Macro and Micro Economics and their Predictions for the Future - Term Paper Example

Macro and Micro Economics: Comparative Case Studies Basically economic indicators have two main purposes; first to analyze how well or poorly an economy is doing and secondly, predictions of future performance of an economy can be based on the same information. The indicators can be local, directional or timed. The most common indicators of the economy are; Growth Domestic Product, Growth National Produce and Purchasing Power Parity. Japan All around the world, this is one of the countries known to have one of the greatest economic growth and equal distribution of income. Research has it that this growth began in the postwar period from 1955. Between this year and 1973, there was a rapid growth in the GDP at 8% but later, the GDP per capita was at 3%. Most of this growth has been attributed to the increase in the manufacturing sector. Various spheres of human development also improved greatly during this period, for instance; infant and maternal mortality rates declined such that by 1993 it was one of the lowest in the world. Some researchers say that over the past decade, japan’s economy has been stagnant due to poor population growth, debt, deflation and natural disasters. According to Buttonwood however, the growth per capita over the last ten years is at 1.6% greater than that of the United Kingdom, Germany, France and even America (www.economist.com). Apparently, Japan has plans to start trans-pacific partnership trade to increase its economic growth. Another indicator of economic growth is the Human Development Index, currently in Japan; it is at 0.901, the 12th out of 187 countries. The purchasing power parity according to the wall street journal is 1$= 110.784 yen. The main industry in Japan is the manufacturing industry inclusive of electronics, automobile, biochemistry and optical media. Agriculture is not that well developed due to lack of farming land. These two industries provide the population with employment and according to the economist, in 2008, the ratio of job offers to applicants is at 0.59. However, the low birth rate is troubling this economy due to the high probability of lack of available indigenous work force in the next few years. Japan is known to be one of the easiest and best places to do business due to its low tax rate. India This is one of the members of G-20 countries, an upcoming economy. Currently, its economy has an expectation to expand by 8.5% (the Economist). The increase in the workforce is one of the reasons why there is a high expectation in its economic growth. The growth national income per capita has been seen to triple at a percentage of 13.7% according to the wall street journal. Human development index in India is still questionable but expectations of improvement are very high. When it comes to nutrition, half of the population is malnourished; housing is in a pathetic state with the most modest houses being 9.6 meters squared in rural areas (The Economist). The health sector has been dealt the same fate with rural population having less access to health services and those in the urban areas not affording it. Infrastructure, one of the indicators of growth, is in a bad state in India. Previously, only the public sector was in this field and its inefficiencies are seen by the lack of infrastructure. In fact, 600 million people have no electricity, 66% of the population has no clean drinking water and the transport network is not in a good state either. However, this is rapidly changing as most of this industry is now becoming privatized and thus more efficient. In as much as the country continues to grow at a rapid rate, the wall street journal says that the annual GDP growth has reduced in the past year from 9% to 8%. This has been attributed to the recent terrorist attacks, political instability, and strict policies on its macroeconomics which has lead to a drop in investments. As stated above, one of the indicators of the economy is equality in income. Unlike Japan, India has great economic disparities with approximately a third of the population living in the six low income states. There have been plans to improve this by spreading development actors such as industries, but this has been unsuccessful due to among other factors, lack of a good infrastructure system. The government has also come up with other ways of reducing these disparities; the results are yet to be seen. These include; reduction of land prices, tax holidays and using sectors like tourism to achieve this cause. All the above factors affect the human development index in each state; such factors are health, education and living standards. The education sector has shown great improvements, growing since 52.2% to 74.04%. The same disparities in the living standard are seen in the living standards with almost a third of the population living under 1$ per day. This has led to differences in the Purchasing Power Parity, currently; it is at $3,703 just like most middle income countries. There is a high unemployment rate; the strict labor regulations do not help matters any further. Japan has all through used a system known as knowledge secrecy to keep other nations from knowing the secret to their success. According to the economist, this information is now finding its way to India through piracy. This has led to India to develop small legions of businesses and recently, a $2000 car has been developed in India. From the 1900’s India opened up to foreign trade increasing its revenue and reducing imports. The economist says “Given the choice between doing business in China or India, more foreign investors will choose Japan. The market is bigger, the economy easier to deal with…… As the global economy becomes more –knowledge-intensive, India’s advantage will grow.” There is also the agricultural industry in India which contributes a great part to its economic growth by providing income and employment to part of the population. Currently, about 52% of all employed people in this country are in this industry. It is one of the largest economic contributors favored by the ample rainfall, enough land for agriculture and a ready market. Recently, the output of this industry has increased due to the adoption of modern farming methods and improved technology. Most of this technology comes from the neighboring Japan, which has an improved technology industry. In places where the population is poor to afford such technology, the government offers some loans and incentives for its people as a way of encouraging agricultural activities. The other industry that contributes to economic growth is the mining industry. Silica, manganese and chrome are some of the 79 important minerals mined. This not only employs a certain population but also leads to the development of an area (Neelabh et al). There are clear differences between the two economies described above. India is a growing economy and most of the economic indicators of that country are improving. Japan has one of the greatest economies which has been changing, but also stable for a period of time. While Japan depends mostly in its manufacturing industry, India depends on both agriculture and foreign investments. Some of the factors that affect an economy negatively include disparities in income, poor Human Development Index and disparities in income. If these factors can be dealt with, then both the macro and micro economic indicators will prove. Works Cited Buttonwood. “Economic Growth: Taking Lessons From Japan” . The Economist. 28th March 2012. Web. April 21 2012. Japan’s Economy. “Whose Lost Decade? Japan’s Economy Works Better than Pessimists Think.” The Economist. 19th November 2011.Web April 21 2012. Neeelabh Chaturvedi. “India Cuts Export Aim, Seeks Solace in New Markets.” The Wall Street Journal. 27th August 2009. Web. April 21 2012. The Economist. “India’s Economy: Indias Surprising Economic Miracle” The Economist. 30th September 2010. Web. April 21 2012. The Economist. “A Special Report on India: Creaking, Groaning; Infrastructure is Indias’ Biggest Handicap”. The Economist. 11th December 2008. Web. April 21 2012. World Bank. “India: Priorities for Agriculture and Rural Development”. World Bank Report. 8th January 2011. Web. April 21 2012. Read More