Economic of USA and India - Research Paper Example

Economic Contents Macroeconomic indicators 1 12 Conclusion 12 Introduction The paper tries to produce a comparative study between the country of U.S.A., one of the G-8 country and India, regarded as one of the developing economies. In the study, some macroeconomic indicators like GNP, GDP, GDP growth, GDP per capita, GDP growth per capita, consumer and producer price index, inflation rates, unemployment and unemployment rates will be taken into account. The economy of the United States is often described as capitalist where the power lies to a small group of the population. They are authorized to take all the important economic decisions and control the capital flows (Conte, n.d.). The period under consideration for the indicators is January, 2006 to January, 2011. Macroeconomic indicators Unemployment rate: The International Labor Organization defines unemployment as the total number of people outside the labor force who are without jobs and has been actively involved to find employment opportunities in the last four years. The measure of the prevalence of unemployment is unemployment rate. (Bureau of Labor Statistics, 2012) The above figure shows that the rate of unemployment took the step path in the following years after 2008. It reached as high as 10% in the later part of the year 2009. (World Bank, 2012). From the above chart it is revealed that the impact of recession was felt in India as well as people began to lose jobs and the level of unemployment rose to 9.4% in the year 2009. Inflation rates: A sustained increase in the prices of services as well as goods in the economy taking a period under consideration is called inflation. Inflation rate is generally defined as the percentage increase in the level of price over a period. The current rate of inflation in U.S. for February, 2012 is 2.87%, a mere increase from the rate prevailed in this time of the last year. The forecasted rate was 2.89%. The most interesting part in the figure is the negative rate of inflation in the year 2009. (Ministry of Statistics and Program Implementation). The most significant difference between the countries under consideration is that the rate of inflation has been negative for U.S. but it has not been the case for India. In fact the rate of inflation has been the highest for India in 2010 while it was relatively low in U.S. Gross Domestic Product The total amount of services as well as goods in a time period within the geographical boundaries of a nation is called Gross Domestic Product. (World Bank). The sustained increase in the Gross Domestic Product for the country of United States can be seen from the above figure except for the year 2010 when the effects of recession were prevalent. (World Bank). India also has followed a sustained path of increase in the GDP over the period under consideration. But the surprising point to note is that U.S. experienced a fall in GDP in 2010 relative to the year 2009 while the case has been opposite for India. The huge difference in amounting terms can also be witnessed from the figures. Growth in GDP: (Bureau of Economic Analysis). The growth in GDP got affected mainly in the year 2009. Recession can be held responsible for such a situation to arrive. The highest negative rate of inflation was 8.9. (India Central Statistical Data). A significant difference between the two countries is that India has never experienced a negative growth in GDP. In spite of recession India has been able to achieve a moderate growth in GDP. However it does not imply that the country was free from the impacts. GDP per capita: Per capita GDP is the ratio of total GDP and resident population calculated for a particular date. (World Bank). Again the year 2010 comes into the picture because of the significant difference between per capita GDP of that year to any of the other years under consideration. (World Bank). It has been figured out from the above indicator that India achieved a fair growth in GDP. The same situation is witnessed in this analysis as well. Consumer Price Index: The CPI increased by about 0.4% in the year 2011 compared to 2010 for the country of United States. The transport sector was mostly affected by the CPI. This led to around .25 points change in the calculation of CPI in January, 2011. (Consumer Price Index, January, 2011, p. 1). It can be figured out that the rate of CPI was maximum in the year 2007. The consumer’s price index for India was 5.76% for the year 2006. The rate was 6.39% in 2007 and 8.32% in 2008. The rate increased rapidly in 2009 to 10.83% while the rate in 2011 was 12.11%. So India achieved highest rate of CPI in 2010 (World Inflation Data). Producers Price Index: The above figure shows the PPI for United States. The country achieved maximum increase in PPI in the month of July, 2008. GDP per capita PPP: (World Bank). The country witnessed lowest per capita PPP growth in the year 2007. The year 2007 was also an unwilling situation for the country. (World Bank). The above graph reveals that India has been able to achieve a sustained growth in the per capita GDP. The lowest rate was in 2007 taking other years into consideration but the year 2011 witnessed highest increase in per capita GDP. Debt The fluctuations in public debt are the result of the annual unified budget deficit or surplus. It increased by over 500 billion dollars in each year since 2003. The gross debt for U.S. as of March, 21, 2012 was above 15 trillion dollars. Among the total amount of gross debt almost 11 trillion dollars were held by the public. The ratio of total outstanding public debt to GDP was 103.2% at the end of 2011. The U.S. Federal deficit held by the public was approximately 5 trillion dollars in the year 2007. The total amount of debt includes intra-governmental debt. The ceiling on debt was imposed on February, 2010 at a little over 14 trillion dollars. The action of the senate allowed the ceiling to be raised to over 15 trillion dollars in 2011. (International Monetary Fund). The debt level has remained moderate for India over the past five years compared to the previous years. Conclusion There is correlation between the federal budget and economy. The budget impacts on the growth of the economy and allocation or redistribution of resources. The difference between budgetary spending and revenues is defined as the budget deficit. Budget deficit contribute in the level of national debt. A variety of problems can result because of budget deficit. Lower national savings rate, higher rates of interest and inflation are some of them. The federal budget is taking an unsustainable path. The debt levels of the federal are expected to grow with the size of the economy. The elevated budget deficit is the cause of increase in federal debt. This will shed its effects on economic downturn. India has witnessed an economic boom and the foreign trade played the central role in the economic policy decisions. India can be defined as the nation of paradoxes. India is the country with the fastest growing economies as well as highest number of people living below the poverty line. In spite of the culture being different from U.S., the two countries maintain a close relationship. A more distinct differences and similarities can be observed if other macroeconomic indicators are taken into account. Works Cited Conte, C. “How the U.S. Economy Works”. usembassy.de .n.d. Web. 28th March, 2012 http://usa.usembassy.de/etexts/oecon/chap2.htm. Bureau of Labor Statistics. “The Employment Situation-February 2012”. Bls.gov. 2012. Web. 28th March, 2012. http://www.bls.gov/news.release/pdf/empsit.pdf. “Consumer Price Index”, overhead.aw. 2011. Web. 23rd April, 2012. https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CEYQFjAD&url=http%3A%2F%2Fwww.overheid.aw%2Findex.asp%3Fnmoduleid%3D4%26wgid%3D6%26nbrwsrdtctn%3D-1%26spagetype%3D6%26docid%3D4000902&ei=WFKVT-qaG4yJrAfXuPj-BA&usg=AFQjCNEE6meq-s2Cl8jh-ywrdNs-zjyERg. World Inflation Data. “Inflation India-2010”. Inflation.eu. Web. 23rd April, 2012. http://www.inflation.eu/inflation-rates/india/historic-inflation/cpi-inflation-india-2010.aspx. Read More