Indicators of Economic Growth

Introduction
What is an 'Economic Indicator'?
An economic indicator is a collection of economic data, majorly at macroeconomic scale, that is
used to interpret current or future investment possibilities or to predict the health of an
economy.
The Economic Indication as economists says a secret weapon which is open source for all the
mass throughout with government websites and different indicators calculating organizations
results. The more the data one can infer from these indicators the more one knows about the
health of an economy. The indicators includes- human development index, foreign direct
investments, consumer price index (CPI), gross domestic product (GDP), unemployment figures
and the price of crude oil and the list is limited one.

Economic indicators analyses the health and divergence of the economy. The employment
report states the size of the nation's workforce, the types of careers and choices people have,
and even how many people belong the working force of the nation are the examples to name a
few where these indicators could help. Moreover, by comparing the results to past periods,
you can illustrate if those numbers are getting stronger or weaker.
The information which the various indicators display have far-reaching implications for
businesses, employees, and the economy as a whole.[1]
economydetail.blogspot.in/2010/02/indicators-of-economic-development.html
Is it a right time to start a business when incomes are rising? Looking for jobs could be more
fruitful when most people are employed.
Measurement of economic development and express in definite index is very difficult task in
economics. So many opinions are found to indicate level of economic development of a nation.

India and China

Looking into the history of both the countries have a centuries old civilizations with economy
majorly related till late 1970s. Both had the same economic setbacks in terms of inflation,
poverty, underutilization of resources, food crises and poor standard of living.
But after 1978, in China leaders focused on market-oriented structured economic development
and by 2000 output had quadrupled. For much of the population, living standards have
improved dramatically and the room for personal choice has expanded, yet political controls
remain tight. Since the early 1990s, China has increased its global outreach and participation in
international organizations.
India recently overtook China as fastest growing economy in the world with the decades long
economic reforms and stable political scenario helped to gain more acceleration.
India is developing into an open-market economy, yet traces of its past closed market policies
remain. Economic liberalization measures, including industrial deregulation, privatization of
state-owned enterprises, and reduced controls on foreign trade and investment, began in the
early 1990s and served to accelerate the country's growth, which averaged nearly 7% per year
from 1997 to 2016. India's economic growth slowed in 2011 because of a decline in investment
caused by high interest rates, rising inflation, and investor pessimism about the government's
commitment to further economic reforms and about slow world growth. Rising macroeconomic
imbalances in India and improving economic conditions in Western countries led investors to
shift capital away from India, prompting a sharp depreciation of the rupee.

Growth rebounded in 2014 through 2016, exceeding 7% each year. Investors perceptions of
India improved in early 2014, due to a reduction of the current account deficit and expectations
of post-election economic reform, resulting in a surge of inbound capital flows and stabilization
of the rupee. Since the election, the government has passed an important goods and services
tax bill and raised foreign direct investment caps in some sectors. Despite a high growth rate
compared to the rest of the world, in 2015 and 2016, Indias government-owned banks faced
mounting bad debt, resulting in low credit growth and restrained economic growth. [2]
www.indexmundi.com/factbook/compare/india.china/economy
Comparing Indias economic growth with China with the following Economic Indicators:

Gross Domestic Product

Money Supply
Consumer Price Index
Human Development Index
Ease of Doing Business
Foreign Direct Investment
Employment Rate
Standard & Poor Ratings

Gross Domestic Product

Gross Domestic Product, or GDP, is the total market value of all goods and services produced by
a country in a specific time period, typically a year. This includes earnings from foreign
investments.
There is something called real GDP which broadly measures the wealth of a society by
figuring out how fast profits might grow, and the expected return on capital.
Its labeled real because its a comprehensive way to gauge the economic well-being of a
nations economy. Every year the data must be adjusted to account for changes in prices from
year to year. [3] dailyreckoning.com/top-10-market-indicators-of-economic-development
GDP calculates the value of the economy within a country's territory but GNP (Gross National
Product) calculates the value of economy contributed by countrys citizens.
We can use the following equation to calculate GDP and GNP:
GDP = Consumption + Government Expenditures + Investment + Exports Imports
GNP = GDP + Net income inflow from abroad Net income outflow to foreign countries

COUNTRY/ INDIA CHINA

INDICATOR
GDP Growth Rate YoY 5.7% 6.9%
GDP Per Capita (2017) 1861.50 USD 6894.50 USD
GNP (2017) 184031.100 USD 111775.01 USD
*tradingeconomics.com: Central Statistical Organization
GDP ANNUAL GROWTH RATE-
Comparing Annual growth rate of both countries we can infer how the heterogeneous flow of
GDP in case of India when actually its GDP was above Chinas in 1990. Due to extreme
reformations in Chinese economy it took a leap in the growth before stabling at around 6 in
recent years. However, we can also infer about Indian economy due to its recent reforms and
IMFs forecast for Indias GDP above 8% for about a decade will make India superpower in
growth.
Money Supply
Money supply is a representation of the total amount of money a country has in circulation.
Different groups of numbers show different subsets of money, based on how liquid they are, or
how easily you can sell them.
M1 is just the dollar value of physical cash and coin, which is the most liquid.
M2 includes all of M1, as well as checking accounts, travelers checks and demand deposits,
personal as well as government deposits.
M3 includes the net time deposits (fixed deposits), savings deposit with post office and all
components of M1.
India

Money Supply M1 28813.20 INR Billion

Money Supply M2 29069.06 INR Billion
Money Supply M3 131811.91 INR Billion
*Source - tradingeconomics.com: Central Statistical Organization
China

Money Supply M1 6970.00 CNY Billion

Money Supply M2 51790.00 CNY Billion
Money Supply M3 165570.00 CNY Billion
*Source - tradingeconomics.com: Central Statistical Organization
Consumer Price Index
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a
basket of consumer goods and services, such as transportation, food and medical care. It is
calculated by taking price changes for each item in the predetermined basket of goods and
averaging them. Changes in the CPI are used to assess price changes associated with the cost of
living; the CPI is one of the most frequently used statistics for identifying periods of inflation or
deflation. [4] investopedia.com/terms/c/consumerpriceindex.asp#ixzz4yCDc1Umu

INDIA

Inflation Rate 3.28%

Consumer Price Index CPI 135.20 (index points)
*Source - tradingeconomics.com: Central Statistical Organization
CHINA

Inflation Rate 1.90%

Consumer Price Index CPI 101.35 (index points)
*Source - tradingeconomics.com: Central Statistical Organization

Human Development Index

The Human Development Index (HDI) was created to emphasize that expanding human choices
should be the ultimate criteria for assessing development results. Economic growth is a mean
to that process, but is not an end by itself. The HDI can also be used to question national policy
choices, asking how two countries with the same level of Gross National Income (GNI) per
capita can end up with different human development outcomes.
The Human Development Report Office strives to include as many UN member countries as
possible in the HDI. To include a country in the HDI we need recent, reliable and comparable
data for all three dimensions of the Index. For a country to be included, statistics should ideally
be available from the national statistical authority through relevant international data
agencies.[5] Website: United Nations Development Programme
Components HDI has-

A long and healthy life: Life expectancy at birth.

Education index: Mean years of schooling and Expected years of schooling.
A decent standard of living: GNI per capita (PPP US$)

China has a very High Human Development Index which is at 12, whereas India has medium
Human Development Index at 131.
Ease of Doing Business

Economy Rankings
Economies are ranked on their ease of doing business, from 1190. A high ease of doing
business ranking means the regulatory environment is more conducive to the starting and
operation of a local firm. The rankings are determined by sorting the aggregate distance to
frontier scores on 10 topics, each consisting of several indicators, giving equal weight to each
topic. The rankings for all economies are benchmarked to June 2017. [6] Website: World Bank
Group- www.doingbusiness.org/rankings
A high ranking means that the regulatory environment is conducive to business operation.
YEAR 2017

Country Distance to Frontier (DTF) RANK

INDIA 60.76 100
CHINA 65.29 78
* Website: World Bank Group- www.doingbusiness.org/rankings

Foreign Direct Investment

Foreign direct investment (FDI) is an investment made by a company or individual in one
country in business interests in another country, in the form of either establishing business
operations or acquiring business assets in the other country, such as ownership or controlling
interest in a foreign company. Foreign direct investments are distinguished from portfolio
investments in which an investor merely purchases equities of foreign-based companies. The
key feature of foreign direct investment is that it is an investment made that establishes either
effective control of, or at least substantial influence over, the decision making of a foreign
business.
Foreign direct investments can be made in a variety of ways, including the opening of a
subsidiary or associate company in a foreign country, acquiring a controlling interest in an
existing foreign company, or by means of a merger or joint venture with a foreign company. [7]
www.investopedia.com/terms/f/fdi.asp#ixzz4yCRkvj3v
FDI till - 2017

Country FDI
India 1108 USD Million
China 940.13 USD HML
* Source - tradingeconomics.com: Central Statistical Organization
According to Department of Industrial Policy and Promotion (DIPP), the total FDI investments
India received during April-June 2017 stood at US$ 14.55 billion, indicating that government's
effort to improve ease of doing business and relaxation in FDI norms is yielding results.
Data for April-June 2017 indicates that the services sector attracted the highest FDI equity
inflow of US$ 1.88 billion, followed by computer software and hardware US$ 1.32 billion and
trading US$ 769 million. Most recently, the total FDI equity inflows for the month of June
2017 touched US$ 3.12 billion.
During April-June 2017, India received the maximum FDI equity inflows from Mauritius (US$
3.29 billion), followed by Singapore (US$ 3.01 billion), Germany (US$ 798 million), USA (US$ 660
million), and Netherlands (US$ 584 million).
Indian impact investments may grow 25 per cent annually to US$ 40 billion from US$ 4 billion
by 2025, as per Mr Anil Sinha, Global Impact Investing Network's (GIINs) advisor for South
Asia. [8]
www.ibef.org/economy/foreign-direct-investment

Unemployment Rate
The degree to which society can provide employment to those who seek employment is one of
the most important indicators of the well-being of any society. Therefore, the unemployment
rate, which measures the inability to provide such employment becomes the most important
indicator to measure the health of a modern economy.
The larger the proportion of productively employed labour force of a population, the greater
the well-being of society. A society where a large proportion of the labour force is employed
provides respite from poverty and vulnerability. It also motivates households to spend more to
improve their quality of life. In doing so, households propel economic growth and more
employment.
An increase in unemployment on the other hand, reduces aggregate spending power, slows
down the economy and most importantly, it increases the vulnerability of households to deal
with economic shocks. [9]
http://www.bseindia.com/bsecmieindices/unemployment.aspx
Thus unemployment rate is one of the most important indicators of an economy. In an ever
changing world it is important to have such an indicator at fast-frequency so the corrective and
preventive actions can be taken without wasting time.

Job creation in India is not expected to pick up pace in 2017 and 2018 as unemployment rises
slightly, representing a near stagnation in percentage terms.
"Unemployment in India is projected to increase from 17.7 million last year to 17.8 million in
2017 and 18 million next year. In percentage terms, unemployment rate will remain at 3.4 per
cent in 2017-18," according to the United Nations International Labour Organization (ILO).[10]
http://www.businesstoday.in/current/economy-politics/unemployment-in-india-to-increase-
marginally-in-201718-report/story/244145.html
S & P Ratings
The S&P rating is a credit score that describes the general creditworthiness of a company, city
or country that issues debt. The Standard and Poor's company rates how likely a debt will be
repaid. The ratings are for information only. They aren't investment recommendations nor do
they predict the probability of default. S&P also rates the creditworthiness of individual bonds.
Here's more about the different types of bonds.
S&P ratings helps to decide whether to buy a bond or not. It is also relevant to know how a
countrys economy is being performing. This helps in investments like foreign stocks and forex
trade.
S&P classifies all debt-issuing entities they review according to the following scale: [11]
https://www.moneycrashers.com/what-is-sp-credit-ratings/

AAA, AA+, AA, and AA- (Very High Capacity to Repay Loans)
A+, A, and A- (Strong Capacity to Repay Loans)
BBB+, BBB, and BBB- (Adequate Capacity to Repay Loans)
S&P publishes ratings for 130 countries. The company analyzes how likely it is that a country
will default on its sovereign debt. It bases this on its analysis of four factors. It looks at whether
the country's government is stable and follows sustainable fiscal policies. It reviews the
country's economic strength and its growth prospects. It takes a look at foreign direct
investment. The analysts give an opinion on whether the nation's central bank is independent
of its government and uses good monetary policy. [12]
(Source: "Global Sovereigns," S&P Global Ratings.)
S & P Ratings

India China
BBB- AA-
Below are comparative economic indicators to know where Indian and Chinese economy stands
Trade

Source: https://countryeconomy.com/countries/compare/china/india