wide-ranging nuclear treaty with the US, in partto gain access to nuclear power plant technology that can reduce its oil thirst. This has proved contentious though, leading to leftist members of the ruling coalition pulling outof the government.As part of the fight against inflation a tighter monetary policy is expected, but this willhelp slow the growth of the Indian economy still further, as domestic demand will bedampened. External demand is also slowing, further adding to the downside risks.The Indian stock market has fallen more than 40% in six months from its January 2008high. $6b of foreign funds has flowed out of the country in that period, reacting both toslowing economic growth and perceptions that the market was over-valued.It is not all doom and gloom, however. A growing number of investors feel that themarket may now be undervalued and are seeing this as a buying opportunity. If their optimism about the long term health of the Indian economy is correct, then this will be aneeded correction rather than a downtrend.The Indian government certainly hopes that is the case. It views investment in thecreaking infrastructure of the country as being a key requirement, and has ear-marked23.8 trillion rupees, approximately $559 billion, for infrastructure upgrades during the11th five year plan. It expects to fund 70% of project costs, with the other 30% beingsupplied by the private sector. Ports, airports, roads and railways are all seen as vital for the Indian Economy and have been targeted for investment.
Further hope comes from the confidence of India’s home bred companies. As well astaking over the domestic reins, where they now account for most of the economicactivity, they are also increasingly expanding abroad. India has contributed more newmembers to the Forbes Global 2000 than any other country in the last four years.
1.1.1 Recent Growth Trends in Indian Economy
India’s Economy has grown by more than 9% for three years running, and has seen adecade of 7%+ growth. This has reduced poverty by 10%, but with 60% of India’s 1.1 billion population living off agriculture and with droughts and floods increasing, povertyalleviation is still a major challenge.The structural transformation that has been adopted by the national government in recenttimes has reduced growth constraints and contributed greatly to the overall growth and prosperity of the country. However there are still major issues around federal vs. state bureaucracy, corruption and tariffs that require addressing. India’s public debt is 58% of GDP according to the CIA World Fact book, and this represents another challenge.During this period of stable growth, the performance of the Indian service sector has been particularly significant. The growth rate of the service sector was 11.18% in 2007 andnow contributes 53% of GDP. The industrial sector grew 10.63% in the same period andis now 29% of GDP Agriculture is 17% of the Indian economy.Growth in the manufacturing sector has also complemented the countrys excellentgrowth momentum. The growth rate of the manufacturing sector rose steadily from8.98% in 2005, to 12% in 2006. The storage and communication sector also registered asignificant growth rate of 16.64% in the same year.Additional factors that have contributed to this robust environment are sustained ininvestment and high savings rates. As far as the percentage of gross capital formation inGDP is concerned, there has been a significant rise from 22.8% in the fiscal year 2001, to35.9% in the fiscal year 2006. Further, the gross rate of savings as a proportion to GDPregistered solid growth from 23.5% to 34.8% for the same period.Large, dynamic and steadily expanding, the Indian economy is characterized by a hugeworkforce operating in many new sectors of opportunity.The economy of India is as diverse as it is large, with a number of major sectorsincluding manufacturing industries, agriculture, textiles and handicrafts, and services.

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