ECONOMIC ANALYSIS – SHORT TERM
Indian economy is third largest economy in Asia and growing with 2nd most growth rate in the world. Despite the above fact, presently it is going through one of the turbulence times. The growth rate of India has slowed down to 6.5% for the FY12 and outlook for FY13 is between 6.5% to 7%. Inflation and interest was at higher levels during the FY 2011-12. Adding to this, higher Fiscal deficit and CAD lead to depreciation of currency to Rs. 55 a dollar. Yield on G-Sec is highest in the world after PIGS countries. The above things have lead to adverse investor sentiments and fresh private investment is being crowded-out due to higher fiscal deficit by the government. The outlook of the economy for the FY 2012-13 is more or less same. It can be said that India is in slowdown phase and it will take some time to go back to 8-9% growth rate. India is domestic demand driven economy and one amongst the higher purchase power parity.
ECONOMIC ANALYSIS – LONG TERM
Indian economy is unique in the world. The rationale behind this is domestic demand of the country is yet to be met. Further, it has second largest population in world which shall keep the domestic demand in check on one hand while companies will have enough labor force at its option on the other. The company is highly dependent on import of oil which is keeping its trade balance in negative. Government of India is allowing FDI in various sectors to bridge the above gap which in turn fulfills the induction of new capital in economy and technologies from western companies are being transferred within a short period of time. This all leads to efficiency of Indian market on demand as well as supply side. The government of India is allowing foreign investment with certain conditions like PPP model, sourcing of raw material internally etc. so that all demand is met internally i.e. only capital & technology is being imported. There is cascading effect of one industry to other and...
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