You are on page 1of 5

Business Environment

Interim Report

Submitted By Gaurisha

Submitted To :Dr. Gajavelli VS

Mayank Bhatt Jigar Nayar Navneet Makharia Nisarg

INDIAN ECONOMY
India is developing into an open-market economy, yet traces of its past autarkic policies remain. Economic liberalization, including industrial deregulation, privatization of state-owned enterprises, and reduced controls on foreign trade and investment, began in the early 1990s and has served to accelerate the country's growth, which has averaged more than 7% per year since 1997. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Slightly more than half of the work force is in agriculture, but services are the major source of economic growth, accounting for more than half of India's output, with only one-third of its labor force. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services and software workers. In 2010, the Indian economy rebounded robustly from the global financial crisis - in large part because of strong domestic demand - and growth exceeded 8% year-on-year in real terms. However, India's economic growth in 2011 slowed because of persistently high inflation and interest rates and little progress on economic reforms. High international crude prices have exacerbated the government's fuel subsidy expenditures contributing to a higher fiscal deficit, and a worsening current account deficit. Little economic reform took place in 2011 largely due to corruption scandals that have slowed legislative work. India's medium-term growth outlook is positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. India has many long-term challenges that it has not yet fully addressed, including widespread poverty, inadequate physical and social infrastructure, limited non-agricultural employment opportunities, scarce access to quality basic and higher education, and accommodating rural-to-urban migration.

4.5 GDP in Trillion $ 4.3 4.1 3.9 3.7 2009 3.76 2010 Years 4.13

4.463 17% Agriculture Industry 56% 27% Services

2011 Fig 2, GDP - Composition by sector

Fig 1, Indias GDP in Trillion US$

The Indian economy was one of the fastest growing economies in the post-crisis period. During 2011-12, however, there was continuous deceleration of economic activity in each of the four quarters which pushed the expansion of the economy to below potential, which is the maximum level of output that the economy can sustain without creating macroeconomic imbalances. There has been a deceleration in all sub-sectors of the economy, barring electricity, gas and water supply and community, social and personal services. Growth slowed down due to multiple factors. One of the reasons was the persistence of inflation at a much higher level than the threshold for two successive years. Persistent and high inflation necessitated continued tightening of monetary policy. Recent research suggests that real interest (lending) rates explain only about one-third of GDP growth. As of March 2012, real weighted average lending rates, that have an inverse relationship with investment activity, were lower than they were in the pre-crisis period between 2003-04 and 2007-08, when investment boomed

CHALLENGES FOR INDIAN ECONOMY 2012-13


The foremost challenge before the new budget was to reduce the fiscal deficit. The prime focus was how to achieve fiscal consolidation. Second challenge was how to achieve growth and eliminate economic inequalities. The growth curve was once 8.4% and now it has come down to 6.9 per cent. Third challenge was inflation. It has come down substantially. But, inflation needs to be maintained at a tolerable level.

IMPACT OF BUGET 2012-13 ON INDIAN ECONOMY


The year 2011 was a year of recovery and drop in GDP growth to 6.9% in 2011-12 was due to weak industrial growth but recovery signs are visible in coal, fertilizers, cement and electricity and inflation was largely under control in 2011, headline inflation was expected to moderate in the coming months. Finance Minister Mr Pranab Mukherjee had suggested acceleration of reforms and keeping food subsidies under 2% in 2012-13 while that was brought down to 1.7% in the subsequent years but at the same time ensuring availability of food under the subsidy scheme.

Budget has taken a step in a very big way. It has taken care of fiscal deficit. It has increased gross budgetary support by 18 per cent.

STEEL INDUSTRY
The steel industry has traditionally been very sensitive to the changing economic conditions. The recent economic meltdown has created several challenges which when addressed appropriately, can be countered to positive effect. However, unlike the previous global recessions, this time around, all the countries have come together and taken action. Additionally, there has been tremendous amount of governmental response to the global depression which is helping to bring about a possible easing the situation. The global downturn also had a major effect on various industries dependant on steel. Major contraction in the construction projects, automobiles, white goods demand from the third quarter of 2012 resulted in the global demand for steel dropping by 21% compared to the level consumed in the same quarter of the previous year. The demand for steel declined by 26% in the UK and Europe in the third quarter compared to a year earlier and after a further contraction in the fourth quarter, demand had fallen by 57% in the UK and 44% in Europe compared with a year ago. This reflected in a sharp downturn in private construction projects, as well as large falls in automotive and mechanical engineering, amplified by severe destocking by both end users and service centers. Indian steel production has increased by 5 million tones every year. The economic reforms initiated by the government since 1991 have added new dimensions to industrial growth in general and steel industry in particular. Steel industry has been removed from the list of industries reserved for the public sectors. Automotic approval of foreign equity investment up to 100% is now available. Price and distribution controls have been removed from January 1992, with a view to make the steel industry efficient and competitive.

JINDAL STEEL
JSPL Steel Ltd is an Indian steel company owned by the JSPL Group based in Mumbai, Maharashtra, India JSPL Steel is among India's largest steel producers, with a capacity of 10 MT as of 2011. Sajjan Jindal led enterprise JSPL Group is one of the largest business conglomerates in India with a strong presence in the core economic sector. It had grown from a steel rolling mill in 1982 and is presently a multi business conglomerate worth US$5 billion. JSPL Steel, the flagship company of the JSPL Group, is the largest integrated private steel manufacturer in India in terms of installed capacity. JSPLs history can be traced back to 1982, when the Jindal Group acquired Piramal Steel Limited, which operated a mini steel mill at Tarapur in Maharashtra and renamed it as Jindal Iron and Steel Company (JISCO). JSPL Steel is one of the lowest cost steel producers in the world. It has established a strong presence in the global value-added steel segment with the acquisition of steel mill in US and a service center in UK. JSPL Steel has also formed a joint venture for setting up a steel plant in Georgia. The Company has also tied up with JFE Steel Corp, Japan for manufacturing the high grade automotive steel. JSPL Steel has recently acquired a majority stake in Ispat Industries Ltd. This will make JSPL Steel Indias largest steel producer with a combined capacity of 14.3 MTPA by March 2011. The Company has also acquired mining assets in Chile, USA and Mozambique. By 2020, the Company aims to produce 34 million tons of steel annually with Greenfield integrated steel plants coming up in West Bengal near Salboni about 35 km from Kharagpur and Barenda in Ranchi district of Jharkhand.