Analysis of Salient Macroeconomic Parameters of India - Assignment Example

Macro Economy of IndiaIntroduction India is a second largest country in terms of population in the world and has been registering second highest growth rate after China in terms of GDP for last several years. The paper examines the salient macroeconomic parameters of India to assess the real strength of the country. GDP In the year 2007 India’s GDP reached $1trillion mark for the first time making it the twelfth-largest economy of the world. How India’s GDP progressed in last few years can be seen from the following table.

The GDP has been measured in trillion dollars in terms of purchasing power parity (PPP) perspective instead of pure exchange rate conversion so that true strength of economy can be assessed.Year200220032004200520062007200820092010GDP in PPP Terms $2.663.033.323.674.162.973.303.684.06Source: http://www.indexmundi.com/g/g.aspx?c=in&v=65 In PPP terms, it is quite evident from the above figures that the economy of India is growing at the average rate of 9 percent, which is certainly a good feat in the wake of liberalization and globalization process undertaken during 1990s.

Inflation RateThe inflation rate has been growing steadily since the year 2005. Rapid economic growth in India has brought the perils of high inflation rate which was estimated at 10.9 and 12 percent in the year 2009 and 2010 respectively; however, in the year 2011 due to appropriate monetary policy by the Central Bank it has reduced to 6.8 percent. High inflation rate in India is causing great inconvenience to the people. (Inflation rate 2011) Unemployment RateAs per the report released by the Labor Ministry in October 2011, the unemployment rate in India was estimated at 9.

4 percent during the fiscal 2010-11 which is certainly a matter of great concern. The government was confident of creating 58 million additional jobs by the end of 11the five-year-plan in 2012. Though India has been agrarian economy until the turn of this century but in last one decade things have changed drastically as contribution from services in the country's GDP has reached to almost 59 percent by the year 2010. (The igovernment 2012)Monetary Policy Stance for the Fiscal 2011-12 In its report of May 3, 2011 the Reserve Bank (Central Bank) specified that the Global economy was in an uncertain state.

Inflation was the nagging issue on the domestic front due to high food prices. The policy document clearly specified that the goal of monetary policy was to nail the supply-side inflation. High inflation causes investment uncertainty. The policy document spelled out the necessity to bring down the inflation even at the cost of growth. Accordingly, Central Bank revised the interest rates upwards and raised the repo rates. Even CRR was often revised to take the excess money out of the market. That really helped to cool down the economy and brought the inflation rate at moderate level.

Thus, Central Bank keeps a strong vigil to control inflation and unemployment rate through its effective monetary measures. (Monetary Policy Statement, 2011)ConclusionThere is no doubt that liberalization has paid off significantly in the growth of India. High GDP growth rate coupled with effective measures in reducing the unemployment and inflation rate has put the country in a big league as one of the prominent economy of the world. Given the large population base, India is certain to become one of the major economies of the world in a decade or two.

References1. GDP ( Purchasing Power Parity), online from March 6, 2012 http://www.indexmundi.com/g/g.aspx?v=65&c=in&l=en2. Inflation rate (2011), online from March 6, 2012 http://www.indexmundi.com/india/inflation_rate_(consumer_prices).html3. The iGovernment 2012, online from March 6, 2012, http://www.igovernment.in/site/india-plans-creating-58-mn-more-jobs-2012-388954. Monetary Policy Statement (2011), online from March 6, 2012, http://www.rbi.org.in/scripts/NotificationUser.aspx?

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