India Growth Story

In: Business and Management

Submitted By poojak878
Words 1020
Pages 5
After going through a long period of high growth and establishing itself as one of the fastest growing economies in the world, the Indian economy is now pegged with a new challenge of maintaining past growth rates whilst taming inflation.
The GDP growth rates from 2006-2011 are listed below [1]. As can be seen from the above figure, India's growth rate has declined to 6.9% in 2011-12. Some of the reasons attributable to that are discussed below:
1. India's high growth rate during the previous years was fueled primarily by high growth in Industry and Service sectors. However, the last fiscal year saw significant slowdown in Industrial growth. One of the reasons for this was RBI's initiative to curb inflation. The central bank had consistently maintained high interest rates for more than a year. Even though Inflation came down to 5% [2], it adversely affected the industrial growth. Many organizations curbed their expansion plans and many new ventures were deferred due to high cost of capital.

2. A further analysis of the Structure of Indian Economy reveals other important aspects:
Year wise contribution of 3 major sectors viz. Agriculture, Industry and Services to GDP is as under:

Source: [1]
A comparison of the contribution of Rural and Urban India to GDP for FY 2011-12 is as per the following figures: - As can be seen, there is a wide disparity between contributions of Rural and Urban India to GDP. While 69% (approx) of our rural population is contributing to just 14% of our national Income, the remaining 31% is contributing to nearly 86% of the national Income.

- Further analysis of Sector-wise growth rates indicates that in order to achieve high growth rates, we cannot depend solely on agriculture since the agricultural land in any country is fixed and there is a limitation on the maximum growth rates that can be achieved in…...

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