Nrega & Impact on Gdp

In: Business and Management

Submitted By jpsingh72
Words 672
Pages 3
The economic slowdown has been haunting India for quite a few quarters now. Sluggish industrial and construction activity, stalled projects and lack of reforms have all taken its toll. What has made matters worse is that inflation has remained consistently high. As a result of which the RBI does not have much headroom to lower rates even when growth is slow. Thus, it is quite apparent that India suffers from stagflation. The latter is a difficult economic situation where prices remain high even when growth slows down.

The slowdown in growth has been due to a combination of factors cited above. But what has been the reason for the persistently high inflation? Firm food prices have certainly been one of the culprits. But that is not all. As per a report by Morgan Stanley and published on Firstbiz, rise in rural wages has also been a reason why overall prices are higher. And the government's populist National Rural Employment Guarantee Act (NREGA) has been blamed for this.

The current UPA government has always been a staunch backer of the poor and rural sections of the society. That is why it introduced the NREGA scheme in 2005, which guarantees 100 days of employment to poor households in the rural areas. But this has led to a distortion in the labour market. This is largely because, while wages have risen, there has not really been much of a rise in productive assets. The NREGA in some sense has also created a shortage of labour in the rural market. Overall, the NREGA has led to a structural shift in the income consumption pattern and has artificially increased inflation labour and input costs. Without raising either productivity or focusing on asset creation, the NREGA has only managed to redistribute wealth rather than increase it. Meanwhile, the purchasing power of households has instead deteriorated an account of high inflation. This has then impacted…...

Similar Documents

Gdp Malaysia

...very rapidly. According to the United Nations, majority of the migrants are come from Asia. Malaysia has hosted more than one million of foreign immigrants, mostly from Indonesia, Bangladesh, Thailand, Myanmar and Philippines while Japan is home for immigrants from Vietnam, China and Myanmar. On the other hand, South Africa has many refugees and asylum seekers residing in it. The existence of immigrants would have played a vital role in the economy. They have contributed quite a large portion to the Gross Domestic Product (GDP). We are now going to analyze on the economic condition of Japan which is a developed country, Malaysia as a developing country, and South Africa as an undeveloped country. Analysis on immigrants’ contribution on the economic condition will be done. 2.0 Japan 2.1 Gross Domestic Product (GDP) from 2000 to 2008 Please refer to Attachment 1.0. It is a table of Gross Domestic Product of Japan since 2000 to 2008. The GDP of Japan shows increase since year 2000 to 2007. However, it suddenly declined 2.74% at year 2008. Reasons will be explained in detail in 2.4 Analysis on Data. 2.2 Number of Immigrants, Unemployment and Crime Incidents As shown in Attachment 1.1, during year 2000 to 2007, the numbers of immigrants keep increasing. However, the unemployment rates keep decreasing. 2.3 Illegal Immigrants in Japan Japan has a population of 127,433,494 as on July 2007 estimate and the news stated that approximately 10,000 illegal......

Words: 5898 - Pages: 24

Nrega

...Assignment 1, PGPM Sharp rise in rural wages contributes to food inflation spike A sharp rise in rural wages has supported consumption growth, but also contributed to a sharp rise in food inflation. An analysis of rural wage data by global investment Bank JP Morgan indicates that the advent of the National Rural Employment Guarantee Act, or NREGA, has resulted in a significant structural break in rural wage inflation. [pic]While nominal wages in the rural economy grew at an average annual rate of 2.7% over a year ago, pre-NREGA average wage inflation almost quadrupled to 9.7% over a year ago between 2006 and 2009. Moreover, wage inflation continues to accelerate. Between January 2010 and May 2011, the annual nominal wage growth averaged almost 20%. While this could be partly because NREGA wages being indexed, sharp acceleration of wages was evident through most of 2010 — even before indexation came into effect. The JP Morgan analysis by Sajjid Chinoy and Jahangir Aziz concludes that the rise in rural wages and incomes have likely contributed to the structural increase in food inflation over the past few years. This, it says has happened through following channel: Rising rural wages and incomes have resulted in increased food demand by rural families. With supply relatively inelastic, this increased demand for food has pressured food inflation. The food inflation, which is still high, once again highlights the need to address supply-side bottlenecks, especially on the......

Words: 276 - Pages: 2

Gdp Forecast

...Individual Project 1 1. Forecasting (a) Economic Growth: According to Bureau of Economic Analysis GDP increased by 2% in the first quarter of 2012 and by 1.3% in the second quarter. It is likely that this positive trend will be confirmed even in the 3rd quarter of this year. A possible estimate is the mean of the variations of GDP which occurred in the first two quarters of 2012. According to this reasoning GDP would increase by about 1.65% in the 3rd quarter. In order to support this estimate we can look at several significant indexes. For instance we can consider the Consumer confidence (this index is aimed at predicting consumption patterns). The figure related to September was 70.3 compared to 61.3 of the previous month. Therefore an increase in private consumption could lead to an increase of GDP. The increase in private consumption is not unreasonable. The average annual expenditure per consumer rose by 3.3% in 2011, slightly outpacing the 3.2% increase in CPI which occurred from 2010 and 2011. This is the first real rise in private consumption after 2007. So we can reasonably expect an increase in consumption expenditure even in 2012. Another meaningful index we can consider in our analysis is New home sales. The data for August was 373K compared to 374K of the previous month. So there is a slight downturn in purchased houses that could represent a reduced willingness to make investments. But at the same time I think that this decrease is too......

Words: 893 - Pages: 4

China Gdp

...The high growth of GDP, not only the material life of our people has been greatly improved and enriched, enhanced China's international competitiveness and attractiveness, but also greatly enhance China's international political status. However, GDP exposed its defects with increasing of the resources and environmental issues. Like the news article write, although China's GDP in recent years has greatly improved, China and developed countries still have a big gap. GDP does not reflect the real employment situation and the improvement of social welfare. The GDP slowdown of China is a good opportunity for structural adjustment. One of the most important measures is to remove the irritating policy and turned to rely on economic endogenous forces to achieve growth. Premier Wen said that China's economy has downward pressure, but reducing speed is mainly to structural adjustment and truly achieve the real high-quality growth. This was also his request on the "quality" of economic growth. Keith (2012) states that “Slower growth partly reflects a government attempt to shift the economy more toward personal consumption, with less emphasis on exports and investment in big domestic construction and infrastructure projects.” As the economy moves into 2008, it faces a growing multiplex of problems. Export growth is expected to continue to temper as the negative impact of the U.S. downturn is compounded by slowdown in the European Union and Japan. As downside risks mount in the......

Words: 1674 - Pages: 7

Nrega Impacts on Indian Economy

...GROUP 7 | SECTION-D | PGP-16 | IIM-Kozhikode | IMPACT OF THE RIGHT TO WORK PROGRAMME | MACROECONOMICS | Ankur ZutshiGokul ManeanLohakare AmolPragyaSatadal BiswasTanmoy Chatterjee | 186196206216226236 | Right to Work The Right to Work, according to the Article 39 of the Indian Constitution under the ‘directive principles of state policy’, states that everyone should be given the right to an adequate means to livelihood. In order to guarantee the basic rights like right to life, right to education, right to food in a country where approximately thirty percent of the population is below the poverty line and the only economic assets it owns is labor power, value-adding profitable employment is very important. NREGA The National Rural Employment Guarantee Act (5th September 2005), according to the Legislative Department of the Ministry of Law and Justice – ‘An Act to provide for the enhancement of livelihood security of the households in rural areas of the country by providing at least one hundred days of guaranteed wage employment in every financial year to every household whose adult members volunteer to do unskilled manual work and for matters connected therewith or incidental thereto’. The Panchayat or program officer validates applications at the village level, and the government provides a valid applicant with an employment within five kilometers and fifteen days. NREGA, UPA’s brainchild, started in two hundred districts in February 2006,......

Words: 2691 - Pages: 11

What Is Gdp?

...What is GDP and why is it so important? The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. For example, if the year-to-year GDP is up 3%, this is thought to mean that the economy has grown by 3% over the last year. Measuring GDP is complicated (which is why we leave it to the economists), but at its most basic, the calculation can be done in one of two ways: either by adding up what everyone earned in a year (income approach), or by adding up what everyone spent (expenditure method). Logically, both measures should arrive at roughly the same total. The income approach, which is sometimes referred to as GDP(I), is calculated by adding up total compensation to employees, gross profits for incorporated and non incorporated firms, and taxes less any subsidies. The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending and net exports. As one can imagine, economic production and growth, what GDP represents, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the growing economy...

Words: 355 - Pages: 2

Gdp

...INTRODUCTION: GDP (Y) is the measure of the value of all final goods and services bought for their final use in an economy for a given time period. The model of the circular flow of income makes it apparent that, in a given time period, income equals amount of expenditure which in turn equals the value of output sold in the economy as a whole. Income = Expenditure = Output (Value Added) Therefore, there are three methods to measuring GDP. These are the Income, Expenditure and Output methods. The income method measures GDP by adding together the total of all factor incomes paid to households by firms for the use of resources. Incomes are divided into 5 categories: compensation of employees, interest for capital, rental income, profits for entrepreneurship and proprietor’s income. Seeing as incomes are calculated at factor cost rather than market price, further adjustments must be made to calculate GDP. Indirect business taxes and depreciation incurred must be added and subsidies subtracted. Y = Income + Depreciation + Indirect Business Taxes + Net Income - Subsidies The expenditure method measures GDP by adding together all expenditures on all final goods and services made by all sectors of the economy. Expenditure is divided into 4 categories: Consumption Expenditure (C), Investment (I), Government Purchases of goods and services (G) and Net Exports (Exports – Imports) (NX). Y = C + I + G + NX The output method measures GDP by adding together the...

Words: 896 - Pages: 4

Understanding Nrega: a Simple Theory and Some Facts

...CDE January 2011 UNDERSTANDING NREGA: A SIMPLE THEORY AND SOME FACTS Diganta Mukherjee Email: digantam@hotmail.com Unitedworld School of Business Kolkata Uday Bhanu Sinha Email: uday@econdse.org Delhi School of Economics University of Delhi Working Paper No. 196 Centre for Development Economics Department of Economics, Delhi School of Economics Understanding NREGA: A Simple Theory and Some Facts * Diganta Mukherjee # and Uday Bhanu Sinha Abstract A developing economy like India is often characterised by a labour market with demand and supply of labour and a wage that even if competitively determined may not be adequate for the poor household to reach their target income; what they consider as means of a decent living. Envisaging situations like these, the Indian government has implemented the National Rural Employment Guarantee Act (NREGA) in recent past, to complement the income of the poor by providing them employment for certain number of labour days in a year. In this paper, using a simple theoretical model, we have analysed the impact of NREGA scheme on (i) rural labour market, (ii) income of the poor households and (iii) overall agricultural production. It is seen that the income from NREGA alone can be a substantial part of the target income of the poor. We show that in such a situation, the poor may exhibit a backward bending supply curve of labour which may lead to an aggregate reduction in agricultural output. This adverse production effect...

Words: 7139 - Pages: 29

Natural and Human Induced Disasters' Impact on Gdp

...disasters and large scale human error can have mixed impacts on a country’s GDP (e.g. New Zealand’s 2011 Christchurch earthquake, Japan’s March 2011 earthquake and tsunami, the 2010 U.S. Gulf of Mexico oil spill, floods and cyclones in Queensland in early 2011). Using one of the above examples, explain why natural and human- induced disasters often have mixed impact on GDP. (100 – 150 words) A series of disasters in recent years has affected economic growth in a country's GDP. Natural disasters are a "negative supply shock" as production processes are disrupted and business assets are damaged. (Reserve Bank of Australia, 2011) The floods and cyclones in Queensland in 2011 have largely impacted the GDP mostly due to the disruption of coal production. The floods also affected the agricultural areas, slowing down production and decrease in the quality of the products. The RBA (2011) has made a conclusion that the GDP growth in those quarters could be around "1/2 percentage point lower" than what it could've been. Use your example to briefly demonstrate the limitations of the current methods used to measure GDP. (about 50 – 100 words) The current methods used to measure GDP have limitations as it is "not necessarily a good measure of production as a contribution to economic well-being." (Mitchell & Wray) The social, health, and environmental costs of these disasters are not deducted from the value of the goods and services produced. GDP also excludes quality improvements......

Words: 373 - Pages: 2

Revisions to the Gdp

...Initial reports include data that do not reflect actual monthly changes in the economy, but quarterly reports. Landefeld and Okubu advised that fiscal and monetary policy projections also need this breakdown to be able to understand and project the impact of trends in intangible assets by type on the trend growth in real GDP and prices. The article “BEA Revises Estimate of Annualized U.S. GDP Economic Growth to 1.73%” Economic/US Economy” mentioned that the BEA found in their first revision to their estimate of the second quarter 2012 GDP that the annualized rate of U.S. domestic economic growth was 1.73%, up 0.19% from their initial estimate -- but still down about a quarter of a percent from the 1.97% reported for the prior quarter and down over two and a quarter percent from the 4.10% growth rate for the 4th quarter of 2011. The article pointed out that the upward revisions in the growth rate came primarily from substantial improvements in trade, with plunging imports alone contributing a half percent to the new growth number. The article highlights that the contributions from exports and consumer expenditures on services also grew modestly, and the contraction rate for government expenditures also moderated. The article advised that the biggest revision was in reported changes to inventories. The previously reported growth from inventory building was revised sharply downward to a net draw-down of inventories -- enough to contract the headline number by -0.23%......

Words: 267 - Pages: 2

Gdp Growth

...India's GDP seen rising but skepticism remains Nyshka Chandran | @nyshkac Monday, 30 Nov 2015 Growth in Asia's third-largest economy likely picked up pace during the July-September period but don't cheer just yet, economists warn. India's real gross domestic product (GDP) is expected to expand 7.3 percent on year, up from 7 percent in the April-June quarter, on the back of improved consumption and rising industrial production, according to widespread estimates from private sector economists. Discretionary consumer spending has been holding up better, reflected by a 9.5 percent annual rise in September car sales, Morgan Stanley pointed out in a Monday report. Meanwhile, positive factory production is another bright spot, with annual industrial output expanding 4.2 percent in July, 6.3 percent in August and 3.6 percent in September. The upshot is ultimately buoyed growth, but it's still far from full-throttle, said Vishnu Varathan, senior economist at Mizuho Bank. "Admittedly, with softer inflation boosting consumption, a less dire-than-expected monsoon outcome and nascent industrial uptick, India is still the bright spot in Asia. But growth momentum is not, as yet, on a solid footing." Experts widely agree that India's biggest problem is a negative output gap, i.e. the difference between actual production and what could be produced under full capacity. "We believe that the root cause of the challenging macro environment in India over the past few years......

Words: 577 - Pages: 3

Relationship of Gdp

... 1.1 Research Background…………………………………..……………..............1-3 1.2 Problem Statement …………………………………….….………………….3-4 1.3 Research Objective …………………………...…………………...…………4-5 1.4 Research Question ………………………………...….…………………...…5-6 1.5 Hypothesis of the Study …………………………………...……...………….6-7 1.6 Significance of Study ……………………….……...……...…………….…...7-8 1.7 Chapter Layout ………………………………………...…………………...8-9 1.8 Conclusion ……………………...……………………...…...……………….9 CHAPTER 2: LITERATURE REVIEW …………………………………..……………..10 2.0 Introduction ………………………………………………….……………...10 2.1 Review of the Literature…………………………………………..………10-11 2.1.1 Gross Domestic Product (GDP) …………………………….……11-12 2.1.2 Foreign Direct Investment (FDI) …………………………………13-14 2.1.3 Stock Turnover Ratio ………….…………………………………15-16 2.1.4 Market Capitalization ………………………………………….…16-17 2.1.5 Stock Traded Value …………..…………………………….………18 2.2 Relevant Theoretical Model ……………………...………………...…….19-20 2.3 Proposed Theoretical/ Conceptual Framework ………………………......21-22 2.4 Hypothesis Development ……..……………………..…………………...23-24 2.5 Conclusion ……………………………………………..…………………. 25 CHAPTER 3: METHODOLOGY …………………………………..……………….…..26 3.0 Introduction ………………………………………………………………..26 3.1 Research Design ………………………………………….................……..26 ...

Words: 15667 - Pages: 63

Flaws of Gdp

...Flaws of GDP As a measure of economic development, GDP is a useful but fundamentally flawed statistic. Some examples of the deficiencies of GDP as a measure of economic development are detailed below. Imputations When computing GDP, goods and services sold in the marketplace are valued at market prices. However, some goods are not sold in the marketplace, and these do not have market prices. Thus the value of these items has to be estimated, or imputed. This is especially true of housing. When people rent housing, their rent is counted as part of GDP, as it is both income (for the landlord) and expenditure (on the part of the tenant). For people who live in their own homes, an estimated market value for the rent that would be paid for the property if they were renting it is computed and a part of GDP. However, there are limits to imputations. Whilst the value of housing services are imputed, the value of other durable goods, e.g. the cost, or ‘rent paid’ towards running cars, fridges and other durable goods are not accounted for in GDP. Additionally, if outputs are produced which do not make it to the marketplace, such as meals cooked at home, these are not included in GDP either. The fact that these items are not included means that GDP may understate economic well-being. For example, a meal produced at home is no different from meals cooked in a restaurant, but the latter is included in GDP whilst the former is not. Therefore GDP is deficient at showing the...

Words: 724 - Pages: 3

Impact of It on the Gdp of India

...India’s GDP and Information Technology Group 5 – Div A Tejaswini Vaidya Mohit Mittal Harshul Trivedi Akshay Mohta Tomy Augustine Contents India’s GDP 3 IT and India 4 IT and its Contribution to GDP 4 Investments in the IT sector in India 5 Education & its impact on GDP 8 Conclusion 9 India’s GDP India’s GDP has grown steadily since 1991, after the Prime Minister Narasimha Rao initiated the economic liberalization of 1991. The reform reduced tariffs and interest rates, terminated public monopolies and allowed autocratic approval of FDI ( Foreign Direct Investments) in many sectors. Fig 1: India – Gross Domestic Product The GDP of India is essentially divided into three broad sectors. 1. Industry and Services: Accounts for 26.3% of the total GDP 2. Agriculture: 18.1% of the total GDP 3. Services: 56.6% of the GDP 4. Total Labor force: 487.6 million 5. Labor force in services: 34% ~ 165.5 million IT and India India gained recognition due to its IT and ITES sector. The ITES can be broadly classified into IT Services and BPO (Business processing outsourcing). The first software export zone setup in India was in Mumbai, the SEEPZ Park, in 1973. Significant growth has taken place since then in the IT Services sector and consequently the net contribution to the GDP has been growing ever since. India’s reputation as both as a source and a destination for skilled workforce helped improve its relations with a number of world......

Words: 1356 - Pages: 6

U.S. Military Spending and Its Impact on the Economy’s Gdp

...U.S. Military Spending and its impact on the Economy’s GDP Matthew Magana Abstract This paper examines whether increases in military spending have a positive or negative impact on the U.S. Gross Domestic Product (GDP). The paper focuses on the three North American economies: Canada, Mexico and the United States as models to develop a case. It will also illustrate the utilization of multiple economic tools to produce variable outcomes to analyze the full spectrum of economics. It will also discuss the multiple statistical models such as Granger causality and Vector autoregression and the asymmetric results produced. Increased U.S. Military Spending and its impact on the Economy Given the long-accepted, theoretical direct relationship between investment and economic growth, if defense spending has a negative impact on investment, then it would seem reasonable that defense spending would have an adverse impact on economic growth. This was exactly the findings of two studies published in the seventies, zymanski (1973) and Lee (1973). Some studies attribute the negative effect of defense spending on economic growth to reduced investment. Another study argues that defense spending restricts export growth and economic growth because military expenditures compete for the same resources used in the production of exports. Which may also be a understood trade off for military spending vs. export and economic growth. However, other studies were unable to find any......

Words: 1973 - Pages: 8