The macroeconomic factors are the major determinant of the growth of an economy. Analyzing the macroeconomic factors gives an idea of the current economy position and a projection of the future of the economy based on which we decide the future of a particular industry. The various macroeconomic factors responsible for mutual fund industry in India are as follow:
Privatization of government-owned industries remains stalled and continues to generate political debate; populist pressure from within the UPA government and from its Left Front allies continues to restrain needed initiatives. The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. India achieved 8.5% GDP growth in 2006, and again in 2007, significantly expanding production of manufactures. India is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers. The strong growth combined with easy consumer credit and a real estate boom fueled inflation concerns in 2006 and 2007, leading to a series of central bank interest rate hikes that have slowed credit growth and eased inflation concerns. The huge and growing population is the fundamental social, economic, and environmental problem.
During the fiscal years 1980-81 to 1990-91, the average GDP growth rate was 5.38 per cent (Source: Handbook of Statistics, RBI). In comparison, the average growth rate between 1990-91 and 2006-07 was 6.23 per cent, an increase of less than one percentage point.
Growth of industrial sector, from a low of 2.7% in 2001-02, revived to 7.1% and 7.4% in 2002-03 and 2003-04, respectively, and after accelerating to over 9.5% in the next two years, touched 10% in 2006-07. Within industry, the growth impulses in the sector seem to have spread to manufacturing. Industrial growth would have been even higher, had it not been for a relatively disappointing performance of the other two sub-sectors, namely, mining and quarrying; and electricity, gas and water supply. Since 1951-52, industry has never consistently grown at over 7% per year for more than three years in a row before 2004-05. Year-on-year, manufacturing, according to the monthly Index of Industrial Production (IIP) available until December 2006, has been growing at double digit rates every month since March 2006, with the solitary exception of the festive month of October.
Agricultural growth decelerated from an average of 3.39 per cent in the pre-reform period to 2.77 per cent. Even the industry didn't really do too well. The average growth rate was lower by nearly 0.57 per cent, as it decelerated from 6.72 per cent to 6.15 per cent.
A agricultural sector that supports nearly 70 per cent of the country's population has seen a steady decline. A slide that even reforms failed to stem. India's agricultural productivity, in most cases, is one of the lowest in the world Per capita availability of food grain is falling as population is growing faster than food grain production. Deplorable rural infrastructure leads to India wasting an amount of food grain that is more than half of Australia 's food grain production. India 's agriculture is still so very highly monsoon dependent.
The service sector as its average growth rate increased by more than 1.48 percentage points, from 6.33 per cent to 7.81 per cent. In case of agricultural produce, unlike oil, producers do not always benefit from rising price because of wrong policies and bad infrastructure.
Between 2002-03 and 2006-07, the Indian economy grew at an average rate of 8.6 per scent. High growth, recorded during the last few years, seems to be more cyclical in nature than structural. Strong global growth, benign inflationary situation and ample liquidity sloshing around caused by a loose monetary policy, both globally and in India , led to this strong growth.
With the American economy slipping into recession and inflation becoming a major concern world-wide, India is on the verge of a slowdown. India does not seem to have reached a stage where continued high growth will not trigger inflationary pressure, unlike China which sustained a scorching pace for a much longer period of time on the back of clearly improving productivity. India does not seem to have gained much by way of improving productivity that would have ensured sustained high growth. A mere five-year-long high GDP growth is seemingly choking the economy via inflation.
The sustainability of growth would also depend on high savings rate. However, a closer look at the composition of India 's savings rate does seem to suggest that the recent spurt in the rate has more to do with cyclical factor than real structural improvement.
GDP (purchasing power parity): $2.989 trillion (2007 est.)
GDP (official exchange rate): $1.099 trillion (2007 est.)
GDP - real growth rate: 9.2% (2007 est.)
GDP - per capita (PPP): $2,700 (2007 est.)
GDP - composition by sector: agriculture: 17.6%
industry: 29.4%
services: 52.9% (2007 est.)
industry: 29.4%
services: 52.9% (2007 est.)
Global Economy
The global economy impacts on the mutual funds in India in various ways. The trading on the global level faces the different issues with the relative to their local problems of the countries. The countries have their own policies, constrains, etc. Some of the countries mentioned below their impacts on the Mutual funds in India .
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