Macroeconomics project on India's GDP & INFLATION

1. MACROECONOMICS
PROJECT
GDP & INFLATION

2. GDP
GROSS DOMESTIC PRODUCT
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3. “The monetary value of all the finished goods and
services produced within a country's borders in a
specific time period though GDP is usually
calculated on an annual basis. It includes all of
private and public consumption, government
outlays, investments and exports less imports
that occur within a defined territory.
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Definition of Gross Domestic
Product(GDP)

4. GDP=C + G + I + NX
where:
"C" is equal to all private consumption, or consumer spending, in a
nation's economy
"G" is the sum of government spending
“I” is the sum of all the country's businesses spending on capital
"NX" is the nation’s total net exports, calculated as total exports
minus total imports. (NX =Exports - Imports)
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➔ First its equal to the total expenditure for all final goods
and services produced within the country in a specified
period of time (usually a 365-days year )
➔ Second ,its equal to the sum of the value added at every
stage of production by all the industries ,plus taxes and
minus subsidies on products.
➔ Third ,it is equal to the sum of the income generated by
productionlike compensation of employees ,taxes on
production and imports less subsidies , and gross
operating surplus.

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• India’s GDP for 2018 was $2,726.32B, a 2.78% increase
from 2017.
• India’s GDP for 2017 was $2,652.55B, a 15.81% increase
from 2016.
• India’s GDP for 2016 was $2,290.43B, a 8.88% increase
from 2015.
• India’s GDP for 2015 was $2,103.59B, a 3.16% increase
from 2014.

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8. • India GDP growth rate for 2018 was 6.98%, a 0.19% decline from 2017.
• India GDP growth rate for 2017 was 7.17%, a 1% decline from 2016.
• India GDP growth rate for 2016 was 8.17%, a 0.17% increase from 2015.
• India GDP growth rate for 2015 was 8.00%, a 0.59% increase from 2014.

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10. • India GDP per capita for 2018 was $2,016, a 1.72% increase from
2017.
• India GDP per capita for 2017 was $1,981, a 14.59% increase from
2016.
• India GDP per capita for 2016 was $1,729, a 7.7% increase from
2015.
• India GDP per capita for 2015 was $1,606, a 2.02% increase from
2014.

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Reasons for declining GDP
• The latest decline was driven largely by slower private consumption and near stagnation in
manufacturing, which was growing by 12% just a year ago. The rate of growth in agriculture
more than halved in the June quarter.
• Nominal GDP growth, a measure of GDP without adjusting for inflation, rose just 8%, the least
in the current series of national accounts going back to FY12, indicating a deep slowdown.
Comparing across different series, it could be the lowest since FY03, economists said.
• Consumption, the bedrock of growth in the past few years, collapsed to an 18-quarter low of
3.1% from 10.6% in the March quarter, pointing to fragile sentiment. Investments grew 4%, up
from 3.6% in the previous quarter.
• The slowdown in investment and consumer demand derailed manufacturing, which grew
just 0.6%. A meagre 2% rise in farm sector added to the demand slowdown

13. Why is India’s Gross Domestic Product falling?
● Sharp decline in overall demand:
● Sharp fall in consumption
● Wrong procedure in the GST implementation
● Decline in investment
● Poor condition of banking sector
● Agricultural crisis
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14. List of measure made:
╺ To boost liquidity in the market, the government has cleared dues
worth more than 60% of 32 CPSEs in the last two months.
╺ The govt provided support to NBFCs/HFCs under the partial
credit guarantee scheme. The govt sanctioned support for Rs 4.47
lakh crore to NBFCs & HFCs which includes Rs 1.29 lakh crore for
pool buyout of assets.
╺ Within two days of cabinet approval, 17 proposals worth more
than Rs 7,000 crore approved. Proposals worth Rs 20,000 crore
will be approved over next two weeks under the partial credit
guarantee scheme.
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15. On investment side, the government has taken steps to
boost investment, support real estate, credit expansion,
corporate tax and bank recapitalization.
FDI inflows of $35-billion in first half of FY20 vs $31 billion in
the same period last year has been achieved
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16. How to increase economic growth
Economic growth is an increase in national output/income (higher real GDP).
There are two main aspects of economic growth:
➔Aggregate demand (AD) (consumer spending, investment levels, government spending,
exports-imports)
➔Aggregate supply (AS) (Productive capacity, the efficiency of economy, labour productivity)
We need to see a rise in demand and/or an increase in productive capacity:
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17. Economic growth
AGGREGATE DEMAND CAN INCREASE FOR VARIOUS REASONS.
• LOWER INTEREST RATES – REDUCE THE COST OF
BORROWING AND INCREASE CONSUMER SPENDING AND
INVESTMENT.
• INCREASED REAL WAGES – IF NOMINAL WAGES GROW
ABOVE INFLATION THEN CONSUMERS HAVE MORE
DISPOSABLE TO SPEND.
• HIGHER GLOBAL GROWTH – LEADING TO INCREASED EXPORT
SPENDING.
• DEVALUATION, MAKING EXPORTS CHEAPER AND IMPORTS
MORE EXPENSIVE, INCREASING DOMESTIC DEMAND.
• RISING WEALTH, E.G. RISING HOUSE PRICES CAUSE
CONSUMERS TO SPEND MORE (THEY FEEL MORE CONFIDENT
AND CAN REMORTGAGE THEIR HOUSE.
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18. Growth in productivity
THIS IS GROWTH IN AGGREGATE SUPPLY (PRODUCTIVE
CAPACITY). THIS CAN OCCUR DUE TO:
• DEVELOPMENT OF NEW TECHNOLOGY.
• INTRODUCTION OF NEW MANAGEMENT
TECHNIQUES, E.G. BETTER INDUSTRIAL RELATIONS
HELPS WORKERS BECOME MORE PRODUCTIVE.
• IMPROVED SKILLS AND QUALIFICATION.
• MORE FLEXIBLE WORKING PRACTICES – WORKING
FROM HOME, SELF-EMPLOYMENT.
• INCREASED NET MIGRATION – ESPECIALLY
ENCOURAGING WORKERS WITH THE SKILLS THAT
ARE IN SHORT SUPPLY (E.G. BUILDERS, FRUIT
PICKERS)
• RAISE RETIREMENT AGE AND THEREFORE
INCREASING THE SUPPLY OF LABOR.
• PUBLIC SECTOR INVESTMENT
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19. To what extent can the government
increase economic growth?
A government can try to influence the rate of economic growth through
demand-side and supply-side policies,
╺ Expansionary fiscal policy – cutting taxes to increase disposable
income and encourage spending. However, lower taxes will increase the
budget deficit and will lead to higher borrowing. The expansionary fiscal
policy is most appropriate in a recession when there is a fall in consumer
spending.
╺ Expansionary monetary policy (now usually set by independent
Central Bank) – cutting interest rates can boost domestic demand.
╺ Stability. A key function of the government is to provide economic and
political stability which enables the usual economic activity to take
place. Uncertainty and political tension can discourage investment and
economic growth.
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20. INFLATION
THE TRENDS IN INDIAN ECONOMY

21. Objective:
❖ To study the causes and effects of
inflation in the Indian economy and
analyze its trends in the past few
years.
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22. What is Inflation?
❖ Inflation can be defined as a rise in the general
price level and therefore a fall in the value of
money that is it takes more currency units to buy
the same amount of goods and services.
❖ Inflation occurs when the amount of buying
power is higher than the output of goods and
services.
❖ Inflation also occurs when the amount of money
exceeds the amount of goods and services
available.
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23. Inflation In India
❖ inflation is most closely observed economic variables in India as
it has considerable influence on the life of an average consumer.
❖ Most of the developed countries use the Consumer Price Index
CPI to calculate Inflation, but in India Wholesale Price Index WPI
is used.
❖ WPI is generally used in India because they are many problems
associated with the CPI.
❖ Economic survey 2008-09 depicts that the years 2000-01,2004-
05,2008-09 show the highest average rates of inflation with
2008-09 being the highest in the decade.
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• India inflation rate for 2018 was 4.86%, a 2.37%
increase from 2017.
• India inflation rate for 2017 was 2.49%, a 2.45%
decline from 2016.
• India inflation rate for 2016 was 4.94%, a 0.93%
decline from 2015.
• India inflation rate for 2015 was 5.87%, a 0.48%
decline from 2014.

25. Major Causes of Inflation in India
There can be two set of factors that can cause inflation in the
economy.
❖Demand Pull Inflation
❖Cost Push Inflation
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26. Cost Push Inflation
Cost-push inflation, or the decrease in the
aggregate supply of goods
and services stemming from an increase in the cost
of production.
An increase in the costs of raw materials or labor
can contribute to cost-
pull inflation.

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Demand-pull inflation
Demand-pull inflation, or the increase in aggregate demand,
Demand-pull inflation can be caused by an expanding economy,
increased government spending, or overseas growth.

28. Demand Pull Factors Of Inflation
❖Rise in population
❖Black money
❖Rise in income
❖Excessive government expenditure
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29. Cost Push Factors of Inflation
❖Infrastructure bottlenecks which lead rise in
production and distribution costs.
❖Rise in Minimum Support Price (MSP).
❖Rise in international prices.
❖Hoarding and black marketing.
❖Rise in indirect taxes.
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30. Measures of inflation
╺ Monetary Measures:
❖ Credit Control
❖ Demonetization of currency
❖ Issue of new currency
Fiscal Measures:
❖Reduction in Unnecessary Expenditure
❖ Increase in Taxes
❖ Increase in Savings
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31. Control of Inflation
As far as the demand side is concerned restrictive
monetary and fiscal policy are commonly used to
control inflation.
In supply side inflation the restrictive monetary and
fiscal policy are not appropriate to control which is
because the rising prices and output below the full
employment level
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32. Relationship between gdp and inflation
When the economy is healthy, there is usually low unemployment and wage increases, as businesses demand labor to meet
the growing economy.
Due to low unemployment and increase in wages, there is an increase in the purchasing power of people. This leads to an
increase in demand for goods and services, which leads to an increase in general price levels.
Hence Inflation will Increase due to an Increase in GDP.
However, if the GDP growth rate is speeding up too fast, the Federal Reserve/Reserve Bank may raise interest rates to stem
inflation—or the rising of prices for good and services. That could mean loans for cars and homes would be more expensive.
Businesses too would find the cost of borrowing for expansion and hiring to be on the rise. In short, the Federal
Reserve/Reserve Bank will try to remove some money from the economy to reduce the spending power of people, and gain a
control on the rising general prices. A fall in the purchasing power will lead to a fall in demand, which will lead to a fall in
production, resulting in a fall in the GDP of the nation.

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THANK YOU
SUBMITTED TO:
PROF. MS. SHALI BOPANA
(MACROECONOMICS)
SUBMITTED BY:
APOORVA GUPTA
MOHITA AHUJA
VIDIT JAIN.
References :
● JSTOR
● ACADEMIA
● Economicsdiscussion.net
● quora