JAIPURIA INSTITUE OF MANAGEMENT, NOIDA

Macro Economics and Economic Environment of Business

Group Assignment

SUBMITTED TO: SUBMITTED BY:

Prof. Sujata Pandey
Anshika Pandey (JN23PGC008)
Ashwin Rathore (JN23PGC014)
Ayushi Kohli (JN23PGC015)
Purvi Chandwar (JN23PGC017)
Gaurav Jain (JN23PGC020)
 REPORT ON ECONOMIC VS. FINANCIAL STABILITY IN
INDIA FROM 2018 TO 2022

INTRODUCTION-
India's economic and financial landscape witnessed significant shifts from 2018 to 2022. This
report analyzes the interplay between economic and financial stability during this period,
highlighting key achievements, challenges, and prospects.
-
ECONOMIC STABILITY
The ability of an economy to maintain consistent growth, low unemployment, and stable
prices over time. This ensures predictability and planning for businesses and individuals.

Variables used:
1. GDP: Gross Domestic Product, the total market value of all final goods and services
produced within a country in a given year. It is a key indicator of the size and growth
of an economy.
2. Employment Rate: The percentage of the working-age population that is employed.
A higher rate indicates lower unemployment and a more active workforce.
3. Inflation: The rate at which the general price level of goods and services increases
over time. A consistently low inflation rate signifies economic stability and
predictability.
4. Foreign Direct Investment (FDI): Investments made by foreign companies directly
into a country's productive capacity, like factories or infrastructure projects. Higher
FDI indicates confidence in the economy and can boost growth.

2018 2019 2020 2021 2022

GDP 6.5% 3.9% -5.8% 9.1% 7.2%
Employmen 7.7% 6.5% 10.2% 7.7% 7.3%
t rate
Inflation 3.9% 3.7% 6.6% 5.1% 6.7%
FDI 1.6% 1.8% 2.4% 1.4% 1.5%

 A rebound in GDP reflects economic resilience and recovery. Positive GDP growth
is vital for job creation, income generation, and overall economic well-being.
GDP growth fluctuated during the period, with a steep decline in 2020 due to the
pandemic followed by a rebound in 2021 and a modest slowdown in 2022. This
volatility indicates an economy susceptible to external factors.
 A declining employment rate can lead to reduced consumer spending, impacting
economic activities. A stable or improving employment scenario is essential for
sustained economic growth.
The employment rate fluctuated, reaching a peak in 2020, likely influenced by the
pandemic's economic impact. The subsequent decline indicates some recovery in the
job market.
 Moderate inflation is generally healthy for economic stability. Central banks aim to
strike a balance to avoid deflation or hyperinflation, which can disrupt economic
activities.
 Inflation rates fluctuated but remained within manageable levels. A spike in 2020 can
be attributed to supply chain disruptions during the pandemic, while subsequent years
saw a moderation in inflation.
 While FDI percentages are modest, they contribute to economic development by
bringing in capital, expertise, and technologies, fostering innovation and growth.
FDI percentages remained relatively low but stable. A steady FDI can contribute to
economic growth by injecting capital and technology into the economy.

FINANCIAL STABILITY-
The ability of an economy to withstand potential financial shocks and maintain its ability to
function effectively. This includes factors like strong banks, healthy asset markets, and
manageable debt levels.

Variables used:
1. Stock Market Performance: The movement of stock prices in a particular market,
such as the Sensex or Nifty 50, reflecting investor confidence in the overall economy
and specific companies.
2. Non-Performing Assets (NPA): Loans granted by banks that are unlikely to be
repaid, indicating financial stress within the banking sector. A lower NPA ratio
signifies improved financial health of banks.
3. Forex Reserves: Foreign currency held by a central bank or government, acting as a
buffer against external challenges like sudden currency fluctuations or economic
downturns. Higher reserves provide greater stability.

2018 2019 2020 2021 2022

SENSEX 35,813 38,581 29,617 58,574 63,284
(BSE)
Nifty_50 10953 11995 8844 17902 18809
(NSE)
NPA 5.7% 6.6% 7.5% 6.3% 5.2%

Forex 426.8 420.1 537.7 642.5 545.6

Reserve
(US$
Billion)

 A bullish stock market reflects positive investor sentiment, potentially leading to

increased investment and consumption, stimulating economic growth.
The SENSEX and Nifty_50 indices exhibited volatility over the years. A surge in
2021-2022 indicates a robust stock market, fostering investor confidence and
potentially contributing to economic growth.
  Rising NPAs can hinder banks' lending capacity, impacting economic growth. A
decrease indicates efforts to clean up the banking sector, facilitating credit flow for
businesses.
NPA increased from 5.7% in 2018 to 7.5% in 2020 but decreased to 5.2% in 2022. A
rising NPA can strain the banking sector, impacting lending capacity. The subsequent
decline suggests efforts to address bad loans, contributing to financial stability.
 Maintaining adequate Forex reserves is crucial for stabilizing the currency and
managing external economic shocks, providing confidence to investors and
maintaining economic stability.
Forex reserves increased until 2021 but slightly decreased in 2022. While the
reduction may raise concerns, maintaining a significant level still provides a safety
net against external economic shocks.

Conclusion
India displays improving financial stability with better market performance and declining
NPAs.
However, economic stability remains a concern due to fluctuating GDP, volatile
employment, limited FDI, and dependence on external factors.

Challenges and Future Prospects:

 Income disparity and job creation: Despite economic expansion, job creation has
lagged, and income inequality is still a problem.

 Investment in infrastructure: Maintaining strong economic growth depends on

ongoing expenditures for the advancement of infrastructure.

 Investment by the private sector: It is essential to encourage private investment

through supportive legislation and regulatory changes.

 External vulnerabilities include slowdowns in the world economy and India's reliance
on imported energy.