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Saturday, December 1, 2007

Economy of India

Indian Economy is the second fastest growing major economy of the world. In 2007 the value of indian economy is measured to be ~1.10 trilion USD. Indian Economy is majorly dependent on agriculture and about 2/3rd of total indian population is still thriving on agriculture sector which is still not automated and majority of agricultural activities are done manually, growing indian population is a major hurdle in smooth growth of the indian economy.
Earlier there was strict government control over all the economic activities but after the liberalisation of indian economy in 90's during the Congress Rule headed by Late P.V.Narsimha Rao and present prime minister Sardar Manmohan Singh(the then finance minister in Narsimha Rao government). hence indian economy became much free and many major MNC's started to tap the potential Indian Market. It was also the same time when indian companies started making global presence and moved out of the indian subcontinent for new markets hence expanding themselves from regional companies to indian MNC's . It was also time when Reliance Industries headed by Late Mr. Dhirubai Ambani earned huge profits and made his company a global company and indian second largest business house just next to the legacy of TATA's.
Earlier there was strict government control over private companies. but after liberlisation of the indian economy the business houses started expanding on their own and are now giving stiff compitition to similar companies of the west with added advantage of cheap labour. Indian Services industry lead by Tata Consultancy Services, Infosys, Wipro, Satyam etc. are also making their mark globally and finally world has come to know the ppower of indian intellectuals the biggest example is Indra Nooyi becoming CEO of Pepsico USA.

Growing Indian economy however has become now a matter of concern for indian I.T. Industry since Indian I.T. Industry is dependent on the rate of U.S. dollar. In the past one year or so Indian Economy has grown about 10% with respect to the U.S. dollar. Stagnation in economy of United States and at the same time the growth in Indian economy has affected the software services sector and the export sector adversly. many of the small exporters have lost lacs of rupees due to growing indian economy. Since small exporters do not use hedging techniques for minimizing the adversity of the growth in indian economy their business is suffering a lot hence government need to intervene now in order to check the present rate of the U.S. Dollar. thus helping indian exporters. Indian software industry which comprises of Tata Consultancy Services, Infosys, Wipro Technology, Satyam Computer Services, HCL etc need to negotiate their contract rates again with the out sourcing firms so that they can maintain the same growth which was prevelant when dollar was in mid 40's when converted to indian rupee. Due to growing indian economy the share prices of the top five services companies are on a steady decline fromthe last 1 year where as the share prices of similar USA copanies like IBM, Perot Systems have grown in the same period.

If the Indian Economy continues to grow at the same rate of about 9% per year than the day is not far when the booming indian I.T. Industry will have to be relocated outside India on a weaker economy country so that the cost benefit can be a plus for indian services industry.

Reserve Bank of India has taken various steps for controlling the growth in indian economy but these steps help temporarily and not are permanent solution .