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Report on India's Economic Trends and Forecasts

Explore India's economic scenario, analyzing key factors like currency, GDP, government expenditure, and foreign relations. Delve into stock market trends, trade deficits, government spending, and infrastructure investments. Gain insights for future financial decisions.

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Report on India's Economic Trends and Forecasts

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  1. Report on India Angus Wong FeiQue Kibwe Prosper AmmarGohir Adam Khan

  2. Introduction • Enormous growth potential in a fast growing emerging economy, showcased by the India’s GDP which has been rapidly climbing since 2003. • Significant slowdown this year in India’s economy, but India still retains strong growth comparatively to global markets.

  3. Introduction • This slowdown is attributed to several key reasons which can be seen by analyzing India’s Currency, GDP, GovernmentExpenditure, Foreignrelations, and Government Policy.

  4. India’s Currency – The Rupee • The Indian Rupee has been on a steady decline for the past year, losing approximately a quarter of its value. • The most evident reason for this is overall global economic weakness. • A weaker currency should boost exports and gradually balance out the value of the currency, but a weak global market has caused a reduction of exports.

  5. The Indian Rupee

  6. Factors Contributing to India’s Worsening Economics • India’s GDP peaked at 10.4% in 2010 • Current GDP down to 5.3% • Indian Currency (Rupees) Down 25.5% from 2010 against US dollar • 237.1bn in External Debt and potential threat of future default • Rising Gas Prices have taken a toll on Import and Exports (Freight) • Shortage of electricity causing Manufacturing and Industrial shutdowns lasting 8hrs or more daily

  7. Decreasing Global Demand Leading to Slowdown of Economy

  8. Heavy Inflation Since 2008 Greek Crisis USA

  9. State of Indian stock markets • Because of current state of the economy, stock markets in India have declined of over the past year • It was announced recently that S&P would downgrade the investment grade for India (BBB- to BB+) • Due to poor economic conditions, we conclude that right now the stocks markets in India are bearish

  10. Bombay Stock Exchange Sensitive Index

  11. National stock exchange of India

  12. Foreign Relations • From 1994 to 2012, India ran a trade surplus for 3 quarters in total • Deficit of US $134.9b 2011-2012 • Major trade partners are UAE and Iran • Import totals US $379.4b, crude oil takes up 36.7% (US $139b)

  13. Government Expenditure • Revenue Expenditure • Consists of year-to-year payments such as defense spending, government grants and subsidies, and interest payments • Major gross increases in revenue expenditure • By percentage of GDP, revenue expenditures remain stable • By percentage of total revenue expenditures, defense spending is on a decline while grants and subsidies to corporations and individuals are on the increase

  14. Revenue Expenditure

  15. Government Expenditure • Capital Expenditure • Consists of expenditure utilized in the growth of India, mainly long-term infrastructure projects • Over the recent years, growth of capital expenditures have increased at a much higher rate than revenue expenditures, 202% as compared to 232% • Government showing increased focus on India’s infrastructure as opposed to current payments

  16. Forecast • Overall forecast – Pending Recession • Constant negative Balance of Trade, affected more by the decline of the Rupee • Increasing trade deficit due to loss of European importers in their own rampaging recession • Increase in subsidies and grants to individuals and corporations, which still doesn’t cover the whole population even with GDP growth • Power grid does not cover all of India, and is inefficient to what it can reach

  17. Forecast • Recession is bound to occur unless the government takes action in • Major infrastructure investments • Focus on restoring trade deficits through indirect incentives to boost its domestic economy

  18. ETF #1: Emerging Global Shares Indxx India Small Cap ETF (NYSEARCA:SCIN) • Position: Short • Tracked by EGshares for a sample of 75 small cap companies in India • Economic indicators point to GDP slowdown in India • Heavy weights in sectors believed to have slowdowns for a downturn in the economy

  19. India Small Cap ETF: SCIN

  20. ETF #2: EGShares India Infrastructure ETF (NYSEARCA:INXX) • Position: Long • Tracked by EG shares on the 30 leading companies dealing with infrastructure • The Indian government must invest heavily in infrastructure in India to promote future growth and avoid the pending recession

  21. India Infrastructure ETF: INXX

  22. Conclusion • India is headed in an ambiguous direction, depending on government action • Government will most likely bolster the economy with improvements to infrastructure and balancing trade deficits • Government reform will take place due to massive shortfalls in subsidies, grants, infrastructure, and expenditure deficits

  23. Conclusion – ETF Choices • Our ETF choices reflect in what the government is most likely to do to save the economy • Small cap companies in India are most likely to face a low period due to consumers focusing on necessities, especially since many in India already face poverty • Infrastructure companies are bound to grow due to India’s necessity to improve conditions to its people and businesses

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