India’s economy: some figures
India’s gross domestic product (GDP) in 2010 was USD 1.7271 trillion, which was 2.73% of the world’s GDP. If this sounds large, then compare populations: 1.2246 billion in 2010, which was 17.7% of the world’s total. So the averageeconomic productivity per person in the world is 6.5 times that of India. Of course a large part of economic productivity in the world today is due to automation, and this could just indicate that India is far behind in automation than the most productive part of the world. So one should compare with a peer group of still developing economies. It turns out that India’s per capita economic productivity is 2.75 times lower than that of east Asia.
Looked at in another way, India’s GDP in 2010 was INR 94,99,050 crores (converted from USD at the rate of INR 55 per USD, which is more appropriate for 2012). The union budget for 2012-13 is INR 14,90,925 crores. So the scale of government funding is around 10-15% of the GDP. About a third of the budget is deficit, ie, tax collections are only about two-thirds of the budget spending. In other words, the government’s budget deficit is about 3-5% of the GDP.
The oil subsidy is reported to be INR 1,38,500 crores, ie, about a third to about half a per cent of the GDP.
Moneycontrol reports dwnward projections of the GDP growth rate:
Citing that India’s potential growth has lowered considerably from its highs of 2003 to 2008, Jahangir Aziz of JPMorgan tells CNBC-TV18 that the decline in equipment investing by corporates is the key trigger for this slowdown.
“In the second half of 2008, overall equipment investment by India was somewhere around 18-19% of GDP. Now, it is down to about 14.5-15% of GDP,” quotes Aziz.
This has nothing to do with subsidies. Note that JPMorgan is not talking of less equipment being bought because of bad exchange rates; it is saying that a smaller part of the GDP is being earmarked for purchase of equipment. Now this is either bad planning, or over-reaction to a negative economic climate on the part of the corporates. The main role of the government of India here could be to tweak things a little, and talk all the time. If you watch the TV you’ll see that this is all that the industry is asking for.