Assignment 1

ECONOMICS ASSIGNMENT-1
ON
ECONOMIC DEVELOPMENT OF
INDIA

Submitted To: Submitted By:

Prof. Mansi Gore Geetika Gupta
PGDM- D
Roll No.- 2804428

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RECENT ECONOMIC DEVELOPMENT

INTRODUCTION

The economy of India is the eleventh largest in the world in terms of GDP and 12th largest
economy in the world in terms of the market exchange rate. It has come a long way to become
one of the fastest growing economies in the world. It originated in the downtrodden states,
especially the large, poor ones. The growth of some states like Gujarat and Maharashtra as
naturally fast-growing have already been long viewed, and others like Bihar and Uttar Pradesh
are assumed as irredeemable failures. Kerala is considered as having good social welfare
without growth, and of Punjab as the main economic dynamo of north of the Vindhyas,
occupying the prime location for favorable developments. India’s service industry accounts for
around 55% of the total GDP, while agricultural and industrial contribute 28% and 17%.

The below pie chart shows the average growth rate of the lower states from the period 2004-
2009:

Name Growth in terms of GDP (%)

Avg Indian
Growth 8.49
Bihar 11.03
Uttarakhand 9.31
Jharkhand 8.45
Chattisgarh 7.35
Orissa 9
Maharashtra 15.7
Gujarat 12.74

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The following table shows the GDP growth in US billion dollars from last five years i.e. from
2003-04 to 2007-08.

Year GDP in USD Billion

2003-04 556
2004-05 638
2005-06 737
2006-07 830
2007-08 1006

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KEY DEVELOPMENT INDICATORS

CORE INDICATORS:

Few mentioned are some of the basic indicators of the key developmental areas. They can be
briefly described as under:

Core Infrastructure:

Growth in the overall infrastructure took place from 3.8% in October 2009 to 9.4% in January
2010, compared to low growth of 2% during the corresponding months in the previous year. In
January 2010, acceleration in growth was seen in all the six core industrial sectors.

Fiscal Trends:

The total expenditure shot up to 17% incurred by the government grew from $150 billion
during the period April-January 2008-09 to $175 billion in the current fiscal year. In terms of
revenue receipts, it showed an increase of 5% during the same span of time. As a result, the

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fiscal deficit increased moderately at the rate of 33% and went up from $58 billion to $77 billion
during April-January 2009-10.

Foreign Investments:

FDI (Foreign Direct Investments) accumulated during the April-December period 2009-10
stood at $26.5 billion, which was $2 billion as compared to the previous year. Portfolio
Investments came in at $23.6 billion, compared to negative $11 billion in the previous year.
This rise was particularly due to FII.

Foreign Exchange Reserves:

India’s reserves as of March 2010 are at above $280 billion. In December 2009, the foreign
exchange was at $283.5 billion, showing an increase from $251 billion from April 2009.

Manufacturing sector:

It has been recorded growth of 9.5% during the period of 2004-05 to 2008-09.Adding on to this,
March growth is 10.3%

Real estate, business service, finance, & insurance: at 9.75%

Agriculture sector: The major area due to which economy of India has been growing.300
percent more investments has been from 2004-05 to 2009-10.Various institutions has been are
contributing to growth of agriculture sector leading to 16% growth.

Mining and quarrying at 10.3%

Community, Personal service, & social: 5.6%.

BIMARU RISES:

Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, along with Orissa, once called "the
sick states" have increased their overall economic growth by 11% and have made India’s record
GDP growth of 8.49% per year in the five-year period 2004-09 is a case of improved
productivity and growth in BIMARU and the non-BIMARU states. When India’s growth began

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accelerating, it was sure that this could not have happened without the big, poor states
participating. These old notions have been shaken up in India’s five year period of miracle
growth, from 2004-05 to 2008-09.

Only when productivity improvement is widespread in all the states, there is enough productivity
improvement from all regions and people to add up to fast growth which means fast growth does
not trickle down, it trickles up.

The miracle growth was sparked by state-level political and policy changes that accelerated the
local growth, which then trickled up to the national level.

The sudden high growth in Bihar, Kerala, Orissa, Jharkhand and Chhattisgarh arose from
changes at the state level. Central policies improved growth potential substantially after 1991.
But only in the last few years did slow-growing states develop local leadership and policies that
converted potential into high-speed growth.

BARRIERS IN BIMARU AREA:

Firstly, Most of the decision makers of central bodies like planning commission are not from
these states and thus not much of the attachment exists which leads in equality in development.

Secondly, due to high population growth in the BIMARU states was much higher that the Indian
average in this period, the income disparity between the BIMARU states and the rest of India has
also increased. Thirdly, the low literacy rate adds another hurdle towards the growth of the
country. Fourthly, healthcare is another drawback.

Moreover, there exists lack of investment in irrigation and flood control, in spite of the highest
incidence of floods in these regions and all the major required resources for the prosperous
agriculture. Lack of perspective in the planning exercise is another failure. Most of the main
public sector industries have their head quarters in non-BIMARU states like coal, steel etc
though they are the biggest producers of the same.

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DEVELOPMENT AREAS

BIMARU States have emerged as `preferable destinations’ for the investors circle. States like
Rajasthan, Bihar, Uttar Pradesh and Madhya Pradesh have recorded maximum rise in
their rankings on Investments. Rajasthan has topped the investment charts during 2008-
09.The next investment destination also witnessed major shift as second place was occupied by
Madhya Pradesh as compared to the sixth place last year. Orissa maintained its place at the third
position.

It will be surprising to know that Gujarat is on top and Madhya Pradesh at the bottom. But many
will be amazed that Bihar has skyrocketed to share the lead with Gujarat, with Kerala close
behind in third position. Indeed, Bihar’s growth average of 11.03% is almost like China.

GROWTH OF HIGLY DEVELOPED STATES AND BIMARU STATES OF THE

COUNTRY

BIHAR:

Bihar is growing at 11.44%, the fastest growing state in the country.

 Bihar’s State Gross domestic Product (SGDP) grew by 18% over the period of 2006-07,
higher than past 10 years.
 Agriculture from Bihar contributes to around 65% of the India’s litchi production. Bihar
has significant levels of production for products of mango, guava, litchi, pineapple,
brinjal, etc.
 The sugar and vegetable industries were at its peak in Bihar.
 Bihar has tremendous resources and their utilization in the interest of its growing
population has to be the supreme responsibility of both the state administration and the
national planners.
 There have been attempts for industrialization like setting up an oil refinery in Barauni, a
motor scooter plant at Fatuha, and a power plant at Muzaffarpur.
 Bihar is known to be the new miracle state of the country.

RAJASTHAN:

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 Rajasthan has the eighth largest State GDP of $11 billion.

 Rajasthan is the second largest mineral producing state in India and houses about 90%
of the total mineral reserves of the country.
 It shares 24% of the aggregate national production of non-metallic minerals
 Another most important revenue contributor of the state is Tourism and accounts for
about 15% of the economy of Rajasthan.
 Rajasthan contributes India’s foreign and domestic tourism.
 Other sources involves infrastructure, telecommunications, electricity, power, banking,
healthcare, etc.

UTTAR PRADESH

 Improved health facility by providing increased outpatient visits overall, for women and
poor, increased bed occupancy, increased institutional deliveries, increased patient
satisfaction, etc.

 Increased health spending through increased portion of revenue budget spent on health
sector (plan and non-plan), increasing shares of public sector health recurrent
expenditures spent on non-wage operating costs.

 Government of Uttar Pradesh invited CII Uttar Pradesh State Office to sign a
Memorandum of Understanding, for facilitating the GI registration of six products in
Uttar Pradesh.
 These products are locks of Aligarh, Sports goods of Meerut, Kebabs of Lucknow and
Petha, Dalmot & Marble Work of Agra.

MADHYA PRADESH
 It has a showed a growth rate of 8.8% for the year 2009 basic drivers of which were
'services' and 'manufacturing'.
 Rashtriya Krishi Vikas Yojana launched with an outlay of Rs. 25,000 crore, National
Food Security Mission with an outlay of Rs. 4,882 crore under National Policy for
Farmers in the Eleventh Five Year Plan.

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 11.4 crore children are covered under Mid Day Meal Scheme, the largest school lunch
program in the world. Nehru Yuva Kendra: This has allocated Rs. 10 crore in 2008-09 to
set up a Kendra in 123 districts.
 Government of Madhya Pradesh intends to develop a new a Systematic Plan for
Conducting a study of Tribal Areas for undertaking Economic Growth oriented Activities
to improve their livelihood and quality of life by allocating funds for various
infrastructure and employment generating activities.

ORISSA

 Orissa has targeted an annual GDP growth of 9% and 4% in the agriculture.

 Orissa had already witnessed a higher average of annual economic growth of 7.2%
against the target growth of 6.2% during the 10th plan period.
 The state government has signed 49 MoUs for setting up steel plants with a total
investment of Rs 1, 97,025 crore for production of about 74.66 million tonnes of steel.
 The plan allocation has increased from Rs 19000 crore to Rs 32225 crore.

GUJRAT

 Gujarat Infrastructure Development Board (GIDB) deals with the agencies for the
development of the infrastructure. This state has an overall development in all the sectors.
 Education Infrastructure it has a literacy rate of 69.1% which is more than the average
Indian literacy and it has the best educational institutes of the country.
 Gujarat totally handles 20% of the India cargo’s it has 29 mini ports.

 Gujarat has a good record of consistent power supply for commercial use and it is trying
to improve the present capacities.

 The state has 1,637 government hospitals and 1,070 primary health centres.

 The Gujarat Industrial Development Corporation (GIDC) has set up 168 industrial estates
and another 106 are being developed in different parts of the state.

 Gujarat is an aspiring leader with e-readiness Initiatives with the IT Policy 2006-2011.

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 Gujarat is tremendously progressing towards urbanization and modernization due the fast
growing economy of the State.

MAHARASHTRA

 The GSDP of Maharashtra is 15.7% which is the highest among all the other states of
India, which is mainly contributed by hotels, restaurants, banking, telecommunications,
electronics, pharmaceuticals, trades.

 Maharashtra had a high growth in infrastructure in last decade.

 Recently, there has been a considerable increase in the number of industrial clusters, and
public private partnerships projects in the in the infrastructure domain.
 In past few years, it has emerged as a major hub for IT and ITeS, electronics, and the
captive business outsourcing industries.
 Currently it is encouraging the investments in the industries in the field of biotechnology,
pharmaceuticals, petroleum and oil and natural gas.
 Its exports were increased to $41.2 billion in 2007-08.
 It also contributes for 32% of biotech outputs and 30% of the software exports.

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CONCLUSION

It is very difficult for countries to improve the productivity of a substantial proportion of the
population. It is only when productivity improvement is widespread is there enough of it from all
regions and people to add up to fast growth. When India’s growth began accelerating, it would
not have happened without the big, poor states participating. It happened only by the widespread
growth, especially in poor states with large populations took place mainly in the developed
states.
Once the Indian economy started growing fast, there was a boom in government revenues, and
can be used to accelerate spending in social sectors and welfare. Welfare and workfare have lead
to the sharp acceleration of economic growth.
The poorer states are no longer poor they are trying to coupe up and reach the bench mark set up
by the developed states like Gujarat and Maharashtra. Poor states are no longer poor any more,
there potential changes in poor states too. Also there should be alterations in certain policies of
the state to maximize the utilization of the resources available in the state, which can help to
contribute more to the GSDP.

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