Interest Rates and Industrial Growth

Topics: Inflation, Monetary policy, Interest rate Pages: 15 (4324 words) Published: July 17, 2013
ECONOMICS PROJECT REPORT
ON
INTEREST RATES AND INDUSTRIAL GROWTH
(2009-10 to 2011-12)

Submitted By:
Mohana Goel (12DM077)
Mohit Bhola (12DM078)
Nidhi Dalal (12DM090)
Nishant Raj (12DM097)
Nishtha Chugh (12DM098)
Piyush Chib (12DM102)
CONTENTS
1. INDIAN ECONOMY:Overview
2. INTEREST RATES
3.1. MEANING
3.2. REAL vs NOMINAL INTERST RATES
3.3. TYPES OF INTEREST RATES
3.4. EFFECT OF INTEREST RATE RISE
3. MONETARY POLICY
4.5. MEANING
4.6. OBJECTIVE
4.7. TOOLS
4.8. IMPORTANCE
4. 2009-10
5.9. OBJECTIVE OF MONETARY POLICY
5.10. POLICY STANCE
5.11. ANALYSIS
5.12. OBSERVATION
5. 2010-11
6.13. OBJECTIVE OF MONETARY POLICY
6.14. POLICY STANCE
6.15. ANALYSIS
6.16. OBSERVATION
6. 2011-12
7.17. OBJECTIVE OF MONETARY POLICY
7.18. POLICY STANCE
7.19. ANALYSIS
7.20. OBSERVATION
7. CONCLUSION
8. RECOMMENDATION
9. BIBLIOGRAPH

INDIAN ECONOMY: AN OVERVIEW
India is a South Asian country that is the seventh largest in area and has the second largest population in the world. India covers an area of 3,287,240 square km and its population stands at 1.215 billion people in 2010. Understanding the Indian Economy

Large, dynamic and steadily expanding, the Indian economy is characterized by a huge workforce operating in many new sectors of opportunity. The Indian economy is one of the fastest growing economies and is the 12th largest in terms of the market exchange rate at $1,430.02 billion (2010 India GDP). In terms of purchasing power parity, the Indian economy ranks the fourth largest in the world. However, poverty still remains a major concern besides disparity in income. The Indian economy has been propelled by the liberalization policies that have been instrumental in boosting demand as well as trade volume. The growth rate has averaged around 7% since 1997 and India was able to keep its economy growing at a healthy rate even during the 2007-2009 recession, managing a 9.668 % growth rate in 2010 (India GDP Growth). The biggest boon to the economy has come in the shape of outsourcing primarily in the areas of technical support and customer services. The economy of India is as diverse as it is large, with a number of major sectors including manufacturing industries, agriculture, textiles and handicrafts, and services.

The State of India Inc.
In 2011-12, rate of growth is estimated to be 6.9%.Outlook for growth and stability is promising with real GDP growth expected to pick up to 7.6% in 2012-13 and 8.6% in 2013-14.

Agriculture and Services sectors continue to perform well. 2.5 % growth in Agro sector forecast. Services sector grows by 9.4 %, its share in GDP goes up to 59%.Industrial growth pegged at 4-5 percent, expected to improve as economic recovery resumes

Almost all industries in industrial societies use borrowed funds in the course of business. As the interest rate rises, borrowing costs increase, which in turn results in decrease in business borrowing. This inhibits industrial expansion, slows the transmission of goods and services, and ultimately reduces all economic activity. At times a country may use this relationship intentionally to reduce excess economic activity that threatens to produce a "bubble"; at other times they may do the opposite i.e. lower interests to increase economic activity.

INTEREST RATE-Meaning
An interest rate is the rate at which interest is paid by borrowers for the use of money that they borrow from a lender. Specifically, the interest rate (I/m) is a percent of principal (I) paid at some rate (m).

Nominal Interest Rates vs. Real Interest Rates
The real interest rate, is one where the effects of inflation have been factored in. A nominal variable is one where the effects of inflation have not been accounted for. Suppose we buy a 1 year bond for face value that pays 6% at the end of the year. We pay $100...

Bibliography: http://www.rbi.org.in/
http://indiabudget.nic.in/
http://www.worldbank.org/en/country/india
http://pib.nic.in/
http://www.thehindu.com/
http://economictimes.indiatimes.com/
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Interest Rate Essay
  • interest rates Essay
  • Interest Rate Essay
  • Interests Rates Essay
  • Essay on Chinese Interest Rate Liberalization
  • Essay on Growth Rates
  • Economics and Growth Rate Essay
  • Inflation Rates and Interest Rates (Mankiw) Essay

Become a StudyMode Member

Sign Up - It's Free