Doing Business in India - RSM Austria

account and to liberalize the movement of foreign capital, a new law called the
Foreign Exchange Management Act (FEMA) has come into effect from 1 June 2000.
2.0 ECONOMIC TRENDS
The global economic meltdown and the consequent recession in the developed
countries over the past year, has adversely
impacted the Indian economy. In 2009-10, the
GDP Growth Rate
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Gross Domestic Product (GDP) is expected to
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grow at 7.2% which is quite encouraging
9.8
considering in retrospect the decline in GDP 8
9
to 6.7% in 2008-09 representing a drop of 6
7.2
6.7
2.1% from the average growth rate of 8.8% in
4
the previous five years (2003-04 to 2007-
08). Inspite of this, India is likely to remain the
second fastest growing major economy. India
2
0
was able to sustain a respectable growth rate
and is expected to bounce back quickly,
2006-07 2007-08 2008-09 2009-10
mainly due to its reliance on domestic demand and largely unaffected banking
sector.
1400
1200
1000
800
600
400
200
0
2006-07 2007-08 2008-09 2009-10
The Inflation as measured by the Wholesale
Price Index (WPI) for the 2008-09 was 5.9%.
A noteworthy development during 2008-09
was a sharp rise in the WPI inflation followed
by an equally sharp fall, with the WPI inflation
falling to unprecedented level of close to 0%
by March 2009. The inflation WPI index for
the period April-December 2009 has
decreased to 1.6%.
GDP (US$ Billion)
Foreign exchange reserves which had
declined to US$ 252 billion as on 31 March
2009 from US$ 309 billion as on 31 March 2008, has increased to US$ 283.5 billion
as on 31 December 2009.
The total exports for 2008-09 increased by 13.6% to US$ 185 billion. The total
imports for 2008-09 was about US$ 304 billion wherein the growth in imports was
20.47% in 2008-09.
There has been a sharp decline in the Rupee exchange rates during 2008-09,
wherein the currency depreciated by over 21% against the US$. The exchange rate
as on 15 August 2009 was Rs. 48.79 against 1 US$. However, the rupee has
strengthened in the latter period and the exchange rate as on 13 May 2010 was Rs.
44.99 against 1 US$. The fiscal deficit during the period shot up from 5.9% to 6.5%
of the GDP.
Indian stock markets experienced a downturn after having experienced a long spell
of growth between 2005 to early 2008 which is directly attributable to the current
international crisis resulting in an immediate effect of withdrawal of FII Investments.
DOING BUSINESS IN INDIA 9