CA Saket Ghiria

Saket GhiriaFirst we would like to express our sincere gratitude to all of you for reading & liking the first part of ‘An Economic Analysis of 2015’. In the part 1 of the article we have covered some of the most crucial and significant economic indicators and how they perform in 2015. The indicators we covered were:

  1. GDP of the Country in 2015
  2. FDI in the Country in the country during 2015
  3. Forex Reserves of India during 2015
  4. Inflation during 2015
  5. Exports position of the country during 2015.

You can read the complete part 1 of the article by visiting to the URL This is the second and final part in which we would cover the remaining major indicators which are the backbone of any economy and will conclude the same.

Crude Oil prices

Gobal Crude Oil PriceThe world needs energy to keep itself alive and crude oil is the biggest source of that energy. Painful thing is that India is the home of around 18% of world’s population i.e. I/6th of the humanity lives in India but we don’t have enough crude oil resources. In fact we don’t have crude oil at all. We need to import 70 to 75% of our crude oil requirement from other countries. Crude oil consists major portion of our total imports and thus it is a major reason of consistent trade deficit faced by India. For the country like India which has to import nearly everything from technology and high tech products to basic necessities like garments and food grains, this consistent trade deficit created a grave situation. Adding more misery to an already very critical condition, the international prices of crude skyrocketed and gone beyond the level of $110 per barrel. This historic high prices of crude oil had totally collapsed the balance of payment position and the government budget of the country which resulted in some of the biggest budget deficit India ever seen (see the image). Very high budget deficit deteriorates the fiscal position and causes a downgrade pressure on the credit worthiness of the country thereby ruins the image of the country as a good investment destination in the world. When all these miseries were at the peak, then a magic happened as the discovery of shale gas by the none other than United States created an entire new source of energy thereby reducing the pressure from the crude oil to a large extent and hence the prices of crude oil started to cool. As we can see from the image above that at the beginning of the year, crude used to be traded at $60 per barrel in the international market and at the end of the year, pricesIndia Government Budget fallen to $38 per barrel. So there is a reduction of approx. 35% in the prices of crude oil in the year 2015. For the country like India, this reduction is very significant as we import majority of our oil requirements. So from a macro perspective, 2015 was a great year as far as prices of crude oil is concerned. I here would like to state that India has no role whatsoever in the determination of crude oil prices in the world. Please don’t take it otherwise.

Performance of Indian Currency INR

INR Vs. USD JAN TO DEC 15The currency of any nation is nothing but the mirror image of its economy. The stronger the economy, the stronger the currency. Now we won’t like to go into the debates of artificial currency manipulation by the countries. It is an established fact that a weaker currency makes the product of a country cheaper in the international market thereby boosts the exports of the country, but at the same time a weak currency makes all imported commodities costly as people have to pay more domestic currency for the same quantity of imported goods & services. Now for the country like India which exports not very much and imports virtually everything, a weak currency would cause more devastation than gains for the exporters as it will increase the prices of all imported goods and services. From the image we can see that at the start of 2015, the exchange rate of dollar and rupee was at INR 63 per dollar but as the year progressed, INR continuously lost its value and ended at INR 66.15 at the end of the year. So in 2015 itself, INR lost around 5% to dollar or we can say it like that rupee depreciated approx. 5% against the dollar. So we can see that 2015 was a mixed year as far as performance of our currency against the American Dollar is concerned.

Performance of Indian Stock Markets

Performance of BSE Sensex in 2015Just like currency, stock market of any country also reflects the economic position of that country. It is true that in this highly connected and interrelated world, the stock market of one country is never 100% reflection of the things going on in that country alone as in this globalized world, every single major piece of information no matter from which part of the world it belongs, puts an impact in the domestic market of the country. We can take an example of how our markets reacted over 7% fall of Chinese Markets few days ago. Moving from that, it is reasonable to consider the stock market as an object being impacted by all global events, but again the major impact on the stock market in any country is being caused by the domestic conditions and events of that country itself. So if a stock market sees a bull phase, major credit goes to the conditions and events in the domestic country itself and vice versa. In India we have two major stock exchanges namely Bombay Stock Exchange or BSE and National Stock Exchange or NSE. BSE is the oldest stock exchange of Asia which has been establish by British Kingdom where NSE is the biggest stock exchange from a trading volume point of view. In BSE, the major market indicator is Sensex which traces the performance of 30 of the largest companies of India from a broad range of industries like Software & IT, Construction, Mining, Power Generation, FMCG, Communication, Transportation & Logistics, Cement Manufacturing, Banking & Finance etc. BSE Sensex can be considered as a, in some way, true reflector of the economic conditions of the country. At the start of 2015, BSE Sensex stood at the level of 27900 which has come down to 26100 at the end of 2015. So if you invested in the Indian markets, year 2015 given you a negative return of around 6.5%. Negative wealth by 6.5% is a major reason our politicians and bureaucrat be concerned about as in India our market is already being run by the foreigners as a common Indian don’t have much understanding as well as interest in the financial markets. So in these conditions, if market would yield negative returns, it will further keep the small domestic investors away from the markets which is a very dangerous thing for the long term growth of any country.

Collection of Taxes in the country

Taxes are the biggest and most consistent source of revenue generation for any nation and a country must have proper mechanism to collect enough taxes so to keep the administrative mechanism functional and in proper shape. India is probably the only country in the world which used to have a very well structured mechanism of collecting taxes since the Vedic period. In Mahabharata, when Yudhishthira asks Bhishma Pitamah about taxes, Bhishma told:

“The king should take wealth from his subjects at the proper time… Like an intelligent man milking his cow every day, the king should milk his kingdom every day. As the bee collects honey from flowers gradually, the king should draw wealth gradually from his kingdom for storing it”.

So we can see since how long we have been guided about the taxation mechanism from our lords.

Now coming to this time, again the sad reality is that India has some of the worst taxation mechanism in the world. It is also true that this mechanism has improved a lot as there used to be a time when personal income tax used to be as high as 90% and custom duty as high as 200 to 300% of the actual import cost there by making the imports almost impossible. So if we look at that history, we can say that things have improved a lot. By introducing the concept of tax recovery at source, government made a master stroke which resulted in huge tax revenue in the country. It is necessary to mention here that the Institute of Chartered Accountants of India and Chartered Accountants played the most significant role in this entire process. Despite of all these great efforts, the tax to gdp ratio (This ratio is the total government tax collections divided by the country’s GDP.) is around 17% in India which is much lower than the tax to gdp ratio of developed and developing countries like Japan has tax to gdp ratio of 29%, USA at 27%, United Kingdom at 40%, China at 22%. In the fiscal year 2014-15, the central government collected Rs 6,96,200 crore ($106 Billion approx.) revenue under the direct taxes while the Indirect taxes like customs duty, excise duty and services tax yielded Rs 5,46,000 crore ($83 Billion approx.) So we can see that in 2014-15, the total tax collected (both direct and indirect) was around $200 Billion and as the size of our economy is $2000 Billion, this roughly translates to 10% of the GDP. For the current financial year 2015-16, the central government has budgeted to collect Rs.7.98 lakh crore ($121 Billion) i.e. a desired increase of 14.5% year to year. If we talk about indirect taxes, the target set by government is 6.46 Lakh Crores ($98 Billion) i.e. a desired increase of 18% year to year. So both for direct and indirect taxes, the desired increase targets are very encouraging which is good for the economy as it shows that government is optimistic about the economic revival of the nation.

Ease of doing business in India

Ease of Going Business RankingThe World Bank ranks Economies (Countries) on their ease of doing business, from 1 to 189. A high ease of doing business ranking means the regulatory environment in that country is more conducive and supportive to the starting and operation of a local firm. The rankings are determined by sorting the aggregate distance to frontier scores on 10 different topics/areas, each consisting of several indicators, giving equal weight to each topic. Some of the topics which are being considered in determining the ranking by the World Bank are:

  • Starting a Business
  • Dealing with Construction Permits
  • Getting Credit
  • Getting electricity connection
  • Registering property
  • Enforcing contracts
  • Paying taxes
  • Resolving Insolvency etc.

Singapore is a very tiny nation having no natural resources, very little landmass, very limited manpower but has highest living standard in the world. Now you will ask how. So the answer is that it is easiest to start a business, getting credit, electricity, running a business etc. in Singapore than anywhere else in the World. So this is the power of business. It is businesses which brings true economic transformations and revolutions. All other things are just illusion. Now coming to India, India had never been a pro-business country. India had never been a nation which promoted or encouraged businesses and entrepreneurship. So India is paying a very high price of this as very few, very few Indian Companies have a global impact and almost none of Indian products could ever became a global brand. Though this is painful but this is the sad reality we have to live with. However as the entire focus of the newly elected government was on the revival of economy in other words revival of businesses. India can make visible economic progress only by becoming a country where it is easy to commence and conduct the business. From the image above we can see that for the year 2015, the ranking of India was at 142 out of 189 Nations but for the year 2016, India improved its ranking by 12 places and now sits at 130th place. To understand it in layman’s term, there are 129 countries where conducting business is easy than India. So if you are planning to make some investment, first do a good analysis.


2015 was a mixed year for India as far as economic frontier is concerned. There were some cheerful progresses like improved ease of doing business ranking but dark clouds also haunted us like sharp falling in exports. There were some windfall gains like crude prices reduced by almost 200% and India attracted huge FDI but a consistently high inflation and depreciating rupee will cause more trouble in the life of poor masses.

So with these words, we would conclude the same. We hope you would found this entire discussion interesting.

Disclaimer: We would like to state that this article is our original work. We have sourced data from the websites like Wikipedia and Times of India. We would also like to acknowledge the efforts of CA. Atul Agarwal and Mr. Sumit Ghiria for the compilation of data and creation of tables, editing of images and typing of text. You can always write your comments and feedbacks at

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0 responses to “An Economic Analysis of 2015: Part 2”

  1. Rahul says:

    Good one
    if you can provide a detailed condition of crude and future prices expected that will be appreciated

  2. Deepa says:

    Superb article, aptly explained with relevant fact and figures

  3. Ankit Mahajan says:

    Hi Saket,

    A Very Nice Article. Full of knowledge & numbers.

    Great Efforts!! Great Work!!


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