Cardinal
Economic Indicators
In
India, we say that, our banking system is one of the robust and rugged systems.
Do we have to believe that or not that’s later part of discourse? But before
that, we need to comprehend some economic vitals to gain an insight into what
actually is going around us. For that matter, we don’t need to be an expertise
in number crunching rather general knowledge would do a way better.
So,
what are these cardinal economic indicators?
Economic
indicators are statistical tools to understand the economic activity of an
entity. What entity? Entity could be any organisation, a firm, an industry of
some kind or on a larger context a country. These indicators are handy when one
needs to seize the economic health of an entity. These furnish a basis to do
analysis of economic performance and of future performance of an organisation.
So, if a firm is in red or doing slack business then these indicators would
show the same i.e. unsatisfactory figures. Economic indicators include
various indices, earnings reports, and economic summaries. So, what do these
economic indicators constitute?
These
are unemployment rate, attrition or quits rate (quit rate in U.S.
English), consumer price index and wholesale price index (a measure for
inflation), consumer leverage ratio, industrial production, bankruptcies, gross
domestic product(Nominal and PPP), broadband internet penetration, stock market
prices, money supply changes, Foreign exchange reserve (One of the most
paramount indicators for India).
Unemployment Rate:-
The
unemployment rate is a measure of the prevalence of unemployment
and it is calculated as a percentage by dividing the number of unemployed
individuals by all individuals currently in the labor force. During periods of
recession, an economy usually experiences a relatively high unemployment
rate.
In
country like USA, Federal employees' job security is so great that workers in
many agencies are more likely to die of natural causes than get laid off or
fired. According to a vetted report, the federal government fired 0.55% of its
workers in the budget year 11,668 employees in its 2.1 million workforces.
Research shows that the private sector fires about 3% of workers annually for
poor performance. At present, USA has 5.3 percent unemployment rate.
India
has presently 3.6 pc unemployment rate reckoned annually. Unemployment Rate in
India decreased to 4.90 percent in 2013 from 5.20 percent in 2012 and then to
3.6 percent in 2014. Unemployment Rate in India averaged 7.32 percent from 1983
until 2013, reaching an all time high of 9.40 percent in 2009 and a record low
of 4.90 percent in 2013. Unemployment Rate in India is reported by the Ministry
of Labour and Employment, India.
Everyone
knows what is GDP and GNP but still let’s get a small walk through those two
vital indicators.
GDP:
- Gross Domestic Product is calculated either by measuring all income earned within
a country, or by measuring all expenditures within the country, which should
approximately be the same.
GNP:
- Gross National Product uses GDP, but adds income from foreign sources, less income
paid to foreign citizens and entities. GNP can be either higher or lower than
GDP, depending on whether or not a country has a positive or negative result
from net foreign inflows and outgo. Though GNP is still calculated, the United
States shifted to GDP as its primary economic measure in 1991, in part because
most countries in the world use GDP to measure the size and direction of their
economies. As a result, GNP numbers are less common than GDP figures.
Those
definitions aforementioned can be learned upon getting by heart and can be
blurted out when an interview would ask. But, if we are economically sound then
we should intent on comprehending the subtle part of GDP and GNP. Now, what is
that?
GDP
and GNP are calculated based on very specific time periods. But not all the
information is available at the same time. This forces the Bureau of Labor
Statistics (the agency that reports official GDP in the US) to rely on
estimates, resulting in revisions after the fact. Unreported income is another
flaw, and one that is not easily remedied. Individuals may under-report income
to minimize income tax liability, which will understate the GDP. This can be a
problem between countries as well, since under-reporting of income is more
prevalent in some countries than in others. Still another problem — given that
GDP and GNP is often used to measure economic strength from one country to
another — is that reporting tends to be less reliable in some countries than in
others. This is especially likely in less developed countries, leading to
under-estimates of true national economic output.
The
lack of comparable reporting from one country to another has given rise to two
methods of computing either GDP or GNP, nominal and purchasing power parity,
or PPP.
Nominal
is measuring the size of a nation’s economy on the basis of its economy in
local currency, converted to dollars (typically). The conversion is based on
currency exchange rates in the currency market.
PPP
ignores currency exchange rates, and measures the economy of countries based on
the cost of a common basket of goods and services. For example, housing costs
more in the US than it does in India, so housing in India will get a boost in
compiling GDP or GNP on the basis of PPP.
As
a rule, PPP will result in a relatively higher GDP or GNP in a country where
costs are lower. PPP adjusts for the fact that a house in the US may cost
$200,000, while a similar home in India may be only $50,000. It attempts to
even out price variations between countries.
As
an example, under nominal, in 2015, India’s GDP 2,067,501 millions of USD or $
2.04 trillion and using PPP, India’s GDP is $ 7,375,900,000,000 — or
about 3.6 times higher.
Herein
below are some figures pertaining to economy of India.
Markets
|
Last
|
Reference
|
Frequency
|
Currency
|
65.43
|
Oct/2015
|
Daily
|
Stock
Market
|
26933
|
Oct/2015
|
Daily
|
GDP
|
26933
|
Oct/2015
|
Yearly
|
GDP
|
2067
USD Billion
|
Oct/2015
|
Yearly
|
GDP
Growth rate
|
7
%
|
Dec/2014
|
Quarterly
|
GNP
|
56739
INR Billion
|
Dec/2014
|
Yearly
|
GDP
Per Capita
|
1263
USD
|
Dec/2014
|
Yearly
|
GDP
Per Capita PPP
|
5565
USB
|
Dec/2014
|
Yearly
|
Foreign Exchange Reserves:-
Foreign
Exchange Reserves in India decreased to 349980 USD Million in September 25 from
352020 USD Million in the previous week. Foreign Exchange Reserves in India
averaged 188027.95 USD Million from 1998 until 2015, reaching an all time high
of 383643 USD Million in December of 2009 and a record low of 29048 USD Million
in September of 1998. Foreign Exchange Reserves in India is reported by the
Reserve Bank of India.
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