ECONOMY AND LABOUR FORCE IN INDIA

Submitted To:

Mrs. Bhandhan Prreet Kaur Submitted By:

Yogesh Verma

MBA(6414)

India at a Glance
MATA GUJRI COLLEGE, FATEHGARH SAHIB
 India is one of the biggest countries with significant diversity. With a land area of
3,287,240 square km and a population of 1,178,732,000, India has abundant
natural resources and a large labor pool to grow at a stupendous rate. Under Dr.
Manmohan Singh’s leadership and the manifesting of the liberalization policy, the
Indian economy has picked up steam and has been registering around 7% real
growth every year. The economy was not severely impacted by the global
recession of 2007-2009, as tight fiscal regulations kept credit crisis at bay.

The issues weighing down on the Indian economy are its unemployment rate and
a rather constant poverty rate. The unemployment rate grew in 2009 to 10.7%
from 10.4% in 2008 and almost 25% of the population lives under the poverty
line. In order to combat this, the Indian administration is keen on encouraging
privatization and improving the employment scenario. Privatization will also
attract FDI that can help in structural improvements and thus trigger growth.

India At A Glance: The Right Place For FDI

Be it Foreign Institutional Investors (FII) or Foreign Direct Investment (FDI), ever

since India opened up its economy to the world, a plethora of investors have
come up, in a bid to tap the huge potential of the market. FDI has been flowing in
at an exponential growth rate and FII has been around $10 billion from April-
September 2009-2010. These investments have come from the primary market.
The amount increased from $7.08 billion in 2006, according to the Securities and
Exchange Board of India (SEBI).

MATA GUJRI COLLEGE, FATEHGARH SAHIB

 The FDI, according to the 2009 figure, was $161.3 billion. Most of the FDI went
toward the IT and ITeS sector. With BPOs preferring India as their favorite
destination for operations, the English speaking population has contributed to the
services sector even more. Besides generating jobs for the skilled workforce, it
has broadened the consumer base and resulted in an increase in demand. Experts
expect the Indian economy to be the world’s biggest economy by 2040.

However, for India to grow into a superpower, major infrastructural changes,

along with socialistic programs that address issues such as poverty and
unemployment, need to be implemented.

Indian Economy: Statistics

In 2009, India's PPP Gross Domestic Product stood at $3.548 trillion, and was
the fourth largest economy by volume.

The services sector, backed by the IT revolution, remained the biggest

contributor to the national GDP, with a contribution of 58.4%. The industry
sector contributed 24.1% and the agriculture sector contributed 17.5% to the
GDP.

MATA GUJRI COLLEGE, FATEHGARH SAHIB

The employment scenario was dominated by the services sector, creating 62.6%
of the jobs for the 467 million workforce. The industry sector contributed 25.8%
to the GDP and employed 20% of the workforce. The agriculture sector
contributed 15.8% to the GDP and created 17.5% jobs (India Labor Force). The
unemployment rate remained around 10% in 2009. However, rising inflation
became a major concern, and measures to check it are being implemented. In
2009, the rate of inflation was around 10.7% (India Inflation Rate Change).

The Poverty Challenge

One of the major challenges for the Indian economy and those responsible for
operating it, is to remove the economic inequalities that are still persistent in
India after its independence in 1947. Poverty is still one of the major issues
although these levels have dropped significantly in recent years. Over 25% of
the working Indian populace is living below the poverty line (India Poverty Line
and Gini Index).

Poverty is a challenge that’s becoming increasingly important in relationship to

the alarming rate of new births. This implies that ever more rapid change, or
birth control policies like the ‘One Child’ policy in China, are needed to reduce
the numbers affected by poverty in the vast Indian economy.

MATA GUJRI COLLEGE, FATEHGARH SAHIB

The per capita income of India is 4,542 US Dollars in the context of Purchasing
Power Parity. This is primarily due to the 1.1 billion population of India, the
second largest in the world after China. In nominal terms, the figure comes
down to 1,089 US Dollars, based on 2007 figures. According to the World Bank,
India is classed as a low-income economy.

India - Fast Facts

India is a lower income economies comes under South Asian region as to the
classification made by the World Bank on the basis of income and region for the
year 2006.

India is one among the fastest growing economies over the world. The economy
follows a mixed type nature with high importance to the market friendliness. The
services sector contributes a largest share to the GDP in the country followed by
the industries.

Major agricultural products in the country are rice, wheat, jute, cotton,
sugarcane, fish, and goat. Important industries

are steel, chemicals, textiles, machinery, software, and food processing. The
services industry in the country is experiencing a faster growth presently.

Indian economic review

MATA GUJRI COLLEGE, FATEHGARH SAHIB
Indian economy has been among one of leading performers in global economic
scenario. However, there have been a couple of problems like inflation that have
offset progress of Indian economy in recent times

Growth of Indian economy

As per economic review of India, this nation has been making steady progress in
last few years, a fact which is obvious when its rate of growth in last couple of
financial years is looked at. For example in financial year 2006, rate of growth
achieved by Indian economy was 9.6 percent and in fiscal 2007, this rate came
down a touch to about 9.2 percent.

There have been a number of causes behind growth of Indian economy in last
couple of years. A number of market reforms have been instituted by Indian
government and there has been significant amount of foreign direct investment
made in India. Much of this amount has been invested into several businesses
including knowledge process outsourcing industries.

India's foreign exchange reserves have gone up in last few years. Real estate
sector as well as information technology industries of India have taken off. Capital
markets of India are doing pretty well too. All these factors have contributed to
growth of Indian economy.

Problems of Indian economy

MATA GUJRI COLLEGE, FATEHGARH SAHIB

However, as of financial year 2008, situation of Indian economy is far from being
rosy. A number of economic crises have besieged Indian economy of late. Rates of
inflation have been high. Reserve Bank of India, which is apex economic body of
India, has been trying its best to limit rate of inflation to 4 percent but by middle
phase of financial year 2008, rate of inflation had reached 11 percent. This has
been highest in last decade and one year.

There have been other problems like increase in expenses of important

commodities like food and oil. India is facing a boom in construction industry, but
there are not enough resources. Problems like these are only adding to India's
woes. India has also been hit hard by ongoing global recession and it is being
assumed that it would take a bit of time for Indian economy to come out of it.

India economic report

An India economic report contains detailed information on various aspects that

are important to its economy as a whole. Economic report India is releases by
Finance Ministry of India.

Monthly economic reports

Monthly economic reports are an important part of Indian economic reports.

These are brought out on a monthly basis. These reports provide highlights of

MATA GUJRI COLLEGE, FATEHGARH SAHIB

economic developments that have been achieved by Indian economy in a
particular month. There are other important details like rate of growth in that
month in comparison to same time period, previous financial year.

India economic growth

India's economic growth really kicked off in 1990s when India made its markets
more accessible. This was done by introducing a number of economic reforms.
From that point in time Indian economy has been growing at a steady pace.
However, India's economic growth

has not been exactly steady. In 1991, Rajiv Gandhi-led Indian government
imposed limits on office holders regarding expansion of capacity, brought down
corporate taxes, and abolished price controls. This led to an increase in growth of
Indian economy.

But there are some disparities across states and sectors. For example,
Maharashtra has been in better economic condition than states like Bihar.

In past, India's economic growth has been hampered by a variety of factors. For
example in 2002, lesser expenditures in areas like power, telecommunications,
construction, real estate and transportation prevented good growth of Indian
economy. This led to permission and promotion of foreign investment, which has
contributed to a continuous rate of development in last one and a half year.

MATA GUJRI COLLEGE, FATEHGARH SAHIB

India Economic Forecast

India is a fascinating country from an economic standpoint because it is so

diverse. In India, you see many of the more traditional industries such as village
farming, fishing, and handicrafts that are blended with modern sectors such as
telecommunications, transportation, and tourism. Today, nearly 50% of the
people work in the agriculture, fisheries, and farming sectors and with the
Progressive Alliance or UPA, India’s government has been able to boost the rural
economy by developing basic facilities and infrastructure. With this, the quality of
life for the poor people living and working in rural areas has improved
significantly.

Some of the other areas that have changed to improve India’s economy includes
the government reducing controls on foreign imports and exports, loosening
controls for investments, and allowing higher limits for Foreign Direct Investment
in a few of the primary sectors. While this country has experienced growth and
economic improvements, fast tariff growth in some of the more sensitive sectors
to include agriculture, fisheries, and farming could cause challenges for foreign
access to the country’s huge and expanding market.

India economic forecast for 2009-10

As per India economic forecast for 2009-10, in coming general election there
would be a new coalition government at center. According to assumptions, Indian

MATA GUJRI COLLEGE, FATEHGARH SAHIB

National Congress, which is administering India at present would find it hard to
hold on to their present seat of power.

According to economic forecast India, Indian national government would find it

hard to adjust to effects of recession that is holding entire economic globe in it
clutches. Reasons being, they do not have a proper economic backup plan and
present fiscal policies are not firm enough to shore up Indian economy.

As a result of this financial crisis, Indian national government had to turn their
economic policies upside down. There had been a deduction in rates of interest
by 100 basis points and more is supposed to follow in financial year 2009.

There would be measures taken in India to minimize risks associated with global
economic meltdown. It has been forecast that in financial year 2009-10, rate of
growth of real gross domestic product of India would be 6.1 percent.

Indian economy has recently experienced a reversal in increase of prices of

commodities. In spite of that there are chances of upward inflation and this would
be harmful to Indian economy.

Value of Indian national rupee would increase and there would be more parity in
its exchange rate statistics as far as United States dollar is concerned. There
would, however, be a fall in financial year 2009, in value of Indian national rupee
at a rate of 7.8 percent, when seen from a year-on-year perspective. On an
average, in that financial year $1 would be worth INR 47.

MATA GUJRI COLLEGE, FATEHGARH SAHIB

India and the Global Economy

India, an emerging economy, has witnessed unprecedented levels of economic

expansion, along with countries such as China, Russia, Mexico and Brazil. India,
being a cost effective and labor intensive economy, has benefited immensely
from outsourcing of work from developed countries, and a strong manufacturing
and export oriented industrial framework. As the economic pace is picking up,
global commodity prices have staged a comeback from their lows and global
trade has also seen reasonably healthy growth over the last two years.

Economic Prospects for 2010

The global economy seems to be recovering after the recent economic shock. The
Indian economy, however, was hit in the latter part of the global recession and
the real economic growth has witnessed a sharp fall, followed by lower exports,
lower capital outflow and corporate restructuring. The global economies are
expected to continue to sustain themselves in the short-term, as the effect of
stimulus programs is yet to bear fruit and tax cuts are working their way through
the system in 2010. Due to the strong position of liquidity in the market, large
corporations now have access to capital in the corporate credit markets.

India’s Economic Outlook Projection

          
   2007 2008 2009 2010
          
GDP Growth   9.40% 7.30% 5.40% 7.20%
CPI  6.40% 9.30% 5.50% 4.90%

MATA GUJRI COLLEGE, FATEHGARH SAHIB

Indian Economy 2010
In order to sustain economic growth during the time of the worst
recession, government authorities in India have announced the stimulus packages
to prop up economic growth. To finance the stimulus packages, the Indian
government has raised over $100 billion over the last four quarters in a way to
finance the stimulus package. The country’s public debt, according to the RBI, has
surged to over 50% of the total GDP and the RBI has started printing new
currency notes.

Central Government Debt

 
in Rs. Crores (10 Million) Q3 2008 Q3 2009 % of GDP     
 
    

Public Debt (Sum of 1 and 2) 2,099,286.23 2,505,450.74 50.71%     

1. External Debt 237,351.77 294,941.67       
2. Internal Debt 1,861,934.46 2,210,509.07  

Labour Force In India

MATA GUJRI COLLEGE, FATEHGARH SAHIB

India's labour force exhibits extremes ranging from large numbers of illiterate
workers unaccustomed to machinery or routine, to a sizable pool of highly
educated scientists, technicians, and engineers, capable of working anywhere in
the world. A substantial number of skilled people have left India to work
abroad; the country has suffered a brain drain since independence.
Nonetheless, many remain in India working alongside a trained industrial and
commercial work force. Administrative skills, particularly necessary in large
projects or programs, are in short supply, however. In the mid-1990s, salaries
for top administrators and technical staff rose sharply, partly in response to the
arrival of foreign companies in India.

Labour Relations

The Trade Unions Act of 1926 provided recognition and protection for a nascent
Indian labour union movement. The number of unions grew considerably after
independence, but most unions are small and usually active in only one firm.
Union membership is concentrated in the organized sector, and in the early
1990s total membership was about 9 million. Many unions are affiliated with
regional or national federations, the most important of which are the Indian
National Trade Union Congress, the All India Trade Union Congress, the Centre
of Indian Trade Unions, the Hind Mazdoor Sabha, and the Bharatiya Mazdoor
Sangh. Politicians have often been union leaders, and some analysts believe
that strikes and other labour protests are called primarily to further the
interests of political parties rather than to promote the interests of the work
force.

The government recorded 1,825 strikes and lockouts in 1990. As a result, 24.1
million workdays were lost, 10.6 million to strikes and 13.5 million to lockouts.
More than 1.3 million workers were involved in these labour disputes. The
number and seriousness of strikes and lockouts have varied from year to year.

MATA GUJRI COLLEGE, FATEHGARH SAHIB

However, the figures for 1990 and preliminary data from 1991 indicate declines
from levels reached in the 1980s, when in some years as many as 35 million
workdays were lost because of labour disputes.

The isolated, insecure, and exploited labourers in rural areas and in the urban
unorganized sectors present a stark contrast to the position of unionized
workers in many modern enterprises. In the early 1990s, there were estimates
that between 10 per cent and 20 per cent of agricultural workers were bonded
labourers. The International Commission of Jurists, studying India's bonded
labour, defines such a person as one who works for a creditor or someone in the
creditor's family against nominal wages in cash or kind until the creditor, who
keeps the books and sets the prices, declares the loan repaid, often with
usurious rates of interest. The system sometimes extends to a debtor's wife and
children, who are employed in appalling working conditions and exposed to
sexual abuse. The constitution, as interpreted by India's Supreme Court, and a
1976 law prohibit bonded labour. Implementation of the prohibition, however,
has been inconsistent in many rural areas.

Many in the urban unorganized sector are self-employed labourers, street

vendors, petty traders, and other services providers who receive little income.
Along with the unemployed, they have no unemployment insurance or other
benefits.

Recent trends

The total number of persons in the labour force is unknown. According to

official figures, from 1981 to 2001 the total number of workers grew more than

MATA GUJRI COLLEGE, FATEHGARH SAHIB

50 per cent from approximately 245 million to 402 million persons. These
figures count only those who are considered to have “engaged in economically
productive activity for 183 days or more.” The actual number of persons in the
labour force is likely to be much higher. From 1983 to 1994, the nation’s
unemployment rate declined from 8.3 per cent to 6 per cent and then increased
to 7.3 per cent by 2000. Unemployment rates have historically been higher in
urban areas, but rural and urban unemployment rates became nearly equal by
2000 (7.2 and 7.7 per cent, respectively).

MATA GUJRI COLLEGE, FATEHGARH SAHIB