Economic Development in India - Example

Economic Development in India Introduction In the very early years, the economic development of India was predominantly associated with socialist-influenced sort of policies, red tape & extensive regulations and state-owned sectors, which are collectively known as "License Raj". As a result of this, the country and its economy got isolated from other economies in the world (Aggarwal & Kumar, 2012). However, this scenario took a U-turn from the mid-1980s, a time when India started opening up its market slowly through economic liberalization. The policy played a huge impact on the economic development of India. The economy of Indian got a major boost through its economic reform in 1991 and again through its renewal in the 2000s. Since these changes were made, the face of economic development of India has drastically changed completely (Rajesh and Manoj, 2015). The India’s economic reform of 1991 played a very vital role in the economic development of the country. Based on these benefits, the economic growth of the country reached around 7.5% in the late 2000s. Based on the forecasts, it is expected to double the average income in the coming 10 years. According to the economists, if India can input more fundamental market reforms, then it is likely that the country will be able to sustain the rate and can even achieve the governments target of 12% by 2016. Economic profile In this section, we present the time series data for the Indian economic profile spanning form the year 2000 to 2013. The data was obtained from http://data.worldbank.org/indicator. GDP growth (annual %) The Gross Domestic Product (GDP) in India expanded from 3.8% in the year 2000 to an all-time high of 10.3% in the year 2010. Population growth rate (annual %) In terms of population growth, the country has maintained a steady slight drop in the growth from 1.7% population growth rate in the year 2000 to 1.2% population growth rate in the year 2013. CPI inflation (annual %) Unlike the population growth rate which has been on the verge of decline over the past 10years, the Consumer Price Index (CPI) inflation has maintained a steady rise in the last decade Population ages 0-14 (% of total) The Indian population of those aged 0-14 years old has been on a decline mission in the last one decade. In the year 2000 for instance, the percent of the population aged between 0-14 years old was established to be 34%. In 2013 however, the percent had dropped to 29% of the total population. Population ages 65 and above (% of total) Unlike the population of those 15 years, the population of those aged 65 years and above has maintained a slight increase. In 2000 for instance, the percent of the population aged over 65 years old was 4% while in 2013 it was estimated at 5%. Development issue One of the development issues identified from the above time series data is the decline in the agriculture added value (% of GDP). Agriculture; value added (% of GDP) in India was last measured at 18.2 in 2013, according to the World Bank. Annual growth rate for agricultural value added based on constant local currency. Agriculture includes forestry, hunting, and fishing, as well as cultivation of crops and livestock production. Value added is the net output of a sector after adding up all outputs and subtracting intermediate inputs. It is calculated without making deductions for depreciation of fabricated assets or depletion and degradation of natural resources.   Inflation is another major setback to the Indian economy. Fuelled by rising cost of food, property prices and wages, inflation in India is an increasing problem. The current inflation rate stands between 10-12%. This rise in the inflation rate has been a major problem despite periods of economic slowdown. For example in late 2013, Indian inflation reached 11%, despite growth falling to 4.8%. This suggests that CPI inflation is not just as a result of excess demand, but it could also be related to cost push inflationary factors. For instance, constraints in the supply of agriculture have resulted to ever increasing food prices. This leads to inflation and is also a major contributor in reducing living standards of the poor who are very much sensitive to food prices. Recommendations The government through the Central Bank of India should make reducing inflation a government’s top priority and as such they should be willing to control the money supply. Monetarists over the past have believed that there exists a strong relationship between the rate of inflation and the supply of money. It is therefore clear that if one can be able to control the growth of the money supply, then this should be able to bring down the rise in inflation rate (Gordon & Robert, 1975). From the monetarists’ policy point of view, the following policies should be put in place: higher interest rates (tightening monetary policy) reducing budget deficit (deflationary fiscal policy) Control of money being created by government If inflation is caused by wage inflation (e.g. powerful unions bargaining for higher real wages), then limiting wage growth can help to moderate inflation. Lower wage growth helps to reduce cost push inflation, and helps to moderate demand pull inflation. Research in new and emerging technologies in the agricultural sector should not be left out either. The government should make all the necessary efforts to see an increase in investment in the research side. With this, the agricultural production will rise back to where it previously belonged to and the end result will be an increase in exportation of the agricultural products in the country. Conclusion Agriculture is one of the strongest backbones in India. Providing food security for the country and at the same time contributing to economic growth of the country is a core value of agriculture. The food and agriculture sector has the primary role of feeding people well by increasing safe, available, affordable, consumption of diverse and nutritious foods & diets that are aligned with the dietary recommendations and environmental sustainability. Applying these principles helps strengthen resilience and contributes to sustainable development. Similarly, it should be noted that if inflation reigns high, it is clear that the value of money would automatically go down. This may lead to a reduction in the purchasing power. In the event, when the rate of inflation is high, the interest rates also increase. With rise in both parameters, cost of goods will not remain the same and consequently people will have to shell out more money for the same goods. If the prices of goods and services increases and the consumers have to compensate for the increase in price, they usually make use of their savings. In the event when savings are depleted, fund for investment is no longer available. An individual tends to invest, only if savings of an individual is strong and has sufficient money to meet his daily needs. The report concludes that the progress in production with regard to crops, milk, eggs and fish, improvement in health status, and growth in access to electric power and drinking water for India’s rural population over the post-Independence period is the result of the proactive role played by the state in promoting research and development. This research has contributed the technologies crucial for a breakthrough in production and promotion of people’s access to basic facilities. References Aggarwal, K., & Kumar, C. (2012). Structural change, industrialization and poverty reduction: The case of India, in United Nations UNIDO workshop. The Untold Story: Structural Change for Poverty Reduction–The Case of the BRICS. Vienna, 6(3), 1-68. Bergmann & Andrew (2014). Worlds Largest Economies. .CNN. CNN Money. Retrieved Feb 23, 2015. Gordon, G., & Robert, J. (1975). Alternative Responses of Policy to External Supply Shocks. Brookings Papers on Economic Activity, (Brookings Papers on Economic Activity, Vol. 1975, No. 1) 6 (3): 183–206. Majumder, Sanjoy (2011). Changing the way Indians shop. BBC News. Singh, R., & Kumar, M. (2015). Methodology change sees Indian economy grow faster than Chinas. Economic Management Research, 5(4), 23-32. Appendix Year GDP growth (annual %) private consumption (C) Population growth (annual %) CPI Inflation (annual %) Population ages 0-14 (% of total) Population ages 65 and above (% of total) Foreign direct investment (% of GDP) Exports of goods and services (% of GDP) Agriculture, value added (% of GDP) 2000 3.80 9.73 1.70 4.00 34.00 4.00 0.80 12.80 23.00 2001 4.80 9.81 1.60 3.70 34.00 4.00 1.10 12.30 22.90 2002 3.80 10.08 1.60 4.40 33.00 5.00 1.10 14.00 20.70 2003 7.90 10.24 1.60 3.80 33.00 5.00 0.70 14.70 20.70 2004 7.90 10.35 1.50 3.80 33.00 5.00 0.80 17.60 19.00 2005 9.30 10.43 1.50 4.20 32.00 5.00 0.90 19.30 18.80 2006 9.30 10.73 1.40 6.10 32.00 5.00 2.10 21.10 18.30 2007 9.80 11.09 1.40 6.40 31.00 5.00 2.00 20.40 18.30 2008 3.90 11.57 1.30 8.40 31.00 5.00 3.50 23.60 17.80 2009 8.50 12.88 1.30 10.90 31.00 5.00 2.60 20.00 17.70 2010 10.30 14.19 1.30 12.00 30.00 5.00 1.60 22.00 18.20 2011 6.60 14.98 1.30 8.90 30.00 5.00 1.90 23.90 17.90 2012 4.70 16.04 1.30 9.30 29.00 5.00 1.30 24.00 17.50 2013 5.00 17.33 1.20 10.90 29.00 5.00 1.50 24.80 18.20 Read More