Asia In The World Economy - Research Paper Example

Explain why poverty reduction in India has been much slower than in China The globalization of world is primarily the outcome of innovations and advancements in information & communication technology. The contraction of virtual boundaries has also facilitated the enhancement of trade and business activities among nations that in turn have resulted in interdependence. For instance, a recent dramatic change in today’s globalized world is the shift of wealth from west to east followed by the emergence of new economic powers such as China (1st largest country in terms of population and 2nd in terms of GDP) and India (2nd most populous country and 10th largest in terms of GDP).

It is worthwhile to mention that China and India are still viewed as developing countries because of their low Per Capita Incomes ($4200 and $1,170 respectively), high unemployment and poverty etc. Nevertheless, the most concerning issue is that poverty reduction in India has been much slower than in China despite 9% annual economic growth rate. Ravallion, Bardhan, Kanpur and Ghosh have presented various underlying reasons that will be discussed in the following sections. Ravillion (2010) pointed out the fact that over 80% of Chinese population had been living below poverty line having an income and purchasing power of $1.

25 per day during 1981 at PPP (purchasing power parity) in 2005. The poverty situation across China was so grave that it had been on 5th in the list of poverty hit nations. Nevertheless, the economic reforms such as opening boundaries for foreign investors through business incentives and efficient use of cheap labor resources have enabled China to reduce its poverty to just above 15%, which is a phenomenal success considering on average 26% poverty in all developing nations. For instance, the annual poverty reduction rate since 1981 has remained around 7%, which is the evidence of rational economic policies of successive Chinese governments.

It is worth mentioning that China has although become a relatively mixed economy, yet the government and state authorities enjoy considerable control over policy-formulation that directly impacts greater public interests. Therefore, it is justified to conclude that China has recorded substantial increase in number of millionaires / billionaires because of industrialization and robust growth in trade and commerce activities, yet its economic structure has proven successful because the masses enjoy growth benefits at large.

Another reason towards rapid poverty reduction in China is its greater focus on growth of agriculture sector because the policy-makers argued that this primary sector cater to masses in rural areas across China; therefore, the growth would create new employment opportunities and reduce poverty. Consequently, the policy proven successful since the agricultural boom had created 4 times new jobs in comparison to expansion in manufacturing sector (Bardhan, 2007). Bardhan (2008) revealed that China’s industrialization led to urbanization, which was intensified due to subsequent migration from rural to urban centers.

In this way, the poor got the opportunity to get settled in industrial cities / trade hubs, thereby benefiting from economic growth of nation (Ians, 2003). As far as the case of India is concerned, it should be emphasized that it is also a mixed economy; however, the government regulatory control (except on core matters) on economic forces is relatively low unlike China (Kanpur, 2007). Therefore, the issue of inequality and poverty is much serious in India as the difference between the rich and poor has been increasing at a drastically high rate.

For instance, Indian industrialists such as Mukesh Ambani, Laksmi Mitthal Azim Premji, Anil Amban, Shashi & Ravi Rulia and others etc. have already joined list of richest people across globe. Moreover, Reuters News (2010) confirmed that wealth in India is concentrated in hands of fewer people as the wealth of 100 richest Indians is almost equivalent to wealth of 400 richest Chinese. The aforementioned facts would corroborate why poverty reduction in India is much slower than that of China because Indian policy-makers have been influenced by elites to devise strategies that would secure their interests and accumulation of wealth (Ghosh, 2010).

Ravillion (2010) highlighted the fact that 42% of India’s population enjoyed earning of $1.25 per day in 2005 compared to just 60% in 1981. The situation has somewhat improved during this tenure but poverty reduction rate was slower than that of China which reduced its 84% $1.25 / day population in 1981 to just 16% in 2005. The average 25-year rate of poverty reduction was estimated to be just 1.5% compared to just under 7% in China. Ghosh (2010) provided the evidence that India’s poverty reduction, though paltry and disappointing, is mainly attributed to growth in telecommunications, Information Technology (especially Software development and export), engineering, automobiles and consumers goods industrial sectors because the aforementioned helped creating a large pool of customers from lower-middle, middle-middle and upper-middle social classes that did not exist during 1980s and 1990s.

References Bardhan, Prenab (2007). Inequality in India and China: Is Globalization to Blame? Yale Global [Online] Available at http://yaleglobal.yale.edu/content/inequality-india-and-china-globalization-blame Bardhan, Prenab (2008). Some Myths about the Rise of India and China. Boston Review [Online] Available at http://www.howardwfrench.com/archives/2008/01/30/some_myths_about_the_rise_of_china_and_india/ Ravallion, Martin (2010). A Comparative Perspective on Poverty Reduction in Brazil, China, and India.

The World Bank Research Observer, pp. 1-34 [Online] Available at http://wbro.oxfordjournals.org/content/early/2010/03/08/wbro.lkp031.full Ians (2003). India, China discuss how to jointly reduce poverty. Silicon India [Online] Available at http://www.siliconindia.com/shownews/India_China_discuss_how_to_jointly_reduce_poverty___-nid-21799.html Ghosh, Jayati (2010). Poverty reduction in China and India: Policy implications of recent trends. DESA Working Paper No. 92[Online] Available at http://www.un.org/esa/desa/papers/2010/wp92_2010.

pdf Kanpur, Ravi (2007). Poverty, Inequality and Conflict. Working Paper [Online] Available at http://www.dyson.cornell.edu/research/researchpdf/wp/2007/Cornell_Dyson_wp0701.pdf Reuters News (2010). India makes more billionaires, but top 2 slip in list. Reuters [Online] Available at http://in.reuters.com/article/2010/09/30/idINIndia-51841520100930