1

SLOWDOWN OF INDIAN ECONOMY:

TEMPORARY OF STRUCTURAL
A PROJECT REPORT

Submitted in Partial Fulfilment for the

Award of The Degree of

BACHELOR OF ENGINEERING

IN

CHEMICAL ENGINEERING

Submitted by

SHUBHAM PATIL 53
TUSHAR KAMBLE 55
PRANJAL VAITY 57
HRISHIKESH YADAV 61
AKASH SHELKE 66

BEE IN CHEMICAL ENGINEERING

DMCE

DATTA MEGHE COLLEGE OF ENGINEERING

AIROLI,NAVI MUMBAI-400081

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DMCE

DATTA MEGHE COLLEGE OF

ENGINEERING

AIROLI, NAVI MUMBAI-400081

PROJECT REPORT

PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENT OF THE DEGREE COURSE

ROLL NO : 53,55,57,61,66

ACADEMIC YEAR : 2020-2021

NAME OF THE DEPARTMENT: CHEMICAL ENGINEERING

SEMESTER : VTH SEM

PROJECT TITLE :SLOWDOWN OF INDIAN ECONOMY:

TEMPORARY OF STRUCTURAL

SUPERVISOR HEAD OF THE DEPT PRINCIPAL

DATE:

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DMCE

DATTA MEGHE COLLEGE OF ENGINEERING

AIROLI, NAVI MUMBAI-400081

APPROVAL SHEET

THIS IS TO CERTIFY THAT

SHUBHAM PATIL

TUSHAR KAMBLE

PRANJAL VAITY

HRISHKESH YADAV

AKASH SHELKE

HAS PRESENTED PROJECT DESSERATION REPORT IN PARTIAL

FULFILLMENT OF DEGREE COURSE IN CHEMICAL ENGINEERING AND

THE SAME IS ASSESSED

BY-:

1.

2.

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DMCE

ACKNOWLEDGNT

This project has been made possible through the direction and cooperation of various people
who we sincerely wish to appreciate for their support.

We would like to convey our heartfelt gratitude towards all the people whose guidance and
support helped us in successfully completing our project report.

We heartily appreciate our encouraging guide “ Prof. S.B. Patange ’’ sir for directing and
motivating us during the project assessment and planning. And for correcting the mistakes
and to keep our focus on betterment of the project work.

This project indeed was a new experience which give us a better approach towards our
economy. Which one of the largest economy in the world and how everything is connected to
the economy. And how much important is to keep or economy strong.

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DMCE

ABSTRACT

This report focuses the on the slowdown of the Indian economy. Since India
independence,has we all know that the Reserve bank of India is based on the book
problem of rupee : its origin and solution. India has faced many economy crisis since
independence, many act and rules where made by government and RBI then also Many
times India faced the economy slowdown. We can take the example of current
pandemic and other example we can take from 1992 and 1993 which were very huge
economy slowdown to the Indian economy. In this report we had focus that whether this
economy slowdown is because of the structure of economy or its just a temporary
slowdown of the Indian economy. Some of the economist suggest there idea for the
growth of the Indian economy. India is the second largest consumer in the world. So
what are the reason because of which India GDP fallen so much current GDP of India is
3.28% share in world GDP. And national growth of GDP is 6.68%. We have discussed
many such issue in our project report.

Shubham Mahadeo Patil

Tushar Siddharth Kamble

Pranjal Kishor Vaity

Hrishikesh S. Yadav

Akash Yogesh Shelke

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DMCE

TABLE OF
CONTENT:
SR Contents Page no
NO.
1 Introduction and History of Indian economy 7

2 Structure of Indian economy 18

3 Reason of Slowdown of economy 21

4 Effect of slowdown of economy 25

5 Value of Rupee in world economy 28

6 Economist solution on Growth of economy 45

7 Conclusion 48
8 Reference 49

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Chapter 1
Indtroduction and History of Indian
economy

7
 1
INTRODUCTION

Indian economy is one of biggest economy in the world, from the ancient times Indian economy has
face many ups and down. Since the emperor ruling this country many empires has been established
and different kind economy structure have been form in India, We can say that Indian economy has
been started from the 3300-1300 BCE ( Before Common Era ). currently India economy is the world
fifth largest economy India share to world GDP is 6.28%. India economy has face a drastic fall in the
years 1992-1993 and from 2015 to 2020. India is 2nd largest consumer in the world then also the India
economy has faced my falls since independence. Indian economy is mixed economy and has impact
of social, political and economical before and after independence

1.1 History :

The history of India begins with the dawn of Indus Valley civilization which flourished between
3500 BC to 1800 BC. The Indus civilization's economy appears to have depended significantly on
trade, which was facilitated by advances in transport.
By 300 B.C., when Middle East was under the Greek Seleucid and Ptolemaic empires the Maurya
Empire (c. 321 -185 BC) united most of the Indian [Link] empire spent considerable
resources building roads and maintaining them throughout India. The improved infrastructure
combined with increased security, greater uniformity in measurements, and increasing usage of coins
as currency enhanced trade. For the next 1500 years, India produced its classical civilizations which
generated wealth in huge amount. Between 1st and 17th centuries AD, India is estimated to have had
the largest economy of the ancient and medieval world, controlling between one third and one fourth
of the world's wealth. During the Mughal period (1526–1858 AD) India experienced unprecedeneted
prosperity in history. The gross domestic product of India in the 16th century was estimated at about
25.1% of the world economy.[1]

1.2 Indian economy In British rule

During british rule India was the largest exporter of the raw material and the largest consumer of the
finished product. None of the british economist attempted to measure the per captia income and
national income of India. Some of the Indian economists Dadabhai Naoroji, V.K.R.V. Rao, R.C.
Desai and British Findlay Shirras and William Digby attempted to measure India’s national income.
Among all, V.K.R.V. Rao was the most successful. Before independence Indian economy was solely
depend on the agriculture. 85% of the population were rural and there main source of subsistence was
agriculture[2]

Many development were made during british era but they where not for the development or growth
of the Indian economy they were to serve in the interest of the british officer, for eg rail road,
telegraph, ports, water transport. The railway, which was developed in the 1850s broke the barrier of
long distance travel and trade. It also fostered the commercialisation of Indian agriculture. But this
could hardly be of any help to the [Link] regional disparity was high, as the Madras Presidency
(entire South India) was more into manufacturing and services sector and rest of India was in the
agricultural sector.[2]

1.2.1 Land system policy

The growth of a new land system in India affected the India‟s economy. In 1793, Lord Cornwallis
introduced permanent settlement in Bengal and neighboring states. By introducing this new
Zamindari system, the peasants lost their ownership right over the land which in the past belonged to
them. Since the Zamindars enjoyed the right to raise the rent they mercilessly exploited the tenants.
After some times, the British extended the settlement policy to other states and created Zamindars
there too, but they changed it to „temporary settlement‟ under which land revenue would be
reassessed after a period ranging between 25-40 years. By a different land system called Ryotwari
settlement was evolved for large parts of Bombay and Madras which subsequently was extended to
North-Eastern and North-Western India. By this system, each peasant holding a plot of land was
recognized as the landlord and made directly responsible to the state for the annual land revenue
payment. The conditions of farmers under the Ryotwari system should not have been as bad as under
the Zamindari system. The greed of the Britishers was responsible for the sad situations of farmers
under this system. So in the both cases, the land rents fixed were excessive and both the systems
were instrumental in destruction of the organic village community based on customs and traditions
(Datt and Sundharam, 2000). But the Zamindari system made the landlords the master of the village
communities, the Ryotwari system cut through the heart of the village communities by making
separate arrangements between each peasant cultivators and the state (Thorner and Thorner, 1974).
There was a built in depressor and the economy move downwards. The exploitation of peasant under
the Mahalwari system, in which all villagers collectively deposit the land revenue, was somewhat
less practiced but this land tenure system was confined only to small parts of the country. An eminent
scholar, Bhatt remarks: “The capacity of the Indian cultivators to save and invest for increasing the
productivity of land was considerably reduced because of the excessive and uncertain land taxes”
(Bhatt, 1963). According to Mishra and Puri, “Due to defective land tenure system, virtually no
investment was made in agriculture and the farm technology remained backward. Moreover, the size
of holdings and the system of distribution of agricultural produce went against any improvement in
agricultural production” (Mishra and Puri, 1989).[4]

1.2.2 Industry and Commerce polices

The Britishers also ruined Indian economy through its industrial and commercial policies which
favored the Britishers at the cost of Indian economy. At the instance of the newly emerged class, the
British government levied protective tariffs on Indian manufacturers making their imports in England
difficult. Until 1813, Indian cotton textiles sold to the British markets was about half the prices of the
British cotton. So, the British government felt it necessary to levy protection. Despite of the
protection levied when the Britishers failed to check entry of Indian cotton into it, it banned the use
of Indian products. “Had this not been the case, had not such prohibitory duties and decrees existed,
the Mills of Paisley and Manchester would have been stopped in their outset, and could scarcely have
been again set in motion, even by the power steam. They were created by the sacrifice of the Indian
manufacture” (Wilson, 1970). In the same manner, a deliberate policy was pursued to destroy other
industries in India. The Court of Director opposed the use of Indian ships in trade between England
and India which not only obstructed India‟s export to Britain, but also created a serious setback for
the Indian shipping industry thereby serving the twin targets of Britishers. Tata wanted to set up an
iron and steel plant in Central Provinces in 1880‟s but the government did not give him permission,
preventing India to develop iron and steel industry. By the development of railway systems, iron and
steel industries were developed in Western European countries and the UK. Hence, India lost the
opportunity due to the negative approach of the Britishers. Also a big setback of Indian economy was
the commercialization of agriculture to supply raw materials to British manufacturers. It led into two
negative things for the Indians. First, it led to shortage of food grains especially during famine. In
fact, according to historians the British created famine in India through its inhuman policy. Secondly,
the manufactured engine goods with lot of incentives and privileges they received flooded into Indian
markets; so, they destroyed Indian cottage and handloom industry. These were the important policies
of British Empire through which it exploited India. India was the mute spectator to her own
destruction by some foreign power. A historian Wilson had said, “Had India been independent, she
would have retaliated, would have proposed prohibitive duties upon British goods, and would thus
have preserved her own productive industry from annihilation”. The act of self-defence was not
permitted to us; we were at the mercy of the stranger. British goods were forced upon us without
paying any duty, and the Indian manufacturer employed the arm of political injustice to keep down
and ultimately strangle a competitor with whom he could not have contended on equal terms (Dutt,
1963).[4]

1.2.3 Revenue and Expenditure policy

To maintain the political power, the British rulers always considered it was necessary to maintain a
big army. In the nineteenth century, the expenditure on army was the largest single item, which
accounted for roughly one-third of the total government expenditure. In addition to it, the
expenditure on the British army stationed in India had to be borne by the Indian government. The
pensions of army officers, expenditure on the office of the secretary of state for India, salaries of the
members of the Indian council, expenditure on the India office and payment to the Bank of England
for debt management were other expenditure which had little concern with India. Hence actually,
India had to pay even for the imperialist growth of Britain in different parts of the world. The British
government charged India for expenditures which were not even remotely concerned with the people
of the country. All these expenditures were arbitrarily treated as the loans granted to India. The
Indian revenue swelled from L 33 million to L 52 million a year during the first thirteen years of
Crown administration and that deficit accumulated from 1866 to 1870 amounting to L 11.5 million.
A home debt of L 3,00,00,000 was brought into existence between 1857 and 1860. (Jenks, 1927).[4]

1.3 Indian economy after Independence

1950-1979
After India got independence from colonial rule in 1947, the process of rebuilding the economy
started. India went for centralized planning . The Five Year Plans which successfully transformed
erstwhile USSR were made a tool for development. First five year plan for the development of Indian
economy came into implementation in 1952. Being largely a agrarian economy, investments were
made in creation of irrigation facilities, construction of dams and laying infrastructure. Due
importance was given to establishment of modern industries, modern scientific and technological
institutes, development of space and nuclear programmes. However, despite all efforts on economic
front, the country did not develop at rapid pace largely due to lack of capital formation, cold war
politics, defense expenditure, and rise in population and inadequate infrastructure. From 1951 to
1979, the economy grew at an average rate of about 3.1 percent a year in constant prices, or at an
annual rate of 1.0 percent per capita. During this period, industry grew at an average rate of 4.5
percent a year, compared with an annual average of 3.0 percent for agriculture.

1980-1990
The rate of growth improved in the 1980s. From FY 1980 to FY 1989, the economy grew at an
annual rate of 5.5 percent, or 3.3 percent on a per capita basis. Industry grew at an annual rate of 6.6
percent and agriculture at a rate of 3.6 percent. A high rate of investment was a major factor in
improved economic growth. Investment went from about 19 percent of GDP in the early 1970s to
nearly 25 percent in the early 1980s. Private savings had financed most of India's investment, but by
the mid-1980s further growth in private savings was difficult because they were already at quite a
high level. As a result, during the late 1980s India relied increasingly on borrowing from foreign
sources. This trend led to a balance of payments crisis in 1990; in order to receive new loans, the
government had no choice but to agree to further measures of economic liberalization. This
commitment to economic reform was reaffirmed by the government that came to power in June 1991

1.3.1 Liberalisation and its effects (1991 Onwards)

in 1991 Dr Manmohan Singh had quoted Victor Hugo and said, “No power on earth can stop an idea
whose time has come. The emergence of India as a major economic power in the world happens to be
one such idea”. Since then economy has progressed immensely with GDP progressing at the rate of
6-8% per annum. The GDP (nominal) has grown from US$ 267.52 billion in 1992 to US$ 1.85
trillion in 2012. India is third largest economy of the world and a preferred FDI destination. India‟s
foreign trade reached US$ 785 billion in 2012. India‟s major industries include information
technology, telecommunications, textiles, chemicals, food processing, steel, transportation
equipment, engineering goods, cement, mining, petroleum, machinery, software and
pharmaceuticals. Major agricultural products include rice, wheat, oil seed, cotton, jute, tea,
sugarcane, potatoes, cattle, sheep, goats, poultry and fish. In 2011–2012, India's top five trading
partners are China, United Arab Emirates, United States, Saudi Arabia and Switzerland. The
percentage share of various sectors in the economy in the year 2011-12 is given below. The high
contribution of services and manufacturing sector indicates the huge progress made by Indian
economy since its Independence when it was predominantly agrarian economy (59% in 1951).
India is a leading country in services sector so much so that she is referred to as „the back office of
the world‟. However, India has made significant progress in various spheres of science and
technology over the years and can now take pride in having a strong network of S&T institutions,
trained manpower and an innovative knowledge base. India has already become hub for
manufacturing of small cars and engineering goods. The Government had devised the National
Manufacturing Policy (NMP) in 2011 with an aim to enhance the share of manufacturing in India's
GDP to 25 per cent and add at least 100 million jobs by 2025. India is poised to become the second
largest economy in manufacturing by 2017, followed by Brazil as the third ranked country, according
to consulting major Deloitte. The manufacturing exports from India could increase to about US$ 300
billion by 2015, according to a report titled 'Made in India-the Next Big Manufacturing Export
Story', jointly prepared by industry body CII and McKinsey. McKinsey analysis finds that rising
demand in India, together with the multinationals‟ desire to diversify their production to include low-
cost plants in countries other than China, could together help India‟s manufacturing sector to grow
six fold by 2025, to $1 trillion, while creating up to 90 million domestic jobs.
India is one of the largest and fastest-growing markets for food and agricultural products in the
world. India is the world's third largest producer of food. Agriculture accounts for about 16.1% of
India‟s GDP. India has emerged as the largest milk producing country, with annual milk production
of over 100 million tonnes. This is expected to grow to 135 million tonnes by 2015. The Indian retail
market for fresh fruit and vegetables is estimated at US$35 billion. Organised retailing is US$73
million and growing at a rate of 30 percent. India has vast resources of livestock, estimated at 485
million. In terms of population, India ranks first in buffaloes, second in cattle and goats, and third in
sheep. According to a recent study by the Federation of Indian Chambers of Commerce and Industry
(FICCI) and Ernst & Young, the India food industry is set to grow by 42.5% from US$181 billion
now to US$ 258 billion by 2015 and by 76% to US$ 318 billion by 2020[6]
India GDP from 1961-2019[5]

India GDP Growth Rate - Historical Data

Year GDP Growth (%) Annual Change

2019 5.02% -1.10%

2018 6.12% -0.92%
2017 7.04% -1.21%
2016 8.26% 0.26%
2015 8.00% 0.59%
2014 7.41% 1.02%
2013 6.39% 0.93%
2012 5.46% 0.22%
2011 5.24% -3.26%
2010 8.50% 0.64%
2009 7.86% 4.78%
2008 3.09% -4.57%
2007 7.66% -0.40%
2006 8.06% 0.14%
2005 7.92% 0.00%
2004 7.92% 0.06%
 India GDP Growth Rate - Historical Data

Year GDP Growth (%) Annual Change

2003 7.86% 4.06%

2002 3.80% -1.02%
2001 4.82% 0.98%
2000 3.84% -5.00%
1999 8.85% 2.66%
1998 6.18% 2.13%
1997 4.05% -3.50%
1996 7.55% -0.02%
1995 7.57% 0.92%
1994 6.66% 1.91%
1993 4.75% -0.73%
1992 5.48% 4.43%
1991 1.06% -4.48%
1990 5.53% -0.41%
1989 5.95% -3.68%
1988 9.63% 5.66%
1987 3.97% -0.81%
1986 4.78% -0.48%
1985 5.25% 1.43%
1984 3.82% -3.47%
1983 7.29% 3.81%
1982 3.48% -2.53%
1981 6.01% -0.73%
1980 6.74% 11.97%
1979 -5.24% -10.95%
1978 5.71% -1.54%
1977 7.25% 5.59%
1976 1.66% -7.49%
1975 9.15% 7.96%
1974 1.19% -2.11%
1973 3.30% 3.85%
1972 -0.55% -2.20%
1971 1.64% -3.51%
1970 5.16% -1.38%
1969 6.54% 3.15%
 India GDP Growth Rate - Historical Data

Year GDP Growth (%) Annual Change

1968 3.39% -4.44%

1967 7.83% 7.88%
1966 -0.06% 2.58%
1965 -2.64% -10.09%
1964 7.45% 1.46%
1963 5.99% 3.06%
1962 2.93% -0.79%
1961 3.72% -0.79%

1.3.2 Economic development under market interventionist policies (1947-1991)

The economic policy framework of India during late 1940s had the following features. The prime
objective was to transform India into a socialistic pattern of society. The economy was viewed as a
mixed economy comprising public and private sectors. Promotion of public sector especially
infrastructure, basic and key industries was the cardinal element of the policy. Centralised economic
planning and five year plans were formulated for the development of the country. It was believed that
through planning and implementation of five year plans, the country can achieve rapid economic
growth within a short period. In agriculture, public investment was promoted in areas such as
irrigation, research and extension to promote private agricultural production. A complex system of
regulatory instruments, aimed initially at conserving foreign exchange but in the course of time
extended to prevent the growth of monopoly houses, was implemented. The other measures included
were a policy of fostering small and medium industries to help diffuse ownership, the use of state
power to regulate the inflow of private foreign capital and the adoption of a regime of administered
prices in key sectors to regulate both the instabilities and the presumed inequalities of the market
system. A restrictive industrial policy was followed. The objectives of the industrial policy of the
Government of India between 1948 and 1980 were increasing production and productivity especially
in priority sectors, bringing about regionally balanced industrial development, encouraging small
scale industries to generate employment and foster entrepreneurial talents, preventing concentration
of economic power by the control of monopolies, limiting and controlling foreign investments in
domestic industry, pursuing self-reliance through import substitution oriented policies and carving
out a central role for the public sector. A system of industrial licensing and a system of import
licensing were introduced. These policies created barriers to entry, provided indiscriminate protection
to domestic industry from foreign competition, created an atmosphere to exist for sick and non-viable
units, imposed a system of physical controls, given the incentive of rent seeking and acted as
obstacles for technological upgradation. This had ultimately led to the notorious licence raj system.
In foreign trade, the choice between import substitution oriented strategies and export promotion
oriented strategies or a suitable combination of the two strategies had been an important element of
the policy. In 1950s, the emphasis was on import substitution strategy. During the 1960s, along with
export orientation, a heavy import substitution oriented strategy was also followed. The imposition of
import controls, licensing and restrictions were widely used to restrict imports. A fixed exchange rate
regime was pursued resulting in the existence of dual exchange rate, viz. official rate and black
market rate. The acute shortage of foreign exchange, the severe restrictions in the use of foreign
exchange, import of technology and foreign capital had prevented the process of technological
development and flow of foreign capital and forced India to remain in the vicious circle of low
capital investment, backward technology and economic backwardness.[7]
 Chapter 2

Structure of Indian economy

2
Structure of Indian economy
It is indeed a great honour for me to address this august gathering of economists from all over the
country assembled here for the 88th Conference of the Indian Economic Association, the oldest,
largest and most representative body in the profession of Economics in India. I am grateful to the
members of the Association for giving me this rare opportunity by electing me as its President for
this year. I am aware of the fact that my predecessors in this position have been scholars with
extraordinarily high intellectual and academic credentials. I have, therefore, to accept this honour
with sincere humility. I have no pretensions nor the capability, to equal them in respect of the
academic significance, erudition and quality of their Presidential addresses. In my address, I have
chosen to dwell upon the familiar subject of Structural Changes in the Indian Economy, a subject on
which I have been pondering over and had discussions with colleagues in the profession and also
written and presented some preliminary ideas on some occasions over the past year1. The reason I
decided to speak on this subject is that over the past decades, particularly since the beginning of
economic reforms and acceleration in the rate of growth since 1990, the Indian economy has
followed a growth pattern, which, on the face of it, appears to be different from the one observed in
the historical development of today’s developed countries and also from that being experienced by
similarly placed developing countries today. I felt that this uniqueness of the growth pattern of India
needs to be recognised, understood and analysed and its implications for longer term development
strategy and policy brought out. In the first part of my address I shall briefly touch upon the
relationship between growth and structural changes and list the major theoretical explanations that
have been advanced for ‘agriculture-industry services’ sequence of structural changes to accompany
economic development. In the second part, I will give a brief account of the historical pattern of
development followed by today’s developed countries. Then I will highlight the main features of the
structural changes in the Indian economy over the past half a century, with particular focus on the
last two decades. A comparison with some of the similarly placed economies of Asia follows to
examine if the pattern followed by India is the one also followed by other developing countries in the
new global economic environment. In the next part, several explanations offered to explain the rather
ahistorical path of India’s development, characterised by a presumably pre-mature emergence of
services as the major sector, are described and briefly examined. I end by raising some questions on
the sustainability of the on-going pattern of growth from the viewpoint of macroeconomic balance
and stability, balance of trade, employment and income distribution.

I Theoretical Perspectives on Structural Changes Economic development has historically been

associated with structural changes in the national economies. It has, in fact, most often, been defined
as a process combining economic growth with changing share of different sectors in the national
product and labour force. The most common structural changes that have been observed historically
have followed a sequence of shift from agriculture to industry and then to services. Thus, an
underdeveloped economy is characterised by a predominant share of agriculture; with development
the share of industry increases and that of agriculture declines, and subsequently after reaching a
reasonably high level of development, the services sector increases in importance, becoming a major
component of the economy. This pattern has not only been observed historically, but also holds
across the countries with different levels of development. Structural shifts and changing sectoral
shares are found to hold both for the national product and the work-force Structural changes do not
only characterise economic development, they are also necessary for sustaining economic growth.
The neoclassical view that sectoral composition is a relatively unimportant by-product of growth has
been convincingly questioned by structural economists like Kuznets, who have empirically
demonstrated that growth is brought about by changes in sectoral composition. This is so both for the
reasons of demand and supply. Though the emphasis laid on different factors by different economists
has varied, the broad line of reasoning advanced by pioneers like Fisher and Clark and followed with
some elaborations and modifications by later analysts has been as follows: Income elasticity of
demand for agricultural products is low; that for industrial, particularly manufacturing goods, is high;
and, for services, it is still higher. As a result, with rising levels of income, the demand for
agricultural products relatively declines and that for industrial goods increases and, after reaching a
reasonably high level of income, demand for services increases sharply. Accordingly the shares of
different sectors in the national product get determined by the changes in the pattern of demand. On
the supply side, agriculture being mainly dependent on a fixed factor of production, namely land,
faces a limit on its growth and is subject to early operation of the law of diminishing returns.
Industry, specially manufacturing, on the other hand, offers large scope for use of capital and
technology, which could be augumented almost without limit with human effort. Labour supply
could constrain expansion of industry, but it is possible to overcome it by introducing labour-saving
technological changes. The same applies to services, where application of technologies seems to
offer much larger scope, as shown by the experience over the past few decades. In the case of
services, there are also additional reasons why their share in national product increases with
industrial development. These arise both out of the technological developments and economic and
institutional arrangements compelled by them (Kuznets, 1966). Technological developments
facilitate and economically necessitate geographical concentration and large scale based production,
leading to larger
 Chapter 3
Reason of slowdown of Indian economy

3
Reason of slowdown of economy

3.1Causes for the Present Slowdown in the Indian Economy

 Much has been written and said about the ongoing economic slowdown in the Indian Economy.
What was being indirectly said about several economic indicators flashing warning signals for the
last year or so, what has triggered the present criticism is the GDP (Gross Domestic Product) figures
for the last quarter which came in at 5.7% and suddenly brought the issue into a full public glare.
Indeed, given the fact that India was touted as the Fastest Growing Developing Country for the last
two years, the slowdown has also caught many of those making such claims by surprise.

3.2 Collapse in Private Consumption and Investment Freeze Leading to Double Whammy

So, what are the reasons for the present slowdown in the Indian Economy? To start with, private
consumption has taken a beating due to Demonetization as consumers suddenly prefer to hoard cash
or keep it in the bank instead of spending on consumer goods. Moreover, demand has also collapsed
in the rural areas as the entire rural economy runs on cash and Demonetization led to the loss of jobs
as well as incomes thereby squeezing the rural consumer who now prefers to wait and watch as well
as postpone consumption except that of essential goods and services. Next, Demonetization has also
led to small and medium businesses or the so-called SMEs to withhold investment since they too
operate on a cash basis and the cash crunch has left them high and dry

3.3 The Effect of Demonetization

Indeed, Demonetization can be said to have contributed too much of the slowdown as the Double
Whammy of demand collapsing, and supply bottlenecks mean that there is a broad slowdown across
the entire value chain of the demand and supply dynamics. Thus, what we have is a situation wherein
cash has dried up leading to a slowdown in the economy. One must also take note of the fact that it is
not only private consumption and small enterprises causing the slowdown. Indeed, the Big
Corporates are as much to blame since they are drowning in debt that they accumulated during the
Boom Years of the first decade of the 21st century. It is also a fact that this has contributed to a
freeze on investment by industrial houses and corporates who are now paying down the debt or
postponing debt repayments to ensure that their present cash flow is sufficient to remain in business.

3.5 Too Much Debt

Added to this is the fact that most Public Sector Banks are saddled with high NPAs or Non
Performing Assets that have resulted in them tightening lending and instead, seeking deposits and
otherwise repairing their balance sheets by making provisions for Bad Loans. Indeed, absent
recapitalization of such banks by the government, one might very well see a vicious cycle wherein
bad debts and demand collapse lead to no lending and no fresh investment in addition to any
consumption. The cycle has to be broken somewhere, and this is where the Government and the RBI
or the Reserve Bank of India have to take concerted action.

3.6 Rollout of GST

Fourth, the fact that the rollout of the GST or the Goods and Services Tax on a nationwide basis has
led to the slowdown cannot be denied. Indeed, GST has hampered the small businesses more than
Demonetization by forcing them to withhold inventory until they migrate to the GSTN or the GST
Network and become compliant with the numerous rules and regulations that are part of this tax. It
can be said that the implementation of GST is also flawed thereby exacerbating some of the factors
that have contributed to the slowdown.
3.7 Global Slowdown

It is not these factors alone, and the most important factor is that there is also a global economic
slowdown that is happening and given the fact that India is a net commodity exporter, there has been
a slump in the volumes of exports. Apart from that, the global slowdown has also been accompanied
by a retreat of globalization which has resulted in FDI or Foreign Direct Investment being only in the
areas of speculative finance and distressed assets purchases rather than into investments that help the
Real Economy. Thus, it can be said that ongoing global headwinds also have contributed to the
slowdown in the Indian Economy.

3.8 Retreat of Globalization

Hence, what the slowdown means for professionals and fresh graduates is that they would be finding
it harder to land jobs as well as see their salaries rise year on year basis. In addition, the policies of
the Trump Administration have contributed to a decline in the number of students and professionals
going to the United States and added to this, Brexit uncertainties have compounded the situation. It
looks as though that the combined effect of all these factors means that the Indian Economy is likely
to remain in the doldrums for some time to come.

3.9 Ride out the Storm

Lastly, the slowdown is also part of a longer-term structural shift wherein the Economy is shifting
gears from the high investment era to a low investment era as well as a transition from being cash-
driven economy to a digitally enabled economy. Indeed, this can be seen most in the Real Estate
Sector that has come to a grind in recent months and hence, has also contributed to the slowdown.
All in all, all the factors have caused a Perfect Storm for the Indian Economy, and there has to be a
time lag before one can reasonably and realistically expect a turnaround. To conclude, the best option
now for all stakeholders would be to Ride out the Storm.

3.10 Recent Slow Down of Indian Economy: Impact is Prominent

The GDP growth of Indian Economy has touched the six year low in the first financial quarter of
AprilJune 2020. It touched 5.8% growth in January-March, although in nominal terms India’s GDP
grew by 7.99% which is also lowest since December 2002. Key sectors bearing the brunt of Indian
Economy slow down are Agriculture, Automobile, Real Estate, FMCG among others. The $100
billion automobile industry that employs 370 lakh people and contributes 12% to the national GDP,
is suffering from huge slow down. Around 3 lakhs jobs are lost, Sales have gone down and the
automobile industry appears to be going in reverse gear. The official data released by the National
Statistics Office (NSO) confirm that. Weaker consumer demand and slowing private investments are
the two key factors behind the Indian Economy Slow Down. Eight core sectors have registered
negative growth of just 2.1% in July, compared to 7.3% in the corresponding month last year.
According to the Centre for Monitoring Indian Economy (CMIE), the overall unemployment in India
has now touched 8.2%, with a high urban figure of 9.4%.

3.10.1Causes of Economic slow down

The cause of the problem as shared by some of the experts consists of supply-side shocks. Besides,
three important contributors to this problem include Demonetisation & stressed banking sector, GST
Implementation and problems in Agriculture sector. The public goods are provided by government
and the government needs tax revenues to supply them, and these depend upon national income.
Then there is employment. A demand for labour exists only when there is a demand for goods. So
growth is necessary if employment is to be assured. There is not only a pool of unemployed persons
in India to absorb but the country also needs to provide employment to youth continuously entering
the labour force. The slowing of the economy is a source of concern as an economy that has been
slowing for five quarters is unlikely to turn around quickly. Besides, it may not be able to revive on
its own.

3.10.2 No demand - No Investment: Vicious Circle operates

Since it is capital formation, or investment, that drives growth in the economy, investment is an
immediate source of demand as firms that invest buy goods and services to do so. It also expands the
economy’s capacity to produce. The two sources of investment are private and public. The Private
investment source is depressed as of now due to the factors cited above and is difficult to revive
unless some external force is applied for example – tax sops, incentives for investment, creating
demand for certain products through public funded projects among others. When there is no demand,
supply has to be stopped due to piling up of stocks and production units go idle, leading to cut in
labour force. It further reduces the income leading to less demand and further reduction in supply and
stopping of production. Since, investment involves committing funds for a long period under
uncertainty, the stepping-up of public investment when private firms are unwilling to invest more is
required. Increased public investment increases demand and quicken growth and also encourages
private investors, as the market for their goods expands.

3.11 Reforms: Are they leading to slowdown?

Structural reforms are being taken by almost all the governments or they have been claiming to be
doing for more or less a quarter of a century now. Since 2014, in particular, “the ease of doing
business” has received great attention from this government. But, the economy today is still less
regulated than it was in 1991. Labour market reforms have not been taken up yet in Parliament. Share
of manufacturing may rise if the labour market is liberalised. Another fact is how the economy came
close to achieving 10% growth in the late 1980s and during 2003- 08 when the policy regime was no
more liberal than it is now. It is also difficult to relate slowing domestic growth to sluggish world
trade as data show 2016-17 to be a year of a major turnaround in exports. On the other hand, capital
formation as a share of output has declined almost steadily for six years now. In 2014-15 it rose
slightly

3.12 Is it temporary phenomenon?

A few of the experts see it as a temporary or technical issue and think that its effects would soon fade
out while others view this as a more serious crisis created by a barrage of supply-side shocks to the
economy. However, the crisis is seen as a deep structural issue rather than merely a short-run one.
Now the government has to play a key role and understand the economic realities and avoid
adventurism in policymaking and implementation.
 Chapter 4

Effect of slowdown of economy

Effects of slowdown of economy

Gold was firm in global markets on possible recession fears. (Photo | EPS)
It was well known that India’s economy would contract, but the National Statistical Office’s
(NSO) data released on Monday evening was quite a shocker. The contraction of gross domestic
product (GDP) for the first April-June quarter of FY2021 was a massive 23.9%, when most
analysts had forecast a 19-20% de-growth. This is the biggest dive into negative territory since the
country began releasing quarterly data since 1996. The obvious reason for the damage is the
lockdowns imposed by the government to prevent the spread of the coronavirus pandemic. India’s
performance was the worst among the G-20 countries, with our nearest rival, the UK, at -21.7%.
In contrast, China and Brazil both registered positive growth of 3.2% and 1%, respectively for the
quarter.
The Q1 GDP numbers are based on initial data and it is expected that the contraction could be
more severe once the MSME sector’s data is factored in. The unorganised and small industries
have been hit the hardest, and many have been wiped out. The lone bright spot is agriculture,
which clocked a positive growth rate of 3.4% on the back of a bumper rabi crop. Even the
pumping up of government spending by 16% failed to have any impact on the overall GDP
numbers.
The implications are serious. The worst-performing sectors—manufacturing and construction,
which slowed down a whopping 39.3% and 50.3% respectively—are also the biggest employers.
The consequent loss of jobs we are seeing and the drift towards increased poverty is in evidence
all round. The country also runs the risk of officially being in recession (defined as negative
growth for two consecutive quarters) as the next July-September quarter is likely to see a
contraction too. As it is, the July data for eight core sectors shows a year-on-year decline of 9.6%.
The impact of shut and limping businesses will translate into poorer tax revenues, thereby giving
less headroom for the government to intervene. It is therefore about time the government drops its
brave face of ‘green shoots’, dismantles the lockdown inertia and gets the economy back on the
rails
 Chapter 5

Value of Rupee in world economy

 5

Value of Rupee in world economy

A surging US dollar to hit Indian rupee

The rupee is likely to edge lower against the US dollar as traders are likely to buy the latter after a
clear mandate in the US presidential election eliminated political and fiscal uncertainty in that
country.

Indian rupee opens 10 paise lower against the US dollar

On Monday, the Rupee fell to the lowest level in a month following broad based strength in the
dollar against its major crosses. Dollar gained on the back of safe haven buying as the number of
Covid cases started to increase in the US and the EU.

Will gains in Indian rupee last?

n the middle of a pandemic, the rupee has moved past the 73 mark to hit a six-month high against
the dollar. And that's not it, analysts are expecting it to rise further. But what's behind this swift
movement in the domestic currency? And why isn't RBI interfering to rein in the rupee this time
around?Will gains in Indian rupee last?

Rupee opens 10 paise higher against the US dollar

The rupee opened at Rs 73.79 against the dollar compared with the previous close of 73.89.

Gold, silver rise marginally

In the international market, gold was trading with gains at USD 1,815 per ounce, while silver was
quoting flat at USD 23.42 per ounce.
Rupee settles 3 paise higher at 73.88 against US dollar

At the interbank forex market, the domestic unit traded in a narrow range as rising COVID-19 cases
offset positive sentiments surrounding the progress on the vaccine front.

Rupee trades 6 paise higher against the US dollar

The US dollar was on the defensive on Thursday as downbeat US economic data and optimism
about coronavirus vaccines prompted investors to seek out riskier assets tied to global commodities
and emerging markets, Reuters reported.

Rupee settles 10 paise higher at 73.91 against US dollar

The dollar index, which gauges the greenback's strength against a basket of six currencies, was
down 0.10 percent to 92.13.

Rupee gains 4 paise against the US dollar

Rupee opened at 73.99 against the US dollar, compared with the previous close of 74.00. At 10:12
am, it was up 4 paise at 73.96

Gold plunges Rs 1,049; silver tumbles Rs 1,588

Silver also faced selling pressure as it tumbled by Rs 1,588 to Rs 59,301 per kg from Rs 60,889 per
kg in the previous trade.

Rupee trades flat against the US dollar

Globally, risk-sensitive currencies gained on Tuesday as investors breathed easier after US

President Donald Trump accepted the start of a transition to a Joe Biden administration, that is
expected to include former Federal Reserve Chair Janet Yellen as Treasury secretary, Reuters
reported.
Rupee opens 4 paise higher against the US dollar

The Indian rupee opened at 74.11 against the US dollar compared with the previous close of 74.15.

Gold inches up by Rs 65; silver jumps Rs 298

Spot gold prices for 24 carat gold at Delhi were trading up by Rs 65 reflecting overnight gains
made in international gold prices limiting upside on rupee appreciation,

Ahead of Market: 12 things that will decide stock action on Friday

Mazhar Mohammad of [Link] said, in next trading session, if the index settles below
12,800 levels on closing basis, then it may kick in the much needed corrective downswing with
initial targets of 12,600 levels.

Gold falls Rs 357, silver declines Rs 532

The yellow metal had closed at Rs 50,610 per 10 gram in the previous trade.

Rupee opens on flat note against US dollar

"The US and countries across Europe are enforcing stricter measures to tackle the rising second
wave of cases. This has stalled the global risk rally as of now. However, with progress on the
vaccine front, there are no signs of panic as yet," said Abhishek Goenka, Founder and CEO, IFA
Global.

Rupee opens 3 paise higher against the US dollar

In the previous session, rupee fell sharply against the greenback ahead of the important inflation
and industrial production number that were released later in the day.

RBI remains net purchaser of US dollar in September, buys $8.17 bn

During the one-month period, the rupee lost a marginal 0.2 percent to the greenback marking itself
as one of the worst performing Asian currencies.
Rupee opens 7 paise lower against the US dollar

In Asian trade, the dollar held broad gains as investors adjusted some of their bullish expectations
about a Covid-19 vaccine, tempering a recent rally in risk assets but keeping enough confidence to
support the greenback against other safe-havens, Reuters reported.

Rupee may return near pre-pandemic levels by March: Nomura

India’s currency rose from a two-month low last week ahead of U.S. election results to 74.3725 per
dollar on Wednesday.

Rupee slumps 18 paise against US dollar to 74.36

At the interbank foreign exchange market, the local currency opened on a weak note at 74.24 and
swung between the day's high of 74.18 and low of 74.50 to the US dollar.

Rupee opens 7 paise higher against the US dollar

After strengthening in the past few sessions, the Indian unit came under pressure in the previous
session on the back of short covering moves even as the domestic equities surged to record high
levels.

Rupee opens 25 paise higher against the US dollar

Motilal Oswal analysts said on the domestic front, the focus will now be on the inflation and
industrial production number that will be released later during the week and price rise could keep
the rupee gains in check.

Rupee opens 40 paise higher at 73.98 against dollar

Brokerage Motilal Oswal Financial Services expects rupee to trade higher in Friday’s session and
quote in the range of 73.80 and 74.40.
GST collection, power consumption show recovery: Ex-RBI chief C Rangarajan

Rangarajan, also the former Prime Minister's Economic Advisory Council chairman, said this
during 'SICCI-360' organised here by the Southern India Chamber of Commerce and Industry.

India's cotton exports could jump 40% to seven-year high as prices rally

Higher exports by the world's biggest cotton producer in 2020/21 season, started on Oct. 1, could
weigh on global prices and limit shipments from rivals such as the United States and Brazil to key
Asian buyers such as China, Bangladesh and Vietnam.

Bank of Baroda Q2 results: Net profit doubles to Rs 1,679 crore YoY

CEO Sanjiv Chadha said higher retail loan growth together with lower cost of funds gave the bank
confidence of sustaining its profits in the immediate future.

Rupee slips below 74-mark against dollar, hits lowest level since Aug 27

The Indian rupee opened at 74.05 against the dollar, down 17 paise from the previous close of
73.88.

Rupee opens 2 paise higher against the US dollar

The dollar index, the greenback’s measure against a basket of currencies, was up 0.2 per cent, with
the US elections' uncertainty adding to the "risk-off" tone.

KPIT Technologies Q2 results: Net profit declines 22.5% to Rs 28 crore

Its revenue from operations declined 10.7 per cent to Rs 485.4 crore for the quarter under review as
compared to Rs 544 crore in the year-ago period, it added.

Investors go long on Asian currencies, Indian rupee bets at 3-year high: Poll

The rupee has appreciated close to 3% over the past two weeks after the central bank cut back on
aggressive dollar-buying it has been undertaking in recent months to build reserves and keep the
currency in check to help exports and its virus-hit economy.
Why the long-term outlook for India equities look so tempting

RBI expects growth to restart from March quarter and continue into FY22, though at lower-than-
trend rate of growth. After every period of a major economic stress, India has bounced back
strongly in the past.

Rupee opens 5 paise lower at 73.43 against the US dollar

On Thursday, the rupee came under pressure in the latter half of the session following a plunge in
domestic equities and strength in the dollar against its major crosses, and selling across the board
was witnessed.

Rupee opens 12 paise lower at 73.39 against the US dollar

Analysts expect weaker-than-expected economic data on the domestic front to keep the rupee
weighed down against the US dollar.

Upside for Indian rupee seen limited despite multiple positives

Reserve Bank of India's stated foreign exchange policy has been to only curb extreme volatility

Market takes Shaktikanta Das' signal positively as yields cool off

The governor's announcement had an instant impact on the bechmark bond as its yield dropped to
5.91% from Thursday's close of 6.01% before ending at 5.94%.

Rupee recovers by 13 paise; ends 2-day losing streak

During the session, the local unit witnessed an intra-day high of 73.29 and a low of 73.55 against
the American currency.

Rupee gets lift from stock flows, current account surplus

Consensus forecasts by analysts surveyed suggest the rupee could struggle in the fourth quarter.
The median estimate is for the the currency to end the year at 73.83 per dollar, slightly weaker than
the 73.2875 it closed at on Monday.
Rupee settles 10 paise higher at 73.76 against US dollar

On Tuesday, the Indian rupee settled at 73.86 against the greenback.

Rupee widens losses by 7 paise against US dollar

At the interbank forex market, the domestic unit opened at 73.78 per US dollar and traded between
a high of 73.75 and a low of 73.91 during the session. It finally closed at 73.86, registering a fall of
7 paise over its previous close.

Rupee settles 18 paise lower against US dollar

On Friday, the rupee had staged a smart rebound and close at 73.61 against the US dollar.

FPIs pull out net Rs 476 cr so far in Sept from Indian markets

They had invested Rs 46,532 crore in August, Rs 3,301 crore in July and Rs 24,053 crore in June
on net basis.

Rupee settles 28 paise higher at 73.61 against US dollar

On Thursday, the rupee dived 32 paise to touch a near one-month low of 73.89 against the US
dollar.

Rupee gains marginally against US dollar

On Tuesday, the rupee depreciated 20 paise to settle at 73.58 against the US dollar.

Gold, silver tumble on weak global trend

The yellow metal had closed at Rs 52,000 per 10 gram in the previous trading session.
$25b ‘safe-haven’ buys in 2 months, but super-low returns for RBI

While the holdings may be safe, the low returns from those investments could crop the RBI's
earnings, potentially reducing its payout to the government amid record low interest rates.

Rupee sees high volatility against US dollar ahead of US Fed policy decision

"The focus will be on the Federal Open Market Committee (FOMC) tonight. Market participants
would expect further clarifications from the US Fed on how average inflation targeting framework
would be implemented," said Abhishek Goenka Founder and CEO, IFA Global.

Even if Nasdaq blips, we will continue to see the uptrend till Diwali: Edelweiss

The real test for markets will come around the 14th of November when Diwali kicks in which will
be the real test of demand for corporate India.

Border tension, inflation data & FII flows among 8 key factors to guide markets
this week

In the coming week, inflation data will be critical as it will make a base for RBI to decide on further
rate cuts.

Rupee settles 9 paise higher at 73.46 against US dollar

Rupee settles 9 paise higher at 73.46 against US dollarDuring the session, the domestic unit
witnessed an intra-day high of 73.16 and a low of 73.50 against the greenback.

Rupee opens 11 paise higher at 73.44 against dollar

Rupee opens 11 paise higher at 73.44 against dollarOn the domestic front, market participants will
be keeping an eye on the industrial production number that will be released on Friday and the
weaker-than-expected number could keep gains capped for the currency.

Rupee opens 4 paise down at 73.18 against dollar

Rupee opens 4 paise down at 73.18 against dollarOverseas investors pulled out Rs 900 crore on net
basis from domestic markets in the first four trading sessions of this month as weak economic data
and India-China border tensions hit market sentiment.

Rupee opens 18 paise down at 73.21 against dollar

Rupee opens 18 paise down at 73.21 against dollarThe US dollar advanced for the second straight
day after remaining under pressure in the past few sessions despite private payrolls number falling
short of expectations.

Rupee opens 20 paise down at 73.07 against dollar

Rupee opens 20 paise down at 73.07 against dollar“Momentum in today’s session is likely to be
curbed as the dollar rose marginally against its major crosses. For the day, we expect USDINR
(Spot) to quote in the range of 72.70 and 73.20,” brokerage Motilal Oswal Financial Services said.

RBI has just twisted yields to stem drop in bond values

RBI has just twisted yields to stem drop in bond valuesThe central bank’s demand side measures
for the bond market, such as in increase in Held-To-Maturity (HTM) limits and the new Operation
Twist calendar, besides the reinforcement of its accommodative stance are positives for bond
market inflows

Rupee zooms past 73-mark, settles 73 paise higher at 72.87 against US dollar

Rupee zooms past 73-mark, settles 73 paise higher at 72.87 against US dollarAt the interbank forex
market, the domestic unit opened at 73.18 against the US dollar, gained further ground during the
trading session and finally settled for the day at 72.87 against the greenback, registering a surge of
73 paise over its previous close of 73.60.

Gold rebounding again, but analysts divided in outlook this time

Gold rebounding again, but analysts divided in outlook this timeBullion prices recovered on
Monday after falling last week. Gold prices at the Multi Commodity Exchange (MCX) for the
October contract were trading 0.5 per cent higher at about Rs 51,700 per 10 gm at in early
afternoon trade, supported by rupee depreciation.

India gold discounts hit five-month high as price dip fails to stir demand

India gold discounts hit five-month high as price dip fails to stir demandOn Friday, local gold
futures traded around 51,200 rupees ($699) per 10 grams, having retreated from a record 56,191
rupees hit earlier this month.

Rupee posts biggest weekly gain in 20 months as RBI stands aside

Rupee posts biggest weekly gain in 20 months as RBI stands aside"The sharp fall in dollar/rupee
spot has been very unexpected and traders are in shock, with every major support being tested,"
said Rahul Gupta, head of currency research at Emkay Global Financial Services

Rupee gains 40 paise; touches 73.90 against dollar after RBI Guv comments

Rupee gains 40 paise; touches 73.90 against dollar after RBI Guv commentsThe rupee rose 40
paise from its closing level of 74.30 on [Link] morning trade on Thursday, it had touched
74.36 against the American currency.

Edible oil prices likely to fall by Diwali

Edible oil prices likely to fall by DiwaliWith palm oil accounting for over 60 per cent of the 15
million tonne annual vegetable oils import in India, a drop in global prices will impact the domestic
prices of all edible oils, industry executives said.

Gold, silver futures trade higher over rise in Covid cases

Gold, silver futures trade higher over rise in Covid casesMCX October gold opened at Rs 51,350
per 10 gm and touched a high of Rs 51, 468. MCX September silver opened on a positive note at
Rs 65,983 per kg and touched a high of Rs 66,159.

Rupee pares early gains, settles 1 paisa down at 74.33 against USD

Rupee pares early gains, settles 1 paisa down at 74.33 against USDThe dollar index, which gauges
the greenback's strength against a basket of six currencies, was trading 0.12 per cent down at 93.18.

Rupee hits over 5-month high, trades at 74.17 against dollar

Rupee hits over 5-month high, trades at 74.17 against dollarOverseas investors have poured in over
Rs 40,000 crore in domestic markets on a net basis in August so far as the excess liquidity in global
markets found its way to emerging markets like India.
What's behind rupee's stellar rally against dollar? No, it's not RBI

What's behind rupee's stellar rally against dollar? No, it's not RBIThe rupee gained 0.70% to close
at 74.32/$, its strongest level since March 18.

Rupee makes U-turn, logs steep 52 paise gains against US dollar

Rupee makes U-turn, logs steep 52 paise gains against US dollarThe dollar index, which gauges the
greenback's strength against a basket of six currencies, was down 0.15 per cent at 93.11.

NRI rupee deposits surge four-fold in Q1 as interest rate gap widens

NRI rupee deposits surge four-fold in Q1 as interest rate gap widensNon-resident Indians are
betting big on India, a sign of their faith in the Indian rupee as well as the economic outlook for the
country, as bank deposits from the diaspora swelled in sharp contrast to the prevailing historic low
interest rates.

Biggest forex buyer in emerging Asia builds on record buffer

Biggest forex buyer in emerging Asia builds on record bufferIt purchased $30 billion of foreign
exchange in the four months to July to bolster what is already the world’s fifth-largest FX hoard.

Rupee rises 7 paise to 74.69 against US dollar in early trade

Rupee rises 7 paise to 74.69 against US dollar in early tradeForex traders further said that markets
will look ahead to the US Federal Reserve minutes scheduled to release tonight.

India takes on Asia’s fx hubs for lion share of rupee trade

India takes on Asia’s fx hubs for lion share of rupee tradePrime Minister Narendra Modi wants to
pitch India as a new Asian destination for global fund flows rivaling the likes of Singapore and
Hong Kong.

Rupee fights August curse with wall of money into nation’s banks
Rupee fights August curse with wall of money into nation’s banksICICI Bank Ltd., Axis Bank Ltd.
and mortgage lender HDFC Ltd. have raised a combined 350 billion rupees ($4.7 billion) this
month.

Rupee settles 6 paise lower at 74.90 against US dollar

Rupee settles 6 paise lower at 74.90 against US dollarAt the interbank forex market, the local unit
opened at 74.85 against the US dollar, then lost ground and finally settled at 74.90 against the
American currency, registering a decline of 6 paise over its previous close of 74.84.

RBI’s June dollar purchases hit 4-year high

RBI’s June dollar purchases hit 4-year highThe central bank bought $14.8 billion from the spot
currency market in June, the highest since it bought $19,1 billion in November 2016. I

Rupee settles on flat note, down 1 paisa at 74.84 against US dollar

Rupee settles on flat note, down 1 paisa at 74.84 against US dollarDuring the session, the domestic
unit witnessed an intra-day high of 74.78 and a low of 74.92 against the greenback.

Rupee settles 12 paise higher at 74.78 against US dollar

Rupee settles 12 paise higher at 74.78 against US dollarAt the interbank forex market, the local unit
opened at 74.83 against the US dollar and gained further ground to settle at 74.78, up 12 paise over
its previous close of 74.90.

KPIT hits upper circuit on sustained deal wins in Q1

KPIT hits upper circuit on sustained deal wins in Q1Shares of mid-tier IT company KPIT
Technologies hit an upper circuit with 5 per cent gain on Tuesday morning amid a weakness among
the stocks of its top-tier peers.

Rupee opens 9 paise down at 74.90 against dollar

Rupee opens 9 paise down at 74.90 against dollarEarlier, the local currency on Friday closed with a
marginal 3 paise gain at 74.81 to the US dollar amid weakness in the greenback against key global
peers.
Infosys poised for a better show in FY21 than peers

Infosys poised for a better show in FY21 than peersAmong the three, Infosys stood out. Its reported
revenue dropped by 2.4% sequentially to $ 3,121 million in the June quarter while its two peers
recorded a steeper drop of over 7%.

$10 billion India fund shuns company debt on unappealing spreads

$10 billion India fund shuns company debt on unappealing spreadsQuantum Asset Management
Co. also recommends avoiding higher-risk India credit because the world’s-biggest lockdown has
significantly weakened the debt-servicing capacity of many companies

Have reasonable exposure to IT stocks; Infosys top pick: Anand Tandon

Have reasonable exposure to IT stocks; Infosys top pick: Anand Tandon‘IT stocks will benefit from
any weakness in the rupee’

FPIs pull out Rs 3,741 cr in three trading sessions in July

FPIs pull out Rs 3,741 cr in three trading sessions in JulyThe latest withdrawal has come after
investment of Rs 24,053 crore by FPIs in domestic markets in June.

Expect catch up rally in silver in second half of 2020: Adrian Ash

Expect catch up rally in silver in second half of 2020: Adrian Ash‘Gold has really proven its value
as a safe haven in the first half of 2020’

How Sensex, US-dollar, 10-year G-sec performed during week ending June 25,
2020

How Sensex, US-dollar, 10-year G-sec performed during week ending June 25, 2020Here is a
weekly tracker of returns from Sensex, 10-year government bond yield and US dollar vis-a-vis
Indian rupee.

Rupee set to crash past record low, former Reliance FX head says
Rupee set to crash past record low, former Reliance FX head saysThe portfolio inflows have done
little to arrest the decline in the rupee.

Gold rate slips as traders book profits at higher levels

Gold rate slips as traders book profits at higher levelsGlobally, gold prices edged up on Tuesday
after notching a more than one-month high in the previous session.

RIL a must-own stock but keep risk factors in mind: Dipan Mehta

RIL a must-own stock but keep risk factors in mind: Dipan Mehta‘The leadership that Reliance has
gained will continue for some more time’

Rupee tumbles 31 paise against US dollar to lowest since April 28

Rupee tumbles 31 paise against US dollar to lowest since April 28MOSL expects rupee to quote in
the range of 75.80 and 76.40 for the day.

Rupee falls 19 paise against the US dollar in early trade

Rupee falls 19 paise against the US dollar in early tradeAt 10.08 am, the rupee was down 19 paise
at 75.7850 against the US dollar. It had opened at 75.80, compared with a previous close of 75.59.

Rupee trades 11 paise higher; US Fed policy outcome eyed

Rupee trades 11 paise higher; US Fed policy outcome eyedOn the domestic front, market
participants will be keeping an eye on inflation and industrial production number that will be
released later this week.

Borrowing costs for India’s shadow banks finally start to fall

Borrowing costs for India’s shadow banks finally start to fallPolicy makers are leaving no stone
unturned to help NBFCs overcome the credit crisis.

Dollar strengthens; euro falls ahead of ECB meeting

Dollar strengthens; euro falls ahead of ECB meetingThe euro was at $1.2025, down 0.3% and
retreating from three-month highs.

The Indian rupee is getting crushed by its own central bank

The Indian rupee is getting crushed by its own central bankRe is the worst performer in emerging
Asia this quarter and that’s because RBI is mopping up dollar, analysts say.

Rupee opens 32 paise up at 75.03 against dollar

Rupee opens 32 paise up at 75.03 against dollarFor the day, MOSL expects the rupee (Spot) to
quote in the range of 74.80 and 75.25.

IndiGo Q4 results: Firm posts quarterly loss of Rs 871 crore as costs rise,
pandemic hits

IndiGo Q4 results: Firm posts quarterly loss of Rs 871 crore as costs rise, pandemic hitsRevenue
for the Jan-Mar quarter grew just 4.5% to Rs 8,635 crore from Rs 8,260 crore a year earlier.

Rupee inches 21 paise higher buoyed by gains in equities

Rupee inches 21 paise higher buoyed by gains in equities“For the day, we expect the rupee (Spot)
to quote in the range of 75.40 and 76.20,” MOSL said.

Deficit monetisation: Is it really as simple as RBI printing more money?

Deficit monetisation: Is it really as simple as RBI printing more money?India has a comfortable
foreign exchange reserves of $487 billion currently.

Rupee opens 8 paise up at 75.63 against dollar

Rupee opens 8 paise up at 75.63 against dollarThe dollar index, which measures the strength of the
US dollar against a basket of six currencies, dropped 0.12 per cent.

Now shop at Dubai airports using Indian Rupee

Now shop at Dubai airports using Indian RupeeThe acceptance of Indian currency is good news for
Indian tourists as earlier they lost a sizeable amount due to exchange rates.

Rupee opens 6 paise down at 76.46 against dollar

Rupee opens 6 paise down at 76.46 against dollarOn the domestic front, market participants are
awaiting for an announcement from the finance minister on the stimulus package to support
MSMEs.

Rupee slips 12 paise to 71.74 against dollar

Rupee slips 12 paise to 71.74 against dollarRupee finally settled at 71.74, lower by 12 paise against
its previous close.
 Chapter 6
Economist solution on Growth of
economy
 6

Economist solution on growth of economy

The economic development in India followed socialist-inspired politicians for most of its
independent history, including state-ownership of many sectors;[1] India's per capita income
increased at only around 1% annualised rate in the three decades after its independence.[2] Since the
mid-1980s, India has slowly opened up its markets through economic liberalisation. After more
fundamental reforms since 1991 and their renewal in the 2000s, India has progressed towards a free
market economy.[2]
In the late 2000s, India's growth reached 7.5%, which will double the average income in a decade.
[2] IMF says that if India pushed more fundamental market reforms, it could sustain the rate and
even reach the government's 2011 target of 10%.[2] States have large responsibilities over their
economies. The average annual growth rates (2007–12)
for Gujarat (13.86%), Uttarakhand (13.66%), Bihar (10.15%) or Jharkhand (9.85%) were higher than
for West Bengal (6.24%), Maharashtra (7.84%), Odisha (7.05%), Punjab (11.78%)
or Assam (5.88%).[3] India is the Fifth largest economy in the world and the third largest by
purchasing power parity adjusted exchange rates (PPP). On per capita basis, it ranks 140th in the
world or 129th by PPP.
The economic growth has been driven by the expansion of the services that have been growing
consistently faster than other sectors.[4] It is argued that the pattern of Indian development has been a
specific one and that the country may be able to skip the intermediate industrialisation-led phase in
the transformation of its economic structure. Serious concerns have been raised about the jobless
nature of the economic growth.[5][6]
Favourable macroeconomic performance has been a necessary but not sufficient condition for the
significant improvement in the human development indicators. Although the rate of poverty declined
after economic reforms of 1991, the improvement in human development has been less than
satisfactory. For instance, child malnutrition has continued to persist (46% in 2005–6).[7]
The progress of economic changes in India is followed closely. The World Bank suggests that the
most important priorities are public sector reform, infrastructure, agricultural and rural development,
removal of labour regulations, reforms in lagging states, and HIV/AIDS.[8] For 2018, India ranked
77th in Ease of Doing Business Index. According to Index of Economic Freedom World Ranking an
annual survey on economic freedom of the nations, India ranks 123rd as compared with China and
Russia which ranks 138th and 144th respectively in 2014.
At the turn of the century India's GDP was at around US$480 billion. As economic reforms picked
up pace, India's GDP grew five-fold to reach US$2.2 trillion in 2015 (as per IMF estimates).

India's GDP growth during January–March period of 2015 was at 7.5% compared to China's 7%,
making it the fastest growing economy.[9][10][11] During 2014–15, India's GDP growth recovered
marginally to 7.3% from 6.9% in the previous fiscal. During 2014–15, India's services sector grew by
10.1%, manufacturing sector by 7.1% & agriculture by 0.2%. Indian Economy grew at 7.6 & 7.1 in
FY 2015–16 and FY 2016–17 respectively as major reforms had taken place like Demonitisation and
implementation of GST in FY 2016–17.

BENGALURU: India's economy contracted 7.5% in the quarter to September, according to official
data on Friday, showing some signs of a pick-up after the easing of pandemic restrictions that
triggered a record contraction in the previous quarter.

The read-out for the September quarter was better than the 8.8% contraction forecast of analysts in a
Reuters poll.

KUNAL KUNDU, INDIA ECONOMIST, SOCIETE GENERALE,

BENGALURU

"While farm sector growth was in line with our expectation, it appears that substantial inventory
building in anticipation of pent-up and festival period-led demand provided a boost to the
manufacturing activity.

That said, we believe that a rather low GDP deflator has resulted in higher-than-expected real GDP
growth. But with signs of emerging fatigue in recent demand uptick and the second wave of infection
already impacting economic activity, we would retain our view of FY21 real GDP contracting by
8.6%, given the likelihood of a much weaker third-quarter activity

ECONOMIST, IBM, NEW DELHI

"Growth data for Q2 indicates recovery in output from the sizeable negative shock in June quarter.
Cushioned by agriculture growth and manufacturing output, economic activity improved during the
quarter. In terms of drivers, a combination of pent-up demand, rural push and festive season demand
likely underpinned this recovery. The improvement notwithstanding, GDP still declined by 7.5% y/y
in Q2FY21.

The recovery will need to be carefully monitored due to lingering risks. After an uptick in early
November, high frequency indicators are beginning to show fatigue. Possibility of dwindling pent-up
demand and rising infections could limit broader gains."

ANAGHA DEODHAR, ECONOMIST, ICICI SECURITIES, MUMBAI

"The second quarter GDP growth number is better than our expectation. While growth in most
segments was along expected lines, performance of two sectors surprised on the upside -
manufacturing and trade, hotels and transportation.

Manufacturing is a relatively less contact-intensive activity compared to services. This could partly
explain quick revival in the sector.
 Conclusion
Our indian economy is the one the largest economy and the structure of the indian economy is also
very well made and for the growth new policy and rules made for the development of the economy
Dr. B.R. Ambedkar said that Indian economy is mixed economy and has impact of social, political
and economical changes before and after independence. Dr. Ambedkar has given new socio and
political view to Indian economics. Dr. Ambedkar decided to “changeover from economics to law
and politics” as he remarked in the preface of the Indian edition of The Problem of the Rupee in 1947
He clearly told “continued devaluation of the Indian currency which while was good for Indian
exports, was not good for the Indian economy. Increasing and decreasing values of gold and silver
has been problematic issue to decide exchange rate.” At that time gold and silver coins are use as a
currency. It troubles to fix standard of gold coin exchange with silver coin or foreign currency due to
change in price of these metal. We conclude our report on this basis that the slowdown indian
economy is temporary, because the Indian economy only get slow because of the scams and
corruption happening in our country. If India had the bad economy structure Indian economy had
been collapse previous when many crisis happen but the economy still is one of the largest economy
in world GDP. Many economist government bodies and RBI has work hard for the growth of the
economy.
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1.