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Factors Affecting Economic Growth India


The Economy of India is the eleventh largest in the world by nominal GDP and the fourth major by purchasing power parity (PPP). In 2010 the country's per capita GDP (PPP) is $3,290 (IMF, 127th). Following strong economic reforms from the post-independence socialist economy, the country's economic growth progress at a quick pace, as free market principles were initiate in 1991 for international antagonism and foreign investment.

The value of any money in an economy is hard to bet, to be stable for a long stage of time as there are number of factor influence its approval and the depreciation. The currency value of an economy influences the growth rate of GDP in an economy. Several other factors that have a direct power on the over or the undervaluation of a currency are listed below:

Following are the main factors affecting economic growth india

1. Capital flows and the stock market of India

This is important to note that in spite of suffering depression, an economy can grow if the capital inflow is constant or incessantly rising. In India even if the GDP rate is less, the currency can still get overvalued due to great capital inflows made by the FII’s in the Indian economy.

2. Global currency trends

Like many other money Indian rupee have also tied its knot with some of the big economy of the world as well as the names of UK, US, Japan and Canada. The depreciation or approval in the currency any of these, especially in the US dollar, influences the valuation of the Indian currency in one way or the other.

3. RBI Intervention

The assessment of the Indian currency highly depends on RBI that manages the ‘balance of payments’, slight modification in which can define the over or the under assessment of the Indian currency.

4. Oil factors

India is a major importer of oil and the valuation of Indian money gets with no trouble exaggerated by the increase in the prices of the crude oil. It can further result in spreading inflation in an economy due to the over valuation of the Indian currency.

5. Political factors

Several other factors that influence the currency constancy are some political factors like change in the government set up, introduction of new export and import policies, tax rates and many more.

Decisively, there are many factors that arise from the economic arrangement of Indian economy and affect the valuation of the Indian currency that in turn affect the economic growth rate of the economy of a country.

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