Finance & Economy in India

Indian finance is a key driver to Indian economic growth. In terms of GDP, Indian economy is the fourth largest in the world. The economic policies of India post independence have helped us in financial and economic growth. Free trade on current account was allowed post 1991. The economic structure in India is very interesting. The agriculture and allied sectors employ 60% of Indian workforce but it accounts for only 17% of the nation’s GDP. The service sector accounts for 54% while the industrial sector contributes towards 29% of the GDP.

The Finance of India is a growing one. The Indian economy has registered a growth rate of 7.4% in the fiscal year 2009–10, with a year-on-year growth of 8.65 in its last quarter. This has exceeded the government forecast of 7.2% increase in GDP India. This year’s growth is driven by robust performance of the manufacturing sector that witnessed a 16.3% growth from last year.

The sectors that showed significant growth include mining and quarrying (10.6%), electricity, gas and water supply (6.5%), manufacturing (10.8%), financing, insurance, real estate and business services (9.7%). The gross national income and the per capita income both have shown remarkable increase compared to last fiscal year. The gross national income is expected to rise by 7.3% in 2009–10 as compared to 6.8% in 2008–09. Per capita income growth rate is expected to be 5.6% in 2009–10.

The Indian capital market faces many challenges for the efficient allocation and mobilization of capital in the economy. The capital market, money market and stock exchange are all regulated by the Securities and Exchange Board of India (SEBI). The stock market in India has two major exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). This is regulated by SEBI. Number of companies listed in stock market in India is second to that in the US. As per Bloomberg data, India’s stock market cap was 2.8% of the world’s stock market cap. In 2009, there were 21 IPOs that raised US$ 4.18 billion, in comparison to 36 IPOs with US$ 3.62 billion.

For the current year, it was reported that the Foreign Institutional Investors (FIIs) registered with SEBI as on March 2010 was 1710. According to the Association of Mutual Funds in India (AMFI), the average assets under management under mutual fund industry stood at US$ 170.46 billion for May 2010 as compared to US$ 135.58 billion in May 2009. The Reserve Bank of India’s Weekly Statistical Supplement reported the total India's foreign exchange reserves to be US$ 271 billion.

The Thomson Reuters publication has given top ranking to India in the global project finance (PF) market in 2009. The domestic Indian market has been the main market for project finance that raised US$ 30 billion which accounted for 21.5% of the global PF market.

The economic policies of India have been such that money and its importance have been recognized. The money market, i.e. the financial market for short-term asset borrowing and lending has provided liquidity funding for the global financial system.

Overall, the Indian economic and financial growth is expected to rise, and GDP is expected to reach a double-digit figure by 2011.

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