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HI5003 Economics for Business Individual Assignment Help
Australia and India are two very strong countries in terms of their developing economy. In this assignment we need to compare the economy of Australia with India in terms of GDP in last 2- 5 years and what are the factors which are affecting to GDP. In the Asia pacific region Australia and India are two democratic countries. In respect to the area they are 6th and 7th largest country. With high GDP Australia is developed country and with high population India is developing country which is boon and bane for its developing economy. USA and China are the main import and export partners of India and Australia. For comparing the economy stability of the both the countries we need to find out certain factors which are national output, fiscal; policy, monitory policy, external sector performance, labour market, inflation rate, population rate, and micro and macro-economic development. The comparison is done with the view of knowing the economies similarities and differences.
For measuring the value of given output which is generated within the country for the goods and services which are produces annually. We need to find out the gross domestic product (GDP).we can do comparison of generated output annually or quarterly basis. It alone cannot measure the economy stability and wellbeing of the country. It just gives us the scenario that how the country is performing in the international market. If the GROSS DOMESTIC PRODUCT rate is higher than it indicates that country is generating more business, more revenue is earned and more employment is generated out of it. Calculating GD helps us in knowing where our country is developing in positive sense or it is declining its position in market in respect to other country.
Economically Australia is still recovering from the global meltdown of year 2009-11 which lead the country to be a part of global economic depression. After economic depression government has taken various initiatives to stimulate the government which includes promoting industries and new products in the market.
Recently in September-December 2016 quarter Australian economy shrank by .5 percent which made the government and RBA took corrective measure and attempts are made to bring back the GDP on track. One of the corrective measure which is proposed to be taken by RBA was an instant reduction in borrowing cost or cash cost. According to various analysts 2017 would be the year when RBA would reduce the rate of borrowing by 1 percent which will be a huge stimulus for the economy and it would enhance the flow of cash in the market and increase the GDP of the country. A shrink in GDP in a quarter in Australia is a rare phenomenon and it happened only 4 times in Last 25 years of economic history of Australia.
Australian bureau of statistics indicated that this slump is partly because of reduced activities in the construction industry of the country and partly because people started cutting back on their expenditure. According to Treasurer Scott Martin the GDP figures presented now are “demand support for policies of job and growth”. He and his assistant are deeply disappointed by the GDP figures of recent quarter but they are confident that coming quarters would be highly promising and they are confident that upcoming quarters would be expanding GDP of Australia. This might be the official outlook of Australian government, RBA and treasurer but there are various market analysts who disagree and consider that this shrink is not just a passing phenomenon but there are strong fundamentals behind this development. Steven Knight who is a celebrated analyst of market at Blackwell Global is giving a broader view of the entire development. He states that Sep-Dec 2016 quarter is the 12th successive quarter in Australian economy which is observing a drop in private investment and that is something everybody should be worried about. He is describing current situation of GDP of country as vulnerable and if fundamentals are not corrected and private investments are not encouraged then there would be a repetition of such GDP shrinkage. He is arguing that in last 6 months there has been a pick up in the prices of crude oil, coal and iron ore which is cushioning the impact of lack of private investment in the economy and that is the reason why no one in government and RBA are able to feel the pinch. He is taking a long term perspective here and asking the most relevant question “what will happen when prices of these commodities level off and their demand slacks”? (Farrer, 2017).
Jason Murphy of news.com.au has a different approach towards this disaster and he is claiming it to be the best thing that has happened to Australian economy. Last three months of Australian economy is the worst period of GDP in last few years and he states that this time nobody has an excuse regarding why it is happening. GDP is just an indicator of the economy and there are various aspects which need to be considered before leaping to a conclusion. He states that another indicator “Net national disposable income per capita” is actually increasing and it indicates that part of GDP which is available to average individual is actually growing up. Below is a graphical representation of NNDIPC
He argues that this has went up in last three quarters which is a positive sign and yes there are negative issues attached with economy and but it is not as bad in shape as it is proclaimed by some of the market analysts.
Another positive aspect of this development is the fact that now government is actually worried about it and they are planning to take a lot of steps to stimulates the economy. A shrinking economy means a cut back in job and growth and these has been the basic tenants on which current government won their election. If they are not able to deliver jobs and growth to Australia and instead end up reducing GDP and increasing unemployment then it would be very embarrassing for the government and another consecutive quarter like Sep-Dec 2016 and it would be official that economy of Australia is slipping into a recession. It is expected that to avoid such developments government would step up the expenditure on infrastructure development, money market and they would also pump in money in the market. This will improvise infrastructure for the people, it would increase the employment opportunity and most importantly it would keep the government on toes regarding such developments (Murphy, 2017).
The economy of India is expected to be high in the recent financial year which is approx. 7.6%. The Indian economy is 6th largest in the terms of GDP and 3in terms of purchasing power parity (PPP). Economically India is on busting high growth and maintaining stable annual growth rate. It is also very much focus on rising high foreign exchange reserves and development of capital market (Malhotra, 2014).
The recent growth rate of India is 7.6%in the year 2017 which has increased from the precious year which was 7.0% in 2016 which indicates positive growth in the country. If we see the GDP of 2014 then it was 7.2% which was increased in 2015 which was 7.6% but it declined in 2016 by .6%. Recent GD is $2.30 trillion in 2016.
If we talk about the service sectors then India is one of the fastest growing countries in the world. This sector has contributed 45.4% in the GDP of recent year 2016. Agriculture sector has contributed to the 16.5% in the GDP OF THIS YEAR AND industry has contributed to the 29.8% in growth of GDP (Tiwari, et al. 2013).
The inflation rate of the year 2016 is 3.41% which is declined from the previous year which was 3.90% which shows the positive sign for the growth of the country. If we talk about the population then it is 2l.2% population which is below poverty line in the year 2013 which is assumed that in recent year it must have decreased.
Now if we talk about the labour forces engaged in the occupation then this is like in agriculture it is 49%, industry it is 20%, and service sector it is 31% approx. in year 2014. Unemployment percentage is like 4.9% in urban areas, 5.1% in rural area, and 5.0% in national areas in 2016 which is according to the labour bureau (Varghese, et al. 2016).
Now let’s come to the external affairs of the country. India does the exports of $272.4 billion in the year 2015. The main goods which are been imported by India are software, petrochemicals, agriculture, leather, jeweller, engineering goods, pharmaceuticals, textiles, chemicals, transportation, ores and other commodities. Main export partners of India are European Union with 16.9%, United States with 15.2% and United Arab Emirates with 11.3% and Hong Kong with 4.6% in the recent year. Import is approx. $ 409.2 billion in 2015. Main imported items are crude oil, gold, precious stones, electronics, engineering goods, chemicals, plastics, coal and ores, iron and steel, vegetable oil , etc. the main importing partner are china , European union, Saudi Arabia and Switzerland.
There was a great slowdown of the economy in India in the year 2012 due to the crude oil disaster taken place in India due to which India has bare a huge loss. But now stability has been observed in the country and it is been developing in the positive way. And it is also expected that within the year 2030 India will be a developed country.
Recently in India there was a demonetization act taken place in which all the notes of Rupees 500 and rs1000 and been considered as illegal. By this step of the government the economy of the country has effected very strongly and now its consequences will be seen at the ending of the financial year march 2017 (Ok, et al. 2014).
The graph showing the GDP growth and GVA growth of the country:
Comparison between Australian and Indian GPD in Recent Years
The Australian economy has dominated its status with uniform growth, limited inflation rate, strong and stable financial system, lower unemployment and a very low public debt under its economy. In year 2012, Australia had achieved a growth rate of 3.5 per cent per annum uniformly during last 20 years of economic growth. The increasing exports in energy and resources sector from loyal consumers such as China and US allows Australian economy to expand their growth rate prominently (Knop, et al. 2014). The commodity exchange led to increase the rate of Australian dollar which has hurt the manufacturing sector of the country. Australian economy is highly based over service sectors which comprises of about 70 per cent of total GDP of the country and 75 per cent of total employment. Australian economy was majorly unaffected from the global financial crisis and recession as the country’s banking system stood strong during the bad economic phase to control the damage and inflation rate remained totally under control. The increment in global commodity prices has enhanced the Australia’s significance as an exported. The foreign investments have been increased with Australia’s abundance and diverse nature of natural resources. Australia has high reserves of coal, uranium, copper, gold, natural gas, iron and renewable natural resources (Rees, 2014).
Indian economy is considered to be in a developing phase. The country’s economic model prefers open market economy but some traces of the past autarkic policies can still be observed in the country. Indian economy is majorly dependent over farming and agriculture. But with increased economy encompass multitude service sectors, modern industrial manufacturing, modern agriculture and handicrafts are popular sectors of India’s economy. Most of the work force of Indian economy comes out of agricultural sector but service sector holds major source of income to economic growth in the country. The outsourcing industry of country and software workers have revolutionised major businesses and information technology services. The education system of the country focus over English speaking courses which depicts large population to get employment in major exporting businesses in the country. The global financial crisis was rebounded from Indian economy due to strong and high domestic demand and uniform growth rate of 8 per cent year after year. In the early 2011, the economy started surging due to declining investments and slowdown in public spending by the government. India is a major exporter of oil and with increasing global crude prices from 2011 to 2014 the fiscal deficit of the country significantly increased. Indian government tried to push back with additional reforms and policies to reduce the impact of external factors. Introduction of FDI (Foreign Direct Investment) in Indian economy was initiated to outlook the medium term growth rate. The economy also face long term challenges such as poverty, increasing population, corruption and unemployment which reduced the effectivity of any financial reforms in the country.
Major differentiating factors among India and Australian GDP
504.70 Billion USD
3 times more than India
172.10 Billion USD
Budget, surplus or deficit
-3.4 per cent of GDP
-5 per cent
47 per cent more than Australia
69 per cent more than Australia
257.90 Billion USD
301.90 Billion USD
1.52 Trillion Dollar
1.84 Trillion Dollar
21 per cent more
GDP per capita
5.2 per cent
8.5 per cent
63 per cent more than Australia
Imports per capita
28 times more than India
Human development Index
59 per cent more than India
Purchasing power parity
961 billion USD
4.72 Trillion USD
5 times more than Australia
4 per cent more than India
GDP per capita in 1950
597 USD597 USD
263 Billion USD
503.50 Billion USD
91 per cent more than Australia
Foreign exchange reserves and gold per capita
5 times more than
Figures and Graphs
This assignment has successfully studied and summarised the comparison of Australian economy with Indian economy. The factors affecting the GDP of both the countries in recent years have been closely observed in this assignment. The growth rates of both economies are uniform due to external and internal factors such as strong exports in Australia and increased local retail sales of India.
Farrer, M. (2017) Australian economy: RBA 'will cut rates to 1%' after decline in GDP – as it happened (Online) available onhttps://www.theguardian.com/business/live/2016/dec/07/australian-economy-dollar-tumbles-after-worse-than-expected-gdp-figures-live last accessed on 14/02/2017
Murphy, J. (2017) Australia’s GDP disaster could be the best thing that ever happened to us (Online)http://www.news.com.au/finance/economy/australian-economy/australias-gdp-disaster-could-be-the-best-thing-that-ever-happened-to-us/news-story/02d100febc624c881237598cac0b0b52 last accessed on 14/02/2017
Malhotra, B., 2014. Foreign Direct Investment: Impact on Indian Economy. Global Journal of Business Management and Information Technology, 4(1), pp.17-23.
Rees, D., Lancaster, D. and Finlay, R., 2014. A state-space approach to Australian GDP measurement. Reserve Bank of Australia.
Knop, S.J. and Vespignani, J.L., 2014. The sectorial impact of commodity price shocks in Australia. Economic Modelling, 42, pp.257-271.
Robson, A., 2014. Australia's carbon tax: An economic evaluation. Economic Affairs, 34(1), pp.35-45.
Tiwari, A.K., Shahbaz, M. and Islam, F., 2013. Does financial development increase rural-urban income inequality? Cointegration analysis in the case of Indian economy. International Journal of Social Economics, 40(2), pp.151-168.
Varghese, M., Guha, S. and Agarwal, A., 2016. SCENARIO OF WOMEN EMPOWERMENT IN 2016: IT’S ROLE IN INDIAN ECONOMY & BUSINESS. World, 2(11).