Page 6 - DECO303_INDIAN_ECONOMY_ENGLISH

Dilfraz Singh, Lovely Professional University
Unit 1: Nature of Indian Economy

Unit 1: Nature of Indian Economy Notes

CONTENTS
Objectives
Introduction

1.1 Basic Characteristics of Indian Economy
1.2 Major Issues of Development in India
1.3 India — How Bad can Things get in India?

1.4 Nature of Indian Economy
1.5 Summary
1.6 Keywords
1.7 Review Questions
1.8 Further Readings

Objectives

After studying this unit, you will be able to:
Discuss the basic characteristics of Indian economy
Describe the major issues of development in India
Understand how bad can things get in India

Evaluate the nature of Indian economy

Introduction

The Indian economy is estimated to have recorded a growth rate of 5.0 per cent in 2012–13 in
terms of gross domestic product at factor cost at constant 2004–05 prices, following a growth of
6.2 per cent in 2011–12. Growth in 2011–12 and 2012–13 is on the lower side, with respect to the
decadal average of 7.9 per cent during 2003–04 to 2012–13. This is attributable mainly to
weakening industrial growth in the context of tight monetary policy followed by the Reserve
Bank of India (RBI) through most of 2011–12, and continued uncertainty in the global economy.

With some moderation in headline WPI inflation, there has been a reduction in the repo rate by
the RBI by 50 basis points in April, 2012 and by 25 basis points in January 2013. The impact of
tight monetary policy has been reflected in the quarterly growth rates of GDP. Quarterly GDP
growth declined in each of the successive quarters between the fourth quarter of 2010–11, and
the fourth quarter of 2011–12. The slowdown in the economy, specifically in the industry sector
has entailed a lower than budgeted growth in government revenues. However, measures
undertaken as part of mid-course correction have helped in improving the expenditure outcome
in 2012–13.
You must understand that the measures including the increase in the price of diesel by ` 5 per
litre, allowing Oil Marketing Companies (OMCs) to raise diesel prices by small amounts
regularly, and a cap on the number of subsidised LPG cylinders are expected to rein in the fiscal
deficit. Growth of exports for most of the current year remained in negative territory, and with
imports picking up in recent months, the trade deficit increased to US$ 147 billion during

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