INDIA S GDP IN PRE AND POST GLOBALISED ERA: AN APPRAISAL

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1 International Journal of Advanced Research in Management (IJARM) Volume 7, Issue 1, Jan-April (2016), pp , Article ID: Available online at Journal Impact Factor (2016): (Calculated by GISI) ISSN Print: and ISSN Online: IAEME Publication INDIA S GDP IN PRE AND POST GLOBALISED ERA: AN APPRAISAL Vineet Singh Assistant Professor, Department of Commerce, Guru Ghasidas Vishwavidyalaya, Bilaspur, Chhattisgarh ABSTRACT The quintessence of the present study is to have an overview of GDP (Gross Domestic Product) and its importance to the economy. In addition the present study also aims to highlight the India s GDP figures since 1964, recent contribution of various sectors (i.e. agriculture, industry and services) in India s GDP and impact of LPG (Liberalisation Privatisation Globalisation) policy on India s GDP. Key words: India, GDP, LPG policy. Cite this Article: Vineet Singh, India s GDP in Pre and Post Globalised ERA: An Appraisal. International Journal of Advanced Research in Management, 7(1), 2016, pp INTRODUCTION Gross Domestic Product (GDP) may be defined as monetary value of all goods and services produced inside a nation s geographical boundaries within a specified period of time. The Organisation for Economic Co-operation and Development (OECD) defines GDP as an aggregate measure of production equal to the sum of the gross value added of all resident, institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs). GROSS DOMESTIC PRODUCT (GDP) CALCULATION GDP of a country is basically calculated by expenditure approach. Under this approach GDP is calculated by summing up the final uses of goods and services (all uses except intermediate consumption) measured in purchasers prices. In other words, in order to measure total production in an economy, the total expenditure of money which is used to buy things can be measured. This method is commonly recognized as expenditure method of calculating GDP. Therefore, in order to calculate GDP by expenditure method the following formula is used: 51 editor@iaeme.com

2 Vineet Singh Y = C + I + G (X - M) Where, Y = GDP; which is sum of the following: C = Consumption I = Investment G = Government spending (X - M) = Net exports C (consumption) includes private (household final consumption expenditure) in the economy. These personal expenditures come under one of the following categories i.e. durable goods and non-durable goods and services. For example consumption expenditures on food, clothing, jewellery etc. Consumption is the largest constituent of GDP in the economy. I (investment) basically include purchase of equipment and machinery by a business, purchase of software s, construction of new mines, spending on new houses by households etc. G (government spending) is the sum total of government expenditures on final goods and services such as purchase of arms and ammunitions for military, salaries paid to public servants, and any other investment expenditures made by government. It may be noted that G (government spending) does not includes transfer payments such as unemployment benefits. X (exports) denotes gross exports. M (imports) symbolize gross imports. OBJECTIVES OF THE STUDY To have an overview regarding importance of GDP. To analyse the recent contribution of various sectors i.e. agriculture, industry and services in India s GDP. To estimate the actual figures and growth in India s GDP before the commencement of LPG policy (i.e. from 1964 to 1990) and after the commencement of LPG policy (i.e. from 1991 to 2014). To test whether there is a significant difference between India s GDP values during (1967 to 1990) and (1991 to 2014), with the help of t-test. RESEARCH METHODOLOGY The study is mainly based on secondary data and the relevant information in this regard has been collected from a number of sources like books, websites, journals, articles etc. The analysis in this regard has been carried out through various statistical tools such as average, percentage, t-test etc. SIGNIFICANCE OF GDP Gross Domestic Product (GDP) is one of the most important tools to measure the health of a country s economy. The vital benefit derived from GDP to a country may be enumerated as follows: 52 editor@iaeme.com

3 India s GDP In Pre And Post Globalised ERA: An Appraisal Gross Domestic Product incorporates consumer spending, investment expenditure, government spending and net exports (i.e. exports - imports). Therefore, GDP gives a true picture of an economy. Gross Domestic Product indices provide guidelines to government and economic decision maker in formulating major economic policies. GDP portrays health of an economy. A positive GDP depicts good signals for the economy where as a negative GDP reveals awful signals for the economy. GDP also helps economists in finding out that whether the economy is in boom, recession, or depression. Since, Gross Domestic Product is an indicator of fitness of a country s economy; it also helps the investors in securities to administer their portfolios. INDIA S GDP: AN OVERVIEW Indian economy and GDP has been classified under three sectors namely: 1. Agriculture which includes crops, milk and animal husbandry, horticulture, fishing, forestry, sericulture, aviculture, aquaculture and interrelated activities. 2. Industry which embraces a number of manufacturing sub-sectors. 3. Services which incorporates health care, banking, education, hospitality, construction, retail, software, communication, information technology, insurance and many other economic activities. Contribution of Agriculture in India s GDP India is second largest country in the world as far as production of agricultural product is concerned. Punjab, Haryana, Uttar Pradesh, Madhya Pradesh, Gujarat, Bihar, West Bengal, Andhra Pradesh and Maharashtra, are the prime contributors in Indian agricultural output. In 2014 the total production of agriculture sector amounted to U.S. $ billion, employed 49% of the total workforce and accounted for 17% of the GDP. But in recent years (1950 to 2010) the contribution of agriculture to GDP has steadily declined, the reason behind this can be growth and diversification of Indian economy. Contribution of Industry in India s GDP The Indian industrial sector has undergone major changes as a result of economic reforms which took place in In 1991 LPG (Liberalisation, Privatisation, Globalisation) policy was adopted which promoted foreign competition and privatisation of government sector industries, removed trade restrictions, relaxed government rules and regulations, encouraged FDI and improved infrastructure. All these measures adopted by government in 1991 have lead to a decent increase in production figures and today industry accounts for 26% of GDP and employs 22% of total workforce. As per World Bank figures India s industrial manufacturing GDP output in 2015 was 6 th largest in the world on current U.S. $ basis ($ 559 billion). Contribution of Services in India s GDP The GDP of Indian service sector amounted to U.S. $ billion in Indian service sector is the largest contributor in India s GDP accounting for 57% of GDP in Service sector provides employment to 27% of the work force and is 9 th largest in the world by nominal GDP and 4 th largest when purchasing power is taken into 53 editor@iaeme.com

4 Vineet Singh account. Indian service sector has shown a decent increase in GDP contribution since Table 1 India s - Gross Domestic Product since 1964 (In U.S. $ billion) Year India's G.D.P. Growth in GDP Figure 1 India s - Gross Domestic Product since 1964 The above table and graph clearly divulge that Indian GDP has shown a drastic increase after Globalisation. Before globalisation the growth rate in GDP figures was lethargic which stood at U.S. $ billion in 1964 and U.S. $ billion in 1989, but after globalisation the GDP values of India has grown tremendously and stood at U.S. $ billion in editor@iaeme.com

5 India s GDP In Pre And Post Globalised ERA: An Appraisal Table 2 India s GDP (1969 to 1991) and (1992 to 2014) (In U.S. $ Billion) Year GDP % growth Year GDP % growth Average Average HYPOTHESIS TESTING ON GROWTH TRENDS IN INDIA S GDP DURING PRE AND POST GLOBALISATION PERIOD In order to test whether there is a significant difference between growth trends in India s GDP during pre-globalisation period (i.e to 1991) and post-globalisation period (i.e to 2014) the following hypothesis is framed and tested through t-test at 95 % confidence level: H 0 There is no significant difference between growth trends in India s GDP during pre-globalisation period (i.e to 1991) and post-globalisation period (i.e to 2014). H 1 There is a significant difference between growth trends in India s GDP during preglobalisation period (i.e to 1991) and post-globalisation period (i.e to 2014) editor@iaeme.com

6 Vineet Singh t-test: Two-Sample Assuming Unequal Variances % Growth in India s GDP Parameters (1969 to 1991) % Growth in India s GDP (1969 to 1991) Mean Variance Observations Hypothesized Mean Difference 0 df 44 t Stat P(T<=t) one-tail t Critical one-tail P(T<=t) two-tail t Critical two-tail Since, the calculated value of t two tail at.05 level of significance is less than table of t, alternate hypothesis is rejected and null hypothesis is accepted; hence it can be concluded that there is no significant difference between growth trends in India s GDP during pre-globalisation period (i.e to 1991) and post-globalisation period (i.e to 2014). CONCLUSION GDP is regarded as one of the significant device to measure the economy s health. As far as Indian economy is concerned, there are three major sectors (i.e. agriculture, industry and service) which are contributors in GDP. With a contribution of U.S. $ billion, service sector is the largest contributor in India s GDP. After the major economic reforms of 1991, Indian GDP has shown a respectable increase in its figures, which clearly represents the successful implementation of LPG policy launched by the government. The above study is also backed by a hypothesis testing regarding growth trends of India s GDP in pre and post globalised era, which reveals that there is no significant difference between growth trends in India s GDP during pre and post globalised era. REFERENCES [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] editor@iaeme.com

7 India s GDP In Pre And Post Globalised ERA: An Appraisal [12] [13] [14] [15] 10 [16] [17] [18] [19] [20] Datt, Ruddar; Sundharam, K.P.M. (2009). Indian Economy. New Delhi: S. Chand Group. ISBN [21] [22] [23] p_pcap_cd&idim=country:ind:pak:bgd&hl=en&dl=en#!ctype=l&strail=false &bcs=d&nselm=h&met_y=ny_gdp_mktp_cd&scale_y=lin&ind_y=false&rdim=r egion&idim=country:ind&ifdim=region&hl=en_us&dl=en&ind=false [24] STATISTICAL METHODS, S.P. Gupta, Sultan Chand & Sons, 2005 [25] Vineet Singh and Abhinna Srivastava. Direct Tax Revenue: A Case Study of Central V/S State Government. International Journal of Management, 6(12), 2015, pp [26] Vineet Singh and Abhinna Srivastava. Receivables Management in Leading Heavy Electrical Industries in India. International Journal of Management, 6(4), 2015, pp editor@iaeme.com