StudentShare solutions
Triangle menu

Macroeconomic Case Analysis using article - Essay Example

Not dowloaded yet

Extract of sample
Macroeconomic Case Analysis using article

India is classified as low-income economy1 as per The World Bank although India's huge population results in a per capita income of $3700 at PPP and $820 at nominal.
The economy is sizzling due to booming investment and consumption. According to survey of 32 countries by Grant Thornton, a London-based accounting firm, Indian businessmen were the most upbeat. Indians are rightly proud of the huge global success of firms such as Infosys, or of Tata Steel's 5.8 billion ($11.3 billion) acquisition of Britain's Corus this week.
Reserve Bank governor Yaga Venugopal Reddy has flagged the possibility that the Indian economy may be overheating2. In other words demand is outpacing supply and hence the pace of growth is unsustainable. Wholesale price of oil inflation has risen to 6%, which is above the 5.5% upper limit set by the Reserve Bank of India (RBI). The crude average of the rates for industrial, non-manual and agricultural workers is above 7%. Capacity utilization is higher than at any time in the past decade.
The most recent trade data suggest that the rapid deterioration in the trade deficit since H1 2004 is stabilizing and portfolio flows only account for 35 per cent of total capital flows and one of the main determinants is GDP growth. The bank expects the balance of payments to improve in FY06 / 07 and has revised its dollar: rupee forecast to 43-43.5 from 44.53.
Credit boom has concerned The RBI also. Bank lending to firms and households has expanded by 30% over the past year. Lending on commercial property is up by 84% and home mortgages by 32%. India's stock market is one of the merging world's most expensive, with a price-earnings ratio of more than 20; this shows rising more than fourfold over the past four years. Asset prices are also rising. In many big cities house prices have more than doubled over the past two years. RBI raised its overnight lending rate by a quarter-point to 7.5%, but left the reverse repo rate at 6%. Over the past couple of years interest rates have risen by less than the rate of inflation, so in real terms they have fallen.
When demand outpaces supply in an open economy it is more likely to show up in a current-account deficit than in inflation. India's deficit widened to more than 3% of GDP in the three months to September-a huge swing from a surplus of almost 4% in the first half of 2004. And the true gap between domestic demand and supply is even bigger. According to Yaga Venugopal Reddy, the RBI'S governor, India's current-account deficit is larger once you exclude the money sent home by Indians abroad. Although these remittances do not reflect domestic demand or supply, but are more like a capital inflow. Excluding workers' remittances, India's deficit is running close to 5% of GDP-larger than the equivalent deficit during India's balance-of-payments crisis in the early 1990s. the Economist is making a political judgment:
"The economic reforms of the early 1990s spurred competition, forced firms to become more productive and boosted India's trend-or sustainable-rate of growth. But the ...Show more

Summary

Indian economy is the fourth largest in the world as measured by purchasing power parity (PPP). Due to reduced government controls on foreign trade and investment since the early 1990s, foreign businessmen and investors are swarming to Bangalore and Mumbai to grab a piece of the action…
Author : cbatz
Macroeconomic Case Analysis using article essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Macroeconomic Case Analysis using article"
with a personal 20% discount.
Grab the best paper

Related Essays

Macroeconomic Data Analysis and Report
The United Kingdom has been selected for economic comparison with Saudi Arabia. These two countries have different social, political and economic structures, and this explains the different economic directions they exhibit. The variables that are taken into consideration in this work comprise of population, exchange rate with the US dollar as the base currency, purchasing power parity and ratio of gross national product to gross domestic product.
3 pages (750 words) Essay
Selecting a macroeconomic variable for a country and explaining its determination using macroeconomics analysis
This depicts the huge nature of macroeconomics that makes it relatively difficult to study as a single subject. To this end, macroeconomics is studied using various variables of the collective economy. In the present study, the inflation rate of Canada is studied as one of the core macroeconomic variable of the country that helps in determining the macroeconomic status of Canada.
7 pages (1750 words) Essay
Apply appropriate macroeconomic analysis
The government expenditure cut by ten percent According to Mankiw and Taiylor, National; Income is the total goods and services supplied thus, implies to the total actual wages paid to labour (MPL x L) and the overall real benefits to the owners of capital (MPK x K).
6 pages (1500 words) Essay
MACROECONOMIC
erve Bank of Australia (RBA) was established in the year 1959. The creation was put into place by the reserve bank act 1959. The act lays down the roles of these bank a puts it that this is not a profit acquisition bank. The bank introduction has seen many improvements in the economy of Australian.
4 pages (1000 words) Essay
Macroeconomic Problems and Analysis
The Phillips curve, named after A.W. Phillips, shows how inflation and unemployment are said to be inversely related. His hypothesis is primarily based on his observation with regard to the prevailing economic conditions in Great Britain from the onset of the 1900s until 1958.
5 pages (1250 words) Essay
Macroeconomic
The government’s efforts at curbing inflation have borne some benefits, though it should do more should be done since the rate of change in inflation is not directly reflected in the
12 pages (3000 words) Essay
Macroeconomic
The article addresses each of these issues and what Pres. Barack Obama must do to achieve good results together with the people who might be able to help him. Fiscal cliff, Tomasky suggests, will most probably be responded to with the impending tax increase
1 pages (250 words) Essay
Macroeconomic Data Analysis and Report
The variables that are taken under consideration in this work comprise of population, exchange rate with US dollar as the base currency, purchasing power parity and
3 pages (750 words) Essay
Macroeconomic Analysis
The Uncles idea is very fine as it would diversify his income base of the coming day’s but there is other economic possibilities provided by the feds which would affect the demand and supply of the uncle’s properties. Through collection
2 pages (500 words) Essay
Case analysis: Macroeconomic concepts
The main macroeconomic concepts highlighted in the article include are aggregated demand, business environment and business cycle. Aggregated demand is applied with the reference to consumer confidence since the later is determined by the total cost of services and goods demanded by the consumers.
1 pages (250 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation