The Indian Economy - A Quick Profile

GDP (Gross Domestic Product) PPP (Purchasing Power Parity) per capita in the world. (Photo credit: Wikipedia)

Alongside those of Brazil, Russia, China and South Africa, the Indian economy forms BRICS, the group of nations with the fastest growing economies in the world. These nations represent the next generation of economic superpowers, however, India and China in particular are already establishing themselves amongst the largest and most potent industrial powers on the planet.

The Statistics
The considered size of the Indian economy varies depending on which metric is used to gauge it. According to the latest measurements of Gross Domestic Product - a reading of the output of a nation’s workforce - it is currently the ninth largest economy in the world. Moreover, when the figures are adjusted to take into account the true value of wealth in each country and the Purchasing Power Parity variant of GDP (GDP PPP) is used, India’s economy can already be considered as the third largest on the world stage. There is a real disparity however between this collective strength and the prosperity of individuals within the country. When these measurements are looked at per capita, they show that India’s population sit (on average) outside of the top one hundred wealthiest and so, in fact, can be considered one of the poorest populations despite the fact that recent economic success has doubled the hourly wage in last decade.

Growth in the Indian economy has really surged following the liberalisation of trade and employment rules in the early 1990s and a subsequent shift towards more capitalist sensibilities. These policies have essentially unlocked the country’s extensive natural resources, space and land as well as a relatively inexpensive labour force (the second largest work force in the world) who are consequently becoming better educated and more affluent. What’s more this affluent population are, in turn, increasing the size of the internal consumer market and the resultant growth in the Indian economy from all of these factors is now averaging around 7.5% a year.

Economic Sectors
Many in the West may envisage that India’s economy is mostly made up of large manufacturing industries or large scale agriculture. These sectors do play an important role in India’s prosperity, particularly agriculture which accounts for 28% of the nation’s output; making use of the vast tracts of land to produce arable crops. Manufacturing and industry however, perhaps surprisingly, only accounts for 18% of the country’s output despite the fact that some of India’s most prominent businesses and global names operate in these markets as, for example, steel suppliers or car manufacturers. India is indeed the second largest growing car producer in the world and still acts as a major (and growing) force in manufacturing and industry on the world stage.

The dominant sector in the Indian economy, as it tends to be in western economies, is the service sector, accounting for 54% of GDP. The most familiar element of that sector to us in the UK may well be the Indian call centre. Over the last few years, countless European and American businesses have spotted the opportunities to move their support services across to India to take advantage of the lower labour costs, good communications infrastructure and educated talent pool for whom English is a prevalent language. However, India is also a leading light in the information technology industries, proving a real challenger to the US as the global player for third party IT services; not to mention possessing established and well developed financial services and banking industries.

For some, the growth in economies across Asia, particularly those of China and India mean that can be considered the right time to investigate investment opportunities, such as Asian Investment Funds, whilst the European investment markets continue to suffer the effects of the recent economic troubles. The Indian economy is certainly on course to become, if it isn't already, one of the most prominent in world trade.

© Stuart Mitchell 2012

The Currencies of Asia’s Leading Economies

English: Japanese Yen and Chinese Yuan signs (Photo credit: Wikipedia)

Asia is home to many of the emerging powerhouses of international trade including the second largest economy in the world, China. Economic muscle in Asia continues to grow whilst markets elsewhere in the world get to grips with the global recession. It is therefore worth being familiar with not only its largest economies but in particular their official currencies.

China
The official currency of the Peoples Democratic Republic of China is the Renminbi (translated as the ‘peoples currency’). The currency is controlled by the People's Bank of China and is used throughout the country, with the exception of the semi autonomous city states of Macau (Macanese pataca) and Hong Kong (Hong Kong dollar). The currency is also used unofficially in Mongolia and areas of Burma.

The primary unit of the Renminbi is the yuan with one yuan, ¥ 1, being made up of 10 jiao or 100 fen. The term yuan itself derives from the name for a small round coin and shares this derivation with the similarly titled currencies of Japan and South Korea (see below). Legal tender in China includes coinage from ¥ 0.01 to ¥ 1 and bank notes from ¥ 0.1 to ¥ 2.

In pound sterling, one yuan is currently worth around £0.101 although the currency’s use in international trade markets is still taking its first tentative steps.

India
India’s official currency is the Indian Rupee which is again used elsewhere unofficially including areas of neighbouring Bhutan and Nepal. The currency is issued by the Reserve Bank of India whilst the rupee’s symbol, ₹, is relatively new and only came into use in July 2011 following a public competition to redesign it.

One rupee, ₹ 1, is theoretically divided into 100 paise, however due to the low value of a paisa, the smallest unit of legal tender in India is actually (the) 50 paise (coin). India’s coinage extends up to 10 rupees and its notes range from 5 to 1,000 rupees. In pound sterling, one rupee is currently worth around £0.013.

Japan
Perhaps the most known Asian currency outside of the continent is the Japanese yen as a result of it being the third most traded international currency (behind US$ and Euro). The yen is controlled by the Bank of Japan and shares a very similar symbol, ¥, to the Chinese yuan as a consequence of the shared derivation of the term (designating a round coin).

One yen, ¥ 1, can theoretically by divided into 100 sen and 1,000 rin although due to the low value of these denominations they have not been in circulation since 1953. Japanese legal tender now ranges from ¥ 1 to ¥ 10,000 with coinage up to ¥ 500 and notes from ¥ 1,000 upwards. In pound sterling, one yen is currently worth around £0.008.

South Korea
The currency of South Korean is the won and is controlled by the Bank of Korea. As implied above, the won, and its subunit, the jeon, are both derivations of the local words for round coin, a derivation held in common with the yen and yuan of Japan and China respectively.

As with subdivisions of the yen, the won only has theoretical sub units with one won, ￦ 1, equating to 100 jeon. The lowest unit of legal tender in South Korea is a ￦ 10 coin, and the highest a ￦ 50,000 bank note. In pound sterling one won is currently worth less than £0.001.

Russia
Russia straddles (or even encompasses) much of the northern territories of both Europe and Asia and it is therefore a major economic power on both continents. It's official currency is the ruble which is controlled by the Central Bank of Russia. As the currency of the former Soviet Union, the ruble has a historical presence in areas outside of modern Russia and is still used, for example in the disputed territories of Abkhazia and South Ossetia. Currently the ruble lacks an official symbol with a variety of unofficial symbols in use, although the Central Bank of Russia are working on standardising one.

One ruble can be further divided into 100 kopeks, with legal tender taking the form of coins from 1 kopek to 10 rubles and banks notes from 5 to 5,000 rubles. In pound sterling, one ruble is currently worth around £0.021.

Some of these Asian currencies, most likely the Chinese yuan (as China embraces international economics), are likely to become almost as familiar to people in the West as the dollar or pound sterling are currently. Asia is guaranteed to play an increasingly prominent role in global finances and trade and so being aware of these markets and their currencies is vital for those looking to ride the wave of Asian success.

© Stuart Mitchell 2012
I'm a small business owner. If you want to find out more about investment opportunities in Asia then visit Asian Investment Funds.