Is India a trillion dollar economy?
It depends when you ask the question. On Monday, June 30th, yes the market capitalization of the Indian financial markets was about one trillion dollars. So was the size of the Indian economy. But on Tuesday, July 1st that was not the case.
It all depends on the price of the crude oil and the exchange rate against the U.S. dollar.
Bombay Stock Exchange closed on June 30th with a market capitalization of about $1.02 trillion. On Tuesday, a fall of 500 points in the Sensex and a gain of 32 Indian paise (100 paise = 1 Indian rupee) for the dollar against the rupee saw that figure drop to $970 billion.
Similarly, India’s Gross Domestic Product for 2007-08, valued at Indian rupees (Rs) 43,02,654 crore, translated into just over $1 trillion as valued at exchange rate on June 30th. With the dollar appreciating against the Indian rupees and crossing the Rs 43 bench mark on July 1st, the India economy was down to $995billion.
High oil prices have triggered a domino effect that have ultimately robbed India of the trillion-dollar tags. The impact was visible on the export-import data released last week.
High oil prices have seen India’s oil import bill rise to $16.5billion for April-May this year, up 49 percent from the figure for the same months of 2007. As a result, the overall import bill has risen by 32% to $48.8b. Despite the fact that exports have grown at 22%, the trade deficit has risen to $20.6 billion — up about 48 percent.
The widening trade deficit has added to the demand for dollars as against Indian rupees. So while the U.S. dollar has been generally depreciating against most currencies, it has been appreciating against the Indian rupee. The exchange rate is over 43 Indian rupees.
India’s economy is faced with trio challenges — rising oil prices, worrisome inflation, and depreciation of Indian rupee — and that is not good news for the country.
Tags: GDP, Indian economy, Indian rupee, Inflation, Trade-deficit, U.S. dollar
