At The Crossroad Of Economic Miracle Or

Economic D Essay, Research Paper

India at The Crossroad Of Economic Miracle Or Economic Disaster India is a country that holds its destiny in its on hands. There are many economists that would say that India is on the verge of an economical boom, and there are those who say that the country is on the verge of disaster. Through this paper, I shell enlighten the reader on both the failure and success of India’s economy, and its place in toady’s global economy.Before I start, I will first like to give the reader an idea of the physical environment of the country. India is roughly one-third the size of the United States. However , its population is well over three times of the United States, and represents 16 percent of the world’s total. Its government consists of a federal parliament system with a lower house, the Lok Sabha (House of the people), and an upper house, the Rajya Sabha (The Council of states). The executive branch has a president, vice-president, prime minister, and a Council of Minister. India’s economy is a combination of capitalist entrepreneur and socialist government control. The country of India has undergone remarkable changes since 1991. Until that date , India had spent fifty or more years as an outcast, isolated from the trade with the rest of the world. Its share of world trade had gone from two percent in the 1950’s to less than a half of a percent in the late 1980’s. At that point, India’s inflation was near the double-digits, and its strategy had discourage the production of exports, repeated shortages of exchange had made the balance of payments extremely vulnerable to external markets. India At The Crossroad Of Economic Miracle Or Economic Disaster By early 1990, India was very close to defaulting on its external debt obligations. In 1991 India implemented a new strategy that has shot its economy upward to now the fifth largest in the world. In June 1991, India ended its four decades of central planning by implementing advances in agricultural development for export, diversification of its industrial sector, nationwide distribution, and an educational system aimed at providing a large quantity of high quality human resources. India has also made extreme changes to its economic policies to simulate domestic and foreign investment and trade. Initially, growth declined, but soon after, growth increased and is continuing to.India has had an average growth rate of 5% between 1992-1995. Growth reached 7% in 1996. India’s GDP growth has been impressive (see figure 1). Its 1993 per capita estimate was only $309 million and in 1995 India’s GNP per capita was $340 million, as reported by the Worldbank. The World Factbook reported an estimated GDP per capita of $1,500 for 1995. Changes in economic policies have caused substantial industrial growth, primarily in capital goods. As a result, a large middle class has abounded almost equal to the entire U.S. population in number. India’s huge middle class consumer sector has attracted the world. Foreign investment is fifteen times great, better than before reforms, and 10% of world investment in emerging markets have been put into India. India’s export have been rising in world India At The Crossroad Of Economic Miracle Or Economic Disaster exports (see figure 2). The main items of exported are diamonds, textile, leather products, carpets, dyes and food. Their major exports to the U.S. are textile/clothing and jewels. India’s largest partners are currently the U.S. and the EU. Trading with the Asia-Pacific region is escalating. Figure 3 shows the export and import (Million USD) during the period of April 1995 to February 1996. India’s clothing and textile export far exceeds the world average of other countries. India’s large population enables it to take advantage of its huge labor force making it one of the India’s biggest resources. In recent years India has put emphasis on upgrading its educational system to produce many scientist and engineers. Expanding its quality human resources has enable India to become active in the telecommunication market. Along with growth of education and the middle class, consumerism is growing. India’s imports have increased exponentially to satisfy the growing desires of its people and to improve its infrastructure. India’s main imports are aircraft and parts, telecommunications services equipment, computer software, electric power generation, mass transportation and food processing and packaging equipment. Most of these items will be used to promote internal and external trade. Wood and paper are also imported frequently. The nation’s expenditures on goods and services have increased almost 14% each year for the past seven years. Over the past decade imports have grown by 16.5% on average. India At The Crossroad Of Economic Miracle Or Economic Disaster India has been able to attract some of the finest US companies in a very short time and it is proven that with patience and effort India can be turned into a receptive and large market not only for local sales but also for export to third world nations. India is now wide open for large-scale imports and investment in capital-intensive industries like power, petrochemicals, Tele-communication, as never before and the infrastructure projects like highways, ports and airports, water resources, construction of housing and commercial real-estate, mass consumption industries like air-conditioning and climate control, sanitary products, domestic appliances, computers and hardware peripherals, basic industries like paper, electronics, food-processing, aviation, printing, automobiles, machine-tools and industrial machinery, fisher.Since June 1996, reform initiatives have been introduced or strengthened in almost every critical infrastructure sub-sector. There have also been new policy measures in several areas such as industrial de-licensing, foreign investment, trade policy, financial sector and capital markets. With the growing participation of virtually the entire spectrum of political opinion in the reform process, there is a good prospect that a higher growth rate would become a permanent feature of India economy. With the future plan of a increasing economical growth, one couldn’t think of such words as: poverty, illiteracy, deprive, and unemployment. These words help describe the India At The Crossroad Of Economic Miracle Or Economic Disaster phantom part of India and its economy. It is safe to say that liberation and restructure has hit India like a tidal wave, and also that of a growth rate of 6, 7, and even 8%. These changes must bring about however not a surge of blind optimism but a careful analysis of the economical circumstance and direction of India economic future. Yes I had pointed to India booming software and telecommunication industries as a coming

of age; as a ticket into the world if you say. Is this really India? To me it is not. I am not attempting to deny the achievements, I am only trying to bring them into context. It is an inescapable fact that 70% of the population lives in the village and survives on agriculture. It is also undeniable that living conditions for a vast majority of these people is basic and depraved at worst. In fact this dependence on subsistence agriculture despite the improvements of the green revolution led to development accommodation of poverty. Accommodation to poverty in my view is a reinforcing cycle where a person adapts and more importantly submits him or herself to the existence of poverty. In such conditions there is massive deterrence for self-improvement. This must viewed in such a manner that agriculture after a certain point is unable to absorb people in terms of employment. You might ask then what is to happen?. Essentially the accommodation to poverty will continue to reinforce itself in a never-ending vicious cycle India At The Crossroad Of Economic Miracle Or Economic Disaster as well as creating more and more bleak picture when one sees that historically the growth of the labor force in India is more than the growth in employment numbers per se. Also with this poverty one has to look on the literacy levels in India. They are by a long shot the world’s most illiterate nation. The contradiction is even more apparent when reads that India has the 5th largest Software Industry in the world. Rural poverty is particularly high for obvious reasons of disincentive poverty. There has been in fact criticism by thinkers that the government has concentrated too much on secondary education while ignoring the essential primary education programs particular in rural India. As a result of this enormous focus on the secondary education, India further exaggerate their unemployment. In one of the world’s poorest countries the amount of paper(read Degrees) needed to get a decent job is impossibly high and completely at odds with their employment’s realities. Where does this impacts the poor is that even those who has the drive find themselves at a dead-end in terms of jobs because their education standards are not up to par even for relatively simple and “lower-end” jobs. For a middle class car owner to hear views as a poor person saying that education means nothing may be blasphemous but to a many poor people that is a reality, and a hard one. India At The Crossroad Of Economic Miracle Or Economic Disaster The issues of poverty in particular the rural or agricultural poverty mention before and the problem of unemployment poses some serious problems for the social economic stability of India. The question is what can be done. With India, the process of Industrialization poses a few problems. What kind of focus should be given to the industrialization process? Should it be given first preference over the primary or agriculture sector. Also who would control these industries, this issue can further divide into two conflict; those occurring between private and public sectors with the perceptions as to their resulting importance in any economy and secondly that occurring between die hard loyalist or the “Swadeshi” bandwagon and those who advocate an opening of India foreign corporate. The government is encourage to privatize for instance the insurance sector. For the government the problem disregarding all other ramifications is the problem of employment. Who will absorb the massively overstaffed government employees in the insurance corporations if these were to happen. Where will these employees go since many of them are at the age were their life is unsuitable for a change in jobs. In a country were 70% of population makes its ends meet with the utmost difficulty and hardship through agriculture employment and for the organized sector, those lucky enough it is a boon. Is it then hard for people then to see where employment assumes such an intense and obsessive concern with people and thereby the government. India At The Crossroad Of Economic Miracle Or Economic Disaster Concurrently let us look at the efficiency debate. It has become apparent that capital intensive work practices in an age where technology has advanced and will continue to expand by leaps and bounds; is the most efficient way of production. However along with this efficient method of production comes a subsequent decline in the need for labor. Once again the whole thing spiral back into a debate on employment. Should India then promote labor intensive methods of production in Industry or embrace the latest methods of production. There is no sure-fire solution. In the world of today and as with any social science economics does not have clear solutions. The options are endless but the dynamics involved and the implementation of any of these alternatives is complex with potential for disaster apparent. Many of them point out India as an example of how domestic protectionism hampered industry and trade and let the further improvement of the country as a whole. The protectionism has hit back with slogans of national honor and more recently the example of the crumbling Asia economies. Would you rather be in Thailand shoes or India?It is no longer enough to sit back against a comfortable chair and rail against the injustices in India; the governments inability to do anything and the general laying waste of India. It is not enough to blame the politicians. It is time for the people of India to blame them selves. Understanding the nature of their failures and as a nation, resolve India At The Crossroad Of Economic Miracle Or Economic Disaster never to give into these again. Never to accept the pity of this world again. Never to consign themselves as just another Third World country. India At The Crossroad Of Economic Miracle Or Economic Disaster Figure 1 Exports + Imports as % of GDP (Gross Domestic Product) The size of exports+imports relative to GDP has risen sharply in the recent past, from 11% in 1986-87 to 21.0% in 1995-96(CMIE estimates for the year 1995-96) India At The Crossroad Of Economic Miracle Or Economic Disaster Figure 2 India’s Exports as % of World Exports In a reversal of earlier trends, Indian exports have grown faster than world exports in the recent past. India’s share in worldexports has risen from 0.44% in 1986-87 to 0.59% in 1993-94. India At The Crossroad Of Economic Miracle Or Economic Disaster Figure 3 Exports and Imports (Million USD)During the period April 1995 to February 1996 exports amounted to $28.2 billion, while imports were to the order of $32.5 billion.