Topic should be something involving macroeconomics Essay

Topic should be something involving macroeconomics - Essay Example (2). 2. Growth of the Indian Economy From a pre-independence average growth of 0.9 % in the Indian economy in the first fifty years of the twentieth century, the Indian economy started to demonstrate accelerated growth in the last decade of the twentieth century, with the economic growth touching six percent. The new millennium witnessed even higher GDP growth rate at an average of 6.9% in the seven year period 2000-2001 to 2006-2007. The acceleration in the economic growth becomes even more evident in from the growth in GDP between in the four years of 2003 to 2004 till 2006-2007., where the average growth in GDP stands at 8.6%, which grew in 2005 to 2006 higher at nine percent and even higher to 9.6% in the year 2006-2007. (3). In 2006-2007 the high growth rate was maintained at 8.7%, though dropping from the high of the previous years. In 2008-2009 the real growth in GDP is estimated to remain high ranging between 8% and 8.5%. (4). Two features stand out in this acceleration in gr owth of the Indian economy. The first is that there has been a significant moderation in the volatility, with particular reference to the in industries and services sector. The second is the main driving force behind the accelerated growth has been domestic consumption, which is estimated to almost two-thirds of the total demand. (3). The strong economic activity in the last decade has received support from the strong financials of gross domestic investment and domestic savings rate. The gross domestic investment, which was 24.3% of GDP in 2000-2001 rose to 33.8% in 2005-2006. The domestic savings rates also rose from 23.7% in 2000-2001 to 32.4% in 2005-2006. Domestic savings was a critical factor in the gross domestic investment contributing about ninety percent of it. (3). In the 1990s India opened out its international trade policy, initiating reforms to create a new market oriented environment. The structural adjustments and the economic reforms that resulted from these initiati ves were to have a strong impact on the Indian economy, particularly with regard to the positive flow of foreign direct investments (FDI). (3). Table -1 shows the year wise FDI inflow into India. Table -1 FDI Inflow into India 1992-1993 to 2008-2009 Year FDI in US $ Million 1992-1993 193 1993-1994 654 1994-1995 1,374 1995-1996 2.141 1996-1997 2,770 1997-1998 3,682 1998-1999 3,083 1999-2000 2,439 2000-2001 2,908 2001-2002 4,222 2003-2004 3,134 2005-2006 2,634 2006-2007 3,754 2007-2008 1,270 2008-2009 1,447 (5). India has demonstrated better fiscal management in the new millennium that has caused a clear drop in the fiscal deficit of the Central Government and the State Governments. In 2000-2001 the fiscal deficit was 9.5%, which diminished to 6.4% by 2006-2007. (3). However, this rosy picture on the fiscal front has changed since the economic recession, which has forced the government to take money spending initiatives to stimulate growth in the economy, besides the political compuls ions of an election year. The forecast of the Central Government on the fiscal deficit for the year 2008-2009 is 6% of GDP. This is well above the targeted fiscal of 2.5% for the year 2008-2009 and is a cause for concern on the health of the Indian economy. (6). The growth of the Indian e