Insights:

In India, the growth rate in GDP measures the change in the seasonally adjusted value of the
goods and services produced by the Indian economy during the quarter. India is the world’s tenth
largest economy and the second most populous. The most important and the fastest growing
sector of Indian economy are services. Trade, hotels, transport and communication; financing,
insurance, real estate and business services and community, social and personal services
account for more than 60 percent of GDP. Agriculture, forestry and fishing constitute around 12
percent of the output, but employs more than 50 percent of the labor force. Manufacturing
accounts for 15 percent of GDP, construction for another 8 percent and mining, quarrying,
electricity, gas and water supply for the remaining 5 percent.

Consumer Spending in India decreased to 17836.11 INR Billion in the second

quarter of 2021 from 21604.13 INR Billion in the first quarter of 2021.

The surplus in the quarter ended June 2021 (Q1FY22) was due to contraction in the
trade deficit for goods to $30.7 billion from $41.7 billion in Q4FY21 and increase in
net services receipts. The trade deficit for goods was $11.7 billion in Q1FY21

Notes from video:

Devaluation: when government decreases the price of their currency

RBI controls the currency. They control the supply and demand of the currency.

Increase the interest rate of the NRI account, or buying and selling the US dollar in
open market or controlling inflation. Low and stable inflation attracts foreign
investment.

Post independence: india adopted fixed exchange rate system. Indian gov had
pegged the rupee to fixed value of dollars. 4.79=1dollar till 1966. Due to the war of
Pakistan and china, india budget was affected. Biggest reason for the devaluation of
the currency. Due to political scenarios, poor growth, surge in oil price, 1991 crisis,
rupee was devalued at 26 rupees=1 dollar. 1993 gov put floating exchange system.
The value of your currency will be determined by market demand and supply.

2021- rupee floating to 76.88, record high.

If 1rupee=1dollar, then imports will be benefited especially the crude oil sector.

If 1rupee=1 dollar, MNC will stop investing in India and invest in their own countries.
Labour cost in india will become extremely uncompetitive. Not only factor wokers
but also for IT Professionals. If FDI is less, then service sector will be affected the
most.

Service Sector includes: telecommunication, IT, software, banking, insurance, non

financial services, outsourcing, R&D,
Service sector contributed 49.27% of GDP of India. If FDI reduces, then GDP of India
will also decrease and also unemployment will also take a hit. India’s export will also
suffer. India export products will shoot up in the international market. Gems and
Jewellry processing is a big industry in certain states, crops will also become
uncompetitive. Many IT companies heavily rely on international sales on their
income.

Indian IT Industry contributes to 7.7% to India GDP in 2020. Estimated to contribute

10% to India’s GDP by 2025.

A weak currency helps to export more and helps country grow. But if you keep
currency too weak, then it results to inflation. Oil becomes more expensive,
imported products become too expensive. Weak is good, too weak is dangerous.

Despite this, production is increasing. Today, India is a leading producer of

lemons, oilseeds, bananas, mangoes and papayas, wheat, rice, sugar cane,
many vegetables, tea, cotton, and silkworms (among others).--
https://www.investopedia.com/articles/investing/043015/fundamentals-how-
india-makes-its-money.asp
Currency value is not an indicator of a country’s development. Japan has weaker
currency than India.

First of all, India should reduce their imports, like import of oil. India is the 3 rd
biggest oil importer. India spent already 3lakh crore till August 2021 on crude oil.
India has to increase their exports, for which Indian start-ups and local industries
needs to be supported and promoted across all sectors.

 If exports increases, then revenue will increase then india’s economic growth
will increase.

Labour laws came in, which would provide impetus to economic growth.

Production linked incentive has the potential to improve the manufacturing and
boost exports.

Suggesstions:

how do they manage fisc in the coming year

 How to move on debt sustainability without compromising on growth

 Making sure that demand is revived
 Exports remain buoyant and employment and livelihoods are on the upswing
 Attention needs to be paid in infra spending which over the years has come
down.
 Improve SME financing
  Improve on health spending and attend to skill development particularly for
the migrant labour
 Boosting the capital spending
 Disinvestment target is achieved
 Need to re-invigorate growth engines: labor extensive exports and
investments.

Challenges:
1. Improve the agricultural industry. The industry is not efficient at all.
Farmers rely on monsoon for the water for their crop production.
Agricultural infrastructure is not well developed, so irrigation is sparse
and agricultural product is at risk of spoilage because of a lack of
adequate storage facilities and distribution channels. However, in recent
years, the issue of agricultural wastage has come to the forefront. In
2019, it was estimated that $14 billion of food is wasted in
India every year. Reports suggest there is little storage for Indian
agricultural products, and experts believe that the solution to the
massive waste issue is a combination of government policy,
technology, and infrastructure. The Indian government is purported
to be exploring a range of options.
2. Inflation rate increasing. RBI wont cut interest rates because of this.

Demand Side Policy:

Fiscal Policy: gov expenditure and taxation:

Taxation hasn’t changed in India budget.

Gov Expenditure: 35000 crore for covid-19. 2.2Lakh crore for healthcare sector.
137% increase in the budget of healthcare.

Monetary Policy: interest rates and availability of money.

Exchange Rate:

International Trade Policy

Supply Side:

Investment in technology, people, sustainability of ability to produce goods,

services. “Investment is the engine of the growth”
Budget:

Privatization of PSUs. FDIs to increase.

FDI cap increased to 74% from 49% for insurance sector.

A higher FDI cap will mean that more promoters could now
completely exit or bring down their stakes in their insurance joint
ventures. It will also provide a reprieve to many state-owned banks
who are dependent on the government to meet their own regulatory
capital requirement and are being discouraged from putting more
money into what is considered as a ‘non-core’ business.
https://theprint.in/theprint-essential/74-fdi-in-insurance-what-this-means-for-policy-
holders-indian-companies-promoters/624624/

Higher FDI limits could see more global insurance firms and their
best practices entering India. This could mean higher competition
and better pricing of insurance products. Policy holders will get a
wide choice, access to more innovative products and a better
customer service and claims settlement experience.
5.54 lakh crore on capital expenditure and asset monetization. Aims
to  drive projects under the National Infrastructure Pipeline and spend on Production Linked
Incentive schemes announced last year alongwith making Indian textiles competitive
globally.
Increased allocation to rural infrastructure development will give the necessary thrust to the
rural areas and drive employment opportunities. Higher spending on building of roads,
highways, expressways etc. will have a propelling effect on other sectors such as cement,
steel etc. Not to forget the advantage being given to affordable housing for all will also have
a multiplier effect on all other related sectors and give the boost to the real estate industry.

Government increased the eligibility for claiming tax holiday by more than one year
ie. March 2022. Tax holiday means: no tax to be paid usually starting stage.

National Hydrogen mission was launched to promote hydrogen power. This could
be an important resource for renewable energy. Allotted 1500 crores to renewable
energy sector.

4000 crore for Deep Sea Mission—multipurpose seaweed park in tamil nadu. This
will promote seaweed faming and cultivation. Seaweed can help fight climate
change, can be used as livestock feed, used as a fertilizer, can be used in beauty
products, helps in reversing ocean acidification, helps in absorbing carbon dioxide
and can be used as recyclable plastics.
Vehicle Scrapping Policies: old cars will be phased out. There will be a fitness test
every 20 years.