Financial Services N Financial Services N GDPGDP

Financial Services N Financial Services N GDPGDP

MFS SEM IIIMFS SEM III

GROSS DOMESTIC PRODUCT• A country’s Gross Domestic Product (GDP) is a

measure of the total flow of goods and services produced over a specified time period, usually a year.

• GDP is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though it is usually calculated on an annual basis.

• It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

GDP Calculation• GDP = C + G + I + NX

where:

"C" is equal to all private consumption, or consumer spending, in a nation's economy"G" is the sum of government spending"I" is the sum of all the country's businesses spending on capital"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX = Exports - Imports)

• The word ‘gross’ means that no deduction for the value of expenditure on capital goods for replacement purposes is made.

• The word ‘domestic’ means that income arising from investment and possessions owned abroad is not included; and this distinguishes Gross Domestic Product (GDP) from Gross National Product (GNP).

The Sector Wise Composition of India GDP

• The economy of India is the twelfth biggest in comparison to that of others in the whole world, for it has the GDP of US$ 1.09 trillion in 2007.

• The country has the second fastest major growing economy in the whole world with the GDP growing at the rate of 9.4% in 2006- 2007.

• The composition of Indian GDP includes many sectors like industry, infrastructure, agriculture, and services. The percentage of the share of these sectors in the composition of India GDP differs and also has changed over the years.

• India GDP Composition Sector Wise was that the agriculture sector contributed around 32%, services sector contributed 41%, and the industry sector contributed 27% in 1990- 1991.

The sector wise contribution to Indian

GDP

• Services contributed as much as 68.6% of the overall average growth in GDP in the last five years between 2002-03 and 2006-07. Practically, the entire residual contribution came from industry. As a result, in 2006-07, while the share of agriculture in GDP declined to 18.5%, the share of industry and services improved to 26.4% and 55.1%, respectively.

Contribution of the Agriculture Sector in India

GDP

• The agriculture sector contributed the most to India GDP after the independence of the country.

• This sector contributed to India GDP around 18.6% in 2005.

• The contribution of the agriculture sector has gone down in India GDP in the last few years but in spite of this the sector remains the largest economic sector in India.

The contribution of the Industrial Sector in India

GDP• 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.

• This shows that the contribution of the industrial sector is increasing in India GDP.

The contribution of the Services Sector in India

GDP

• The services sector contributes the most to the India GDP for it accounted for 53.8% in 2005.

• After independence it was the agricultural sector that contributed the most to the India GDP but in recent years it has been the services sector, which has contributed the most.

• The agricultural sector contributed 20%, industry sector contributed 26%, and the services sector contributed around 54% to the India GDP in 2005- 2006

Contribution of the Infrastructure Sector in India

GDP

• The infrastructure sector contributed around 3.5% to the India GDP in 1996- 1997 and the next year, this figure increased to 4.6%.

• The contribution of the infrastructure sector to the India GDP increased after the India government opened the sector to private sector.

Services Sector in India

• India ranks fifteenth in the services output and it provides employment to around 23% of the total workforce in the country.

• The various sectors under the Services Sector in India are construction, trade, hotels, transport, restaurant, communication and storage, social and personal services, community, insurance, financing, business services, and real estate.

Transport, hotels, communication major contributors to services sector

growth • Services sector growth has continued to be broad-

based, according to the Economic Survey 2006-07 presented in parliament on 27 February 2007.

• Among the three sub-sectors of services, ‘trade, hotels, transport and communication services’ has continued to boost the sector by growing at double-digit rates for the fourth successive year.

• Impressive progress in information technology (IT) and IT-enabled services, both rail and road traffic, and fast addition to existing stock of telephone connections, particularly mobiles, played a key role in such growth.

Services Sector Growth Rate in India GDP

• The Services Sector contributes the most to the Indian GDP.

• The Growth Rate of the Services Sector in India GDP has risen due to several reasons and it has also given a major boost to the Indian economy.

The Reasons for the growth of the Services Sector contribution

to the India GDP

• The contribution of the Services Sector has increased very rapidly in the India GDP for many foreign consumers have shown interest in the country's service exports.

• This is due to the fact that India has a large pool of highly skilled, low cost, and educated workers in the country. This has made sure that the services that are available in the country are of the best quality.

• The foreign companies seeing this have started outsourcing their work to India specially in the area of business services which includes business process outsourcing and information technology services.

• This has given a major boost to the Services Sector in India, which in its turn has made the sector contribute more to the India GDP.

The Services Sector in India must be given boost

• Services Sector Growth Rate in India GDP registered a significant growth over the past few years.

• The Indian government must take steps in order to ensure that Services Sector Growth Rate in India GDP continues to rise. For this will ensure the growth and prosperity of the country's economy.

Financial services has larger share of GDP in India than in

UK

• Financial services accounted for 9.7 per cent of India's GDP in 2005-06, which was 1.2 per cent more than the share of financial services in the GDP of the UK, as per a global consulting firm KPMG study .

• Growth in financial services (comprising banking, insurance, real estate and business services), after dipping to 5.6% in 2003-04 bounced back to 8.7% in 2004-05 and 10.9% in 2005-06. The momentum has been maintained with a growth of 11.1% in 2006-07.