kushal khare -43 eco project

7/28/2019 Kushal Khare -43 Eco Project

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Trends and changes in consumtionpattern in India : Implications on

Economic growth

Submited by:-

Name- KUSHAL KHARE

ENROLL NO:- 12BSPHH010499

SECTIONC

SEAT NUMBER-43


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ACKNOWLEDGEMENT

Project work is essentially a learning process in which apart of learning the subject itself, one

also learns to share ideas and work as a team. I am sure that involvement in this project as well

as the exposure I have gained will prove to be stepping stone for other opportunities that come in

my way.

I am thankful to our teacher and mentor Mrs. Paulomi Bhattacharjee who helped in all ways to

make this project a success.

.


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INTRODUCTION

To start with the topic let us first understand what GDP is. GDP is the name we give to the total

market value of the final goods and services produced within a nation during a given year.

GDP= C + I + G + X

Where, GDP is gross domestic product, C is consumption, I is investment, G is government

spending, X is net exports.

GDP is used for many purposes, but the most important one is to measure the overall

performance of an economy.

GDP can be calculated by two approaches. A) Goods flow approach B) Earnings approach.

The above diagram shows the circular flow of macroeconomics activity in which the outer loop

shows the EARNINGS APPROACH and the inner loop shows the GOODS FLOW APPROACH

(or production approach).

The production approach includes:-

1) Personal consumption expenditureA) Durable goodsB)Nondurable goodsC) Services

2) Gross domestic investment3) Net exports of goods and services4) Government consumption expenditure


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Thus this project emphasizes on the changes and effect of consumption pattern on the economic

growth of INDIA i.e. on GDP.

Objectives

The objective of this project is to:-

a) Understand the concept of GDPb) Factors determining GDPc) To see the trends and the changes in consumption pattern and what are its implication on

the economic growth.

DATA ANALYSIS

Share of Variables of Final Private Consumption Expenditure at 2004-2005 prices:-

The above pie chart shows the share of different variables of final consumption expenditure. Wecan see that in the year 2004-2005 the food variable has maximum share of 40% followed by

19.3% in transportation and communication and important expenditure of Medicare and health

40

6.613.83.4

5

19.3

38.9

2004-2005Food, beverages, & tobacco

Clothing & footwear

Gross Rent, fuel, & power

Furniture, furnishings, etc.

Medical care & health services

Transport & communication

Recreation, education, & cultural

servicesMiscellaneous goods & services


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services is only 5%.

Where as in the year 2007-2008 the share of food has fallen over to 36.3% this is the time of

recession were we can see that people have started spending less and saving more. The

expenditure on transportation and communication has also fallen to 18.7% which is not that

significant. The expenditure over miscellaneous goods and services has risen to 13% over years.

In the year 2010-2012 we can see that peoples expenditure on food has again fallen to 32.1%.

Expenses on transportation and communication have increased may be due to rise in oil prices.

Rent, power and fuel expenses has also risen to 11% and the expenses on other miscellaneous

36.3

8

12.1

4.1

4.8

18.7

3

13

2007-2008

Food, beverages, & tobacco

Clothing & footwear





Recreation, education, & cultural

services

Miscellaneous goods & services

32.1

8

11.14.6

4.8

20.4

2.916.2

2010-2012Food, beverages, & tobacco

Clothing & footwear





Recreation, education, & cultural services

Miscellaneous goods & services


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goods and services has risen sharply to 16.2% indicating change in lifestyle and people

purchasing other luxury goods.

The chart below shows the percentage share of all the variables in private consumption taking 4

years for analysis for conviences i.e. year 2004-2005, 2007-2008, 2008-2009, and 2011-2012.

Growth in Private Consumption Expenditure and Government Consumption

Expenditure

05

1015202530354045

2004-2005

2007-2008

2008-2009

2010-2011

0

2

4

6

8

10

12

14

16Growth in PVT and GOVT CONSUMPTION

Private final consumption

expenditure

Government final consumption

expenditure


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The above bar chart shows the growth rate of both the private and government consumption

expenditure. We can see that in year 2005-2006 the growth in expenditure were almost same for

private and government consumption expenditure i.e. 8.6% and 8.9% respectively. Then therein

2006-2007 there is a sudden fall in the government consumption expenditure. It has fallen to3.8% and again rose to 9.6% in 2007, whereas the private consumption expenditure remains

almost the same for both the year. In year 2009-2010 we can see that government consumption

expenditure shot up to 14.3% and private consumption coming down to 7.2% due to recession in

the economy. This is one of the expansionary fiscal policies that government has applied to

overcome from recession and a very high inflation; after the conditions has been stable the

government spending has again fallen to 7.8% in 2010 and again to 5.6% in the year 2011.

The diagram below represents the total final consumption expenditure of both the government

and private sector.

0

2

4

6

8

10

12

GDP at factor cost

GDP at factor cost


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From the above two tables we can see that there has been a fluctuation in the GDP of INDIA

over years. This is due to the recession in the economy. This is evident from the fact that the

GDP in the year 2004-2005 was 9.5 and was stable till year 2006-2007. Due to GLOBAL

CRISIS the GDP in the year 2007-2008 has fallen to 6.7 and again started recovery in the year

2008-2009 and was stable and again fallen to 6.9 in 2010-2011 which was due to double dip

recession.

Despite the fact that there was an economic slowdown during the year 2007-2009, the private

final consumption in the domestic market has been rising constantly over years. This is due to

the economic policies that India has followed which secured growth in the economy but at a

slower rate.

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

Private final consumption expenditure

in domestic market

Private final

consumption

expenditure in domestic

market


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Conclusion

With an increase in national income, as expected, the consumption of luxury goods (furniture

and misc goods) has increased. And the expenditure on necessity has declined in proportion to

total consumption. Transportation expenditure has increased which can be attributed to the rise in

fuel prices.

Private consumption does not vary as much as other demand-side components and partly on

account of inflationary tendencies, which tend to reduce savings rather than affecting the

consumption level in the economy.

The reduction in the financial savings rate of households could be partly attributable to

inflationary tendencies in the economy during the period that resulted in higher growth of private

final consumption expenditure than of personal disposable income and partly to a reduction in

real interest rate.

Consumption on assets and infrastructure services contributes more in economic growth by

increasing productivity. Investments in capital assets have the same impact. Consumption of

domestically produced good has a ripple effect on the economic growth as it increases demand,increases domestic employment and income through profits and wages. Moreover it reduces the

imports and increases the ability to export.India has started to invest on luxury goods but inflation has taken toll on savings and hence on

investment. Adding to our woes, slowdown has decreased the employment outlets and level of

income earned, thus, hindering the economic growth which shall be overcome in the near future.


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Appendix

Table 1 : Private Final Consumption Expenditure : Annual Growth and Shares at 2004-05prices

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10PE

2010

11QE

Annual Growth (per cent)

Food, beverages, & tobacco 6.3 3.4 6.4 3.3 0.3 6.2

Clothing & footwear 19.7 23.3 5 5 14.9 3.6

Gross Rent, fuel, & power 3.7 3.8 4.7 3.6 5.4 4.9

Furniture, furnishings, etc. 15.1 17.1 16.1 12.2 8.7 13

Medical care & health services 8.8 8.7 4.5 6.9 8.9 7.6

Transport & communication 5.8 9.1 7.9 7.7 12 12.5

Recreation, education, & cultural services 11 8.4 9.8 6.8 4 5.6

Miscellaneous goods & services 20.1 21.1 28.6 20.2 15.7 11.4

Total private consumption 8.5 8.7 9.2 7.1 7.4 8.2

Share in Total (per cent)

Food, beverages, & tobacco 40 39.1 37.3 36.3 35 32.7 32.1

Clothing & footwear 6.6 7.3 8.3 8 7.8 8.4 8

Gross Rent, fuel, & power 13.8 13.2 12.6 12.1 11.7 11.5 11.1

Furniture, furnishings, etc. 3.4 3.6 3.9 4.1 4.3 4.4 4.6

Medical care & health services 5 5 5 4.8 4.8 4.8 4.8

Transport & communication 19.3 18.8 18.9 18.7 18.8 19.6 20.4

Recreation, education, & cultural services 3 3 3 3 3 2.9 2.9

Miscellaneous goods & services 8.9 9.9 11 13 14.6 15.7 16.2

Total private consumption 100 100 100 100 100 100 100

Source: CSO.


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Table 2 : Growth in GDP at Constant Market Prices (per cent)

2005-2006

2006-

2007

2007-

2008

2008-

2009

2009-

2010

2010-

2011

2011-

2012

1Total final consumptionexpenditure 8.7 7.7 9.4 7.7 8.3 8.1

1.1

Private finalconsumptionexpenditure 8.6 8.5 9.4 7.2 7.2 8.1 6.

1.2

Government

finalconsumption

expenditure 8.9 3.8 9.6 10.4 14.3 7.8 3.

2 Gross capital formation 16.3 15.3 17.2 -1.6 11.6 11.1 5.

2.1

Gross fixedcapital

formation 16.2 13.8 16.2 3.5 6.8 7.5 5.

2.2Changes instocks 26.7 31.6 31.3 -51.4 63.2 37.4 2.

2.3 Valuables -1.6 13.7 2.9 26.9 57.6 32.4 12.

3 Exports 26.1 20.4 5.9 14.6 -4.8 22.7 14.

4 Less imports 32.6 21.5 10.2 22.7 -2.2 15.6 17.

5 Discrepancies 48.2 47.5 111.8 -75.3 230.5 38.9 -111.

Growth in GDP at 2004-5market prices 9.3 9.3 9.8 3.9 8.2 9.6 7.

Source: CSO.

Table no-3:- GDP AT FACTOR COST

Year2004-

2005 2005-2006 2006-2007 2007-2008 2008-2009

2009-

2010

2010-

2011

GDP at factor cost 9.5 9.6 9.3 6.7 8.4 8.4 6.9


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TABLE NO- 4:- Private final consumption expenditure in domestic market

yearPrivate final consumption expenditure in domestic

market(CRORE)

2004-2005 1,926,858

2005-2006 2,158,349

2006-2007 2,477,209

2007-2008 2,825,356

2008-2009 3,226,826

2009-2010 3,722,036

2010-2011 4,359,792


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BIBLIOGRAPHY

http://www.indiabudget.nic.in/

http://mospi.nic.in/Mospi_New/site/India_Statistics.aspx?status=1&menu_id=43

http://mospi.nic.in/mospi_new/upload/nad_press_release_31jan12.pdf
http://www.indiabudget.nic.in/http://www.indiabudget.nic.in/http://mospi.nic.in/Mospi_New/site/India_Statistics.aspx?status=1&menu_id=43http://mospi.nic.in/Mospi_New/site/India_Statistics.aspx?status=1&menu_id=43http://mospi.nic.in/mospi_new/upload/nad_press_release_31jan12.pdfhttp://mospi.nic.in/mospi_new/upload/nad_press_release_31jan12.pdfhttp://mospi.nic.in/mospi_new/upload/nad_press_release_31jan12.pdfhttp://mospi.nic.in/Mospi_New/site/India_Statistics.aspx?status=1&menu_id=43http://www.indiabudget.nic.in/

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