The Economy of India

India is a diverse country located in Asia. Many languages are spoken in the country and the country is very rapidly coming up as far as the economy is concerned. The population of the country is the second-largest in the world, some people look at this as a negative but the people in the country often make the most of it by providing manpower which is required to carry out numerous important tasks. There are certain factors that hamper the growth of India like corruption; corruption is one of the biggest issues which hamper the economic growth of the country. This paper will throw light upon the Economy of India and the paper will provide a comprehensive analysis of its role played in the Middle East.

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In addition to being placed at no second population wise, the economy of India is also the second fastest growing only behind China. The growth which the country showed in the year 2007-2008 was very surprising; it surprised many people in terms of GDP growth which was 9.1 %. Outsourcing jobs are constantly on the rise in the country, it serves as a perfect destination for foreign companies to establish back offices in the country and this is because the country has many educated people who are fluent in English. There are two sides to every coin and this case is no different, the country has serious issues to think about, some of the most important is poverty, inequality etc. These factors hinder the economic growth of the country; in addition to this corruption is another major problem that is constantly on the rise in India.

Currency System of India

India strictly follows one currency which is the INR, better known as the Indian Rupees. The currency is divided into 100 Paise. 100 Paise make a rupee, the highest denomination as approves by the Reserve Bank is 1000 Rupees. Reserve bank is the central bank of India. It carries our various important tasks. It is the note issuing authority, it controls the exchange rate, it is responsible for the circulation of money in the country and in addition to this the bank carries out many other important processes. The Rupee in recent days has fallen when compared to the US dollar, this has happened because the foreign investors have sold the Indian Stocks and have invested in the US Treasury Bonds.

Contribution of Agriculture to India Economy

Agriculture is the back bone of the Indian Economy; the country is ranked second in the world when it comes to output in the field of Agriculture. “Agriculture employs (with forestry and fishing) about two-thirds of India’s workforce. Most farms are small, averaging about 1.5 hectares (about 3.7 acres). About 40 percent of the land in India is cultivated by farmers owning more than 4 hectares (10 acres), but few farms are larger than 20 hectares (50 acres) due to land reforms that imposed ceilings (maximum limits) on holdings. Most Indian farmers, particularly those who own smaller farms, cultivate their land by hand or by using oxen.” (Agriculture, 2008)

The Role of RBI

RBI stands for the Reserve Bank of India; it is the central bank of India. “It was established in April 1935 with a share capital of Rs. 5 crores based on the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the beginning. The Government held shares of the nominal value of Rs. 2, 20,000.” (Reserve Bank of India, 2008). The year 1949 saw the RBI being nationalized. The RBI is headed by the governor, who acts as a managing director when compared with the case of a private company. The most significant function of the RBI is to regulate the money in the country. This is an extremely important function as the economic growth of a country largely depends upon the money which the country possesses. Whenever there is a shortage of money in the country only RBI has the authority to issue money in the country, no other authority can take over and issue currency in the country. Another important function of the RBI is to ensure monetary stability in the country. The bank also makes sure that the credit and the currency system works in favor of the country. It also serves as the banker to the last resort, this means if a bank in the country falls short of money, it can approach the RBI and borrow money from it. So it comes to the rescue of banks that fall short of money.

The contribution of Mumbai towards the Indian Economy

Mumbai is a state located in India. It is the commercial capital of India. NSE and BSE both are located in Mumbai. NSE stands for the National Stock Exchange and BSE stands for the Bombay Stock Exchange. Mumbai was formerly known as Bombay, the NSE and the BSE are the Stock Exchanges of India. All the share market trading activities take place in these stock exchanges. A country’s stock exchange over a period of time gives a good picture of how well that particular country’s economy is doing. Recently the NSE and the BSE were bullish and many people made the most of the same by earning money from buying and selling of shares but off late the bearish trend in the Indian Market has triggered off and the results have been devastating.

In addition to being the commercial capital of India, Mumbai also provides a good opportunity to all the export companies. There are numerous export companies that are based out of Mumbai. The export is carried out very easily through the sea because of the harbor located in Mumbai and hence it provides ideal conditions to all the export companies in India. Seven of the best and top Indian companies have their head quarters in Mumbai. These seven companies are as follows: Tata Group, Reliance Industries, Aditya Birla Group, Hindustan Petroleum, Bharat Petroleum, State Bank of India, ICICI Bank, Larsen and Turbo, Reliance Communication and the Essar Group. All these companies are the biggest Indian Companies and contribute immensely to the Indian Economy. These companies provide employment to countless people; in addition to this these companies help the Indian Economy by earning foreign income which also contributed to the GDP.

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“Telephone connections in the country crossed the 200 million mark and an addition of about 67 million phones was made during the year 2006-07. Today the total telephone connections in the country stand at 206.8 million, of which 139.8 million come from mobile phones and the remaining 40.7 million connections from landline connections. March 2007 saw mobile phones making lowest ever addition during the year; additions of just 3.53 million phone connections due to insistence by the Government to ensure verification of subscribers.” (Current State of Indian Economy, 2008).

The Indian economy has grown in more areas than one; the telecom industry in India has come up with in no time. There are varieties of service providers that a person in India can choose from. For instance there is BSNL which is in the hands of the government; it stands for Bharat Sanchar Nigam Limited. It is one of the leading telecom authorities in India. The network of BSNL is incredibly strong and reliable. In addition to this there are many private companies that provide the Indians with top notch service. Some of the leading companies are Airtel, Aircel, and Vodafone.

Since 1979 the Indian Economy has steadily increased, it averages an annual growth of 5.7%, which is quite outstanding. But there are many challenges that still haunt the future growth of the Indian Economy. The biggest of them all is illiteracy and the rising rate of population. Even to date there are so many people in India who are uneducated; an uneducated person contributes nothing to the development of a country’s economy. But luckily there are states like Kerala in India where the literacy rate is almost 100%. The population is another issue that hampers the growth of the Indian economy. There are many awareness programs that are funded by the Indian government, these programs help in spreading awareness in the rural areas of India. Once if these two problems get sorted out, India will emerge as a global leader in almost all fields.

“The Indian economy moved to a high growth path in the 1980s, with economic growth averaging 5.5% per annum through the decade. This was possible because of a high investment rate of over 22% of the GDP, financed mainly (over 90%) by domestic savings. An annual increase in employment was estimated at 4.3 million in the 1980s. Industrial growth averaged over 7% annually. Population growth, which is continually decelerating had come down to 2.1% per annum. India’s major achievements are advances in agriculture, making India one of the largest food grain producers in the world; a broad-based and diversified industrial sector; a modern financial sector spread across the country; a well developed market infrastructure; and an educational system that produces a large pool of high quality human resources. While the state played an active role in guiding industrial activity, private enterprise and market mechanisms developed well in agriculture, manufacturing, trading and in the services sector. The economy was, however, largely shielded from foreign competition, both in production and trade.” (The Indian Economy, 2008). The rules and regulations on production and investment in India are very relaxed, the same has given a lot of encouragement to all the exporters and to all the other people who like to work in a liberal environment. There are private players in almost all the industries in India, like any other developed country. The government does not follow strict rules in this regard. This has contributed immensely to the economic growth of India

Role of India in the Middle East

“Not surprisingly, perhaps, the focal point of India’s energy diplomacy has been the Middle East as around 65 percent of its energy requirements are met by this region. It is in this context that India’s relationship with Iran has come under global scrutiny in recent years. India’s large and growing energy demand and Iran’s pool of energy resources make the two nations natural economic partners.” (India Expands role in the Middle East, 2008). India has volunteered an open approach with regard to its participation in the Middle East. The county is more open towards its participation in the Middle East. In a few year’s time India will directly compete with China in this regard. China is very active in the Middle East, the goods exported from China target the countries located in the Middle East.

“India’s crude oil imports from the volatile Middle East region increased 11 per cent to 89.73 million tons in 2007-08 with Saudi Arabia being the single largest supplier to Asia’s third largest oil consumer.” (Indian Oil Imports from the Middle East). India spends lot of money on Oil Imports and the majority of imports come from the Middle East countries. The Oil imported from Kuwait saw a decrease of 10.3 million tons on the other hand the Oil imported from the UAE increased to 24.11% when compared to the last year. This goes to show that India is very active in Oil imports from the countries located in the Middle East.

The Latest Developments Taking place in the Indian Economy

“HCL Technologies an Indian IT services company that brought in more than $1 billion from U.S. clients in its most recent fiscal year has won state incentives to add more than 500 jobs in Wake County.Gov. Mike Easley’s office said Monday that HCL America, the company’s U.S. arm, is in line to receive slightly more than $5 million in state incentives if it creates 513 jobs over the next five years and sustains them for 10 years.” (Indian Company to add 513 jobs in Wake County, 20 November 2008)

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The direct Impact of this decision will be on HCL America which is expected to receive more than $5 million as incentives. This is also very good news for the Indian Economy, the unemployment will surely reduce because of this step taken by HCL. The workers will be paid a very good salary which is expected to be around $ 47,000 annually. In addition to this the workers will get incentives which are expected to be higher than the salary. The new people recruited will look after tasks like being at the help desk, Server maintenance, application development and other important jobs. The company roughly recruits 50,000 people all across the globe, the fiscal year saw a whopping sales of $1.8 billion for the company, out of which $1 Billion came from the customers living in US. The company posted a whopping net income of $245 million for the fiscal year.

“Beginning June 14, Jet Airways Ltd. is scheduled to start daily service to San Francisco International Airport from Mumbai via Shanghai, becoming the first India-based carrier to link the Bay Area to the world’s second most populous country. Jet Airways, India’s largest airline, is undergoing a major expansion of its international destinations. The Mumbai-based airline sought the route to SFO to tap into what it said is growing demand in the Bay Area for business and leisure travel.” (Three Indian Air Carriers Circle San Francisco, 2008).

San Francisco was chosen because there are many Indian Citizens living in the state; they travel frequently to India in relation to business or in connection with some other thing. The airline industry in the country is growing; the wiliness to spend by the Indians on travel is the reason for the same. The newly launched Airline will have to face a stiff competition from the likes of United Airlines, Delta Airlines and Singapore Airlines. All these Airlines fly to different cities in India. San Francisco is believed to attract roughly about 40,000 travelers from India in a year. This figure includes tourists, people who come for Business, people who visit their relatives etc. The ticket prices however are far from being affordable for a middle class Indian, the ticket price of travelling from San Francisco to Mumbai is on the higher side. It takes roughly about $100,000 as far as the fuel price of a plane s concerned travelling from San Francisco to Mumbai, considering this the price of the tickets inevitably goes up.

“Indian giant Wipro Ltd. is scouting Buckhead office buildings to house its first U.S. software development center, according to several sources familiar with the search. The buzz about Wipro (NYSE: WIT) follows the $3 billion company’s announcement last August that its global IT services business, Wipro Technologies, had chosen Atlanta as its first U.S. location, and one of the first sites for its North American expansion.” (Indian Software Giant Eyes Buckhead, 2008).

Wipro Technologies is one of the biggest tech companies in India; it has chosen Atlanta as one of its cities under North American Expansion. The company has been very consistent when it comes to profit making and this is why it is one of the best Indian Companies, to maintain the same it is very important to expand and look for new locations to expand. The company is looking around a space of 40,000 square feet initially for settling down. This is expected to touch around an area of 100,000 as the company goes through the process of expansion. Buckhead is one of the most appropriate places for the company to settle. Buckhead is in the lead for the company to settle in because other places will surely take some time for completion because of the subprime credit crisis which has affected almost all the major economies of the World. Wipro has been very successful in its operations especially in companies like Japan and Europe. The same growth and return are expected by Azim Premji who has been in-charge of the company since 1966.

References

  1. Agriculture. In MSN Encarta.
  2. Indian Oil Imports from Middle East. In The Financial Express. Web.
  3. Indian Company to add 513 jobs in Wake County. In Triangle Business Journal. Web.
  4. Indian Software Giant Eyes Buckhead. In Atlanta Business Chronicle. Web.
  5. Reserve Bank of India. In India Finance and Investment Guide.
  6. The Indian Economy. In Handbook for Asian Indians.
  7. Three Indian Air Carriers Circle San Francisco. In San Francisco Business Times. Web.
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