Comparing Regional Development in China and India - Assignment Example

India Question 1 India’s economy historically focused on central planning that involved business unfriendly regulation and trade barriers which led to an economic crisis in 1991.This prompted the government to launch economic liberation to drive economic recovery. These regulations were tailored to adopt a capitalist system of trade and industry in order to spur economic growth (ESI, 2007; Pandit, 2005). India’s economy owes its progressive growth to economic reforms enacted in 1991 under the leadership of the then prime minister Manmohan Singh. These reforms were tailored towards the liberation of the economy to international trade. In this new framework India adopted liberal and free market principles that would see the end of the British colonial legislation that impeded on industrial development. As a requirement, government controls over the setting up of industry by the old British legislation obstructed economic development due to minimal investment in the local economy (The Economist, 2010). Owing to the 1991 economic reforms, India’s economy has experienced progressive growth since Prime Minister Manmohan Singh’s reign i.e. 1991-1996. The International Monetary Fund 2013 report ranks India among the world’s G-20 economies. In the fiscal year 2012 India comes in third place in terms of Purchasing Power Parity worldwide and is ranked 130th world wide in terms of nominal GDP. The IMF report also reveals that India is the 19th largest exporter and the 10th largest importer in the world despite a dismal economic growth performance in the fiscal year 2012-2013 at 5%, 1.2% less than the fiscal year 2011-2012. Notwithstanding, India’s economy is yet to address the unemployment problem which was at 9.8% nationwide in 2011. Similarly the rate of inflation was at an all-time high at 7.55% in 2012 (The Hindu, 2011). More so, India’s greatest impediments to economic development lie include, poor infrastructure, public sector reforms, HIV/AIDS eradication, labour regulations, agricultural and rural underdevelopment (World Bank, 2013). Question 2 The importance of sectors of the economy in India lies in the benefits that each sector contributes to the overall economy. These sectors can generally be grouped into three categories namely; Primary sector, secondary sector and the tertiary sector. Primary sector makes use of raw materials and natural resources they include agriculture, mining and fishing industries. It is very important in providing raw materials for secondary industries. On the other hand, the secondary sector creates finished goods and construction while the service sector incorporates majorly service industries such as; transport, trade, hotels, communication and banking among (Mahadevan, 2003; Dimitriu & Savu, 2010; Eichengreen & Gupta, 2010). Development in infrastructure has played a central role in the development of major sectors of the economy in India. For instance, the development of rural infrastructure has facilitated the development of the agricultural sector while at the same time facilitated the movement of manufactured goods to rural dwellings due to sufficient and reliable transport networks. This therefore shows that the primary and secondary sectors of the economy are the greatest beneficiaries of infrastructure development in the country. Nonetheless, the greatest impediment to the development of infrastructure in India remains in legislation that would allow the ease of flow of government funds for financing projects (Mahadevan, 2003; Eichengreen & Gupta, 2010). Question 3 The role of the Indian government in human development has majorly been concentrated on health and education. The government of India has made strategic investments in education and health of the Indian people as part of the economic reforms that took place in 1991. By doing this the literacy levels of the Indian people has appreciated along with skills and knowledge that have aided in business eventually translating into economic growth. By investing in education the Indian government plays a central role in human development by empowering people with knowledge and skills to engage in trade (Haldar & Mallik, 2010). Further, a direct relationship between human capital and sustained growth in GDP has been the main driver for reforms in legislation that supports investments in education on human capital. Similarly, investments in health of human capital have also sustained economic growth as good health enhances worker’s productivity leading to overall growth of various sectors of the economy. The Indian government also cares for the health of its citizenry by making strategic investments in healthcare ensuring that workers’ are healthy and hence can be capable of sustaining and maintaining high productivity levels in their jobs. In the end, the performance of healthy workers translates into economic development (Haldar & Mallik, 2010). China Question 1 China took up economic reforms in 1979 that brought to an end decades of poor and stagnant economic growth. These reforms were targeted at economic liberation that ended isolation of the Chinese economy from world financial markets. Today, China is a fast growing economy, it’s the second destination for direct foreign investments and the largest holder of foreign exchange reserves world wide (Morrison, 2013). China’s economic growth averages 10% annually making it the 2nd largest economy in the world after the USA. China is also the largest manufacturing economy in the world and the largest exporter worldwide. According to the report, it is also the 2nd largest importer worldwide (IMF, 2013). However, the Chinese economy is one that is deprived of economic freedom. China ranks 136th worldwide in terms of economic freedoms. This ranking is largely due to the lack of political will to undertake fundamental restructuring of the economy. Evidently, regulation undermines private ownership of land and enterprise underpinning economic freedoms. Similarly, corruption and lack of intellectual property rights serve to discourage economic freedoms as well (Index of Economic Freedom, 2013). Question 2 The importance of China’s sectors of the economy can be explained by the regular five year plans that the Chinese government puts in place to achieve development objectives. Currently, China is on the verge of implementing its 12th 5-year plan for the 2011-2015 period. The plan is geared towards both local and foreign investments in various sectors of the economy that would thrust its citizens into prosperity by exporting its goods to various destinations around the world. More importantly, the five year plan is aimed at opening up the sectors of the economy to the world’s markets and in so doing improve the GDP per unit. Hence, importance that the economic sectors through the 5 year plan improves living standards of the Chinese people (KPMG, 2009). In this plan the government aims at improving trade between China and financial markets the world over. For instance, by exporting its goods to various destinations around the world the government aims at improving foreign revenue earnings for the country. Similarly, through the 5 year plan, the government plans to attract both foreign and local to investors to invest in the various sectors of the Chinese economy. In the long run this is expected to grow China’s GDP per capita (KPMG, 2009). Question 3 China is governed politically through a single party socialism framework where state power is sanctioned by the China Communist Party (CCP). The CCP runs the central government coordinating with elected congress members at the county level who run county governments. County congress members are elected by voters in their regions and the congress members elect members to the National People’s congress (CIIC, 2013). The political process in China is widely controlled and censured by the China Communist Party (CCP), there are minor political parties that are loyal to the CCP which is committed to maintaining monopoly of power in the state. Its dominance over China’s politics is achieved by giving no tolerance to anyone who questions its (CCP’s) right to rule. The National People’s Congress (NPC) functions as the judiciary in the state although it is not free from influence of the CCP. The CCP also has influence over the army which owes loyalty and allegiance to it as well. Meritocracy is used as a lee way for the CCP to justify its one party rule system that has in turn encouraged the development of the culture of corruption and disrespect for the rule of law especially by those in power (Lawrence & Martin, 2013). Bigger Issues Question 1 Growth and development are interrelated although one can be mistook for the other. Whereas growth can be gauged in terms of economic performance, for instance it can be measured in terms of GDP. Development on the other hand is more widely associated with the improvement of people’s living standards. Development also entails the improvement of human dignity and freedoms. China can be said to have made substantive gains in economic growth given its impeccable performance in the global financial markets, it stands the largest exporter and the second largest importer in the world. However, in terms of development China lags behind as lack of reforms in its political system deprives its citizenry of human rights and economic freedoms (Index of Economic Freedom, 2013; Lawrence & Martin, 2013). Question 2 The implication for the growth of the middle class in both India and China is that there is increased expenditure on goods and services that formally the greater populous could not afford. This has beneficial values for industry as companies find more lucrative markets for their products in India and China (Rapoza, 2011). However, much of India’s middle class are at a high risk of falling back into poverty basically due to the rising population rate. China’s one child policy has done a lot to cap its population explosion and this has had a great influence in sustaining its middle class. India on the other hand stands to lose most of its middle class to poverty lest it addresses its population influx (Lahiri, 2010). Question 3 Economic development in both India and China has not addressed the gap between the poor and the rich despite the two countries experiencing tremendous economic growth over the last decade. The gap between the rich and the poor has continued to widen as a result of regional imbalance within the two countries. Consequently, the rich have become richer while the poor even poorer. Urbanization and infrastructural development are major contributors to the imbalance in development of regions within China and India. In India for instance human development is a major contributor to regional disparity in development where people with access to education and good health care live better than the poor. On the other hand, in China human development is a major contributor to regional disparity in development while in China the export sector is the main contributor to regional imbalance in development. In either case the regional imbalance in development created serves to widen the gap between the rich and the poor in both countries (Wu, 2008) Question 4 Globalization is a continuous process of international integration propelled by the exchange of information, ideas, world views, products and different aspects of culture. Globalisation can also be considered as the process through which the world is made a global village. This process incorporates international integration that allows cultural transmission from one part of the world to another (Al-Rodhan & Stoudmann, 2006). Trade for instance is one way through which globalisation is facilitated. The movement of goods and people from one part of the world to another allows for cultural transmission and integration. Globalisation also involves the integration of economic, cultural and political activities of individuals from different cultures, countries or geographical areas (Wells, Shuey & Kiely, 2001). Question 5 Globalisation has been particularly criticised for encouraging neo-colonialism especially in developing countries through multinational companies. The domination of multinational companies in some countries has led to a decline in state powers particularly when it comes to economic matters. In some countries, governments have been put under pressure to implement policies designed to favour powerful multinational corporations. This has in turn compromised the economic sovereignty of some countries. The loss of government power to intervene in how market mechanisms operate can adversely affect job security and employee wages. Whereas these claims may hold some truth they are not justified as globalisation has brought with it more benefits than harm. Globalisation is beneficial in the sense that it has enhanced international trade, interactions and cooperation (Wells et al., 2001). Question 6 Models of economic growth are frameworks that employ several strategies geared towards the growth and development of an economy. A model of economic growth is a guideline that explains how the economy of a particular country can develop to provide better living standards for its citizens. Economic growth models provide knowledge on how GDP per capita can be instrumental in the growth and development of the economy. Examples of economic growth models include; the Harrod-Domar Growth model, the Neo-classical model and Rostow’s model among others. These models attempt to provide a mechanism through which strategic investments can be made that would lead to economic development. For instance the Neo-classical model emphasises that improved GDP per capita is an indication of improved standards of living as people have more money at their disposal and therefore can invest and save leading to overall economic development (Welker, 2012). References Cronin, M. (2003). Translation and globalization. New York: Routledge. Dimitriu, M. C. & Savu, B. M. (2010). ‘Econometric Analysis of Efficiency in the Indian Manufacturing Sector’. Romanian Journal of Economic Forecasting 13(1), 182-197. Eichengreen, B. &Gupta, P. (2011). The Service Sector as India’s Road to Economic Growth. NBER Working Paper No. 249. pp. 1-33 Haldar, S. K. & Mallik, G. (2010). ‘Does Human Capital Cause Economic Growth? A Case Study of India’. International Journal of Economic Sciences and Applied Research 3(1), 7-25. KPMG (2009). Infrastructure in China: Foundations for Growth. Retrieved October, 7 2013 Lawrence, S. V. &Martin, M. F. (2013). Understanding China’s Political System. CRS Report for Congress. Retrieved October 7 2013 Lahiri, T. (2010). Much of Indian ‘Middle Class’ is almost poor. Retrieved October 7 2013 Mahadevan, R. (2003). ‘Productivity Growth in Indian Agriculture: The Role of Globalization and Economic Reform’. Asia-Pacific Development Journal 10(2) 57-72 Nikiforuk, A. (2007). Pandemonium: How Globalization and Trade are putting the world at risk. Brisbane: University of Queensland Press. Rapoza, K. (2011). Within A Generation, China Middle Class Four Times Larger than America’s. Forbes. Retrieved October, 7 2013 The Economist (2010, September 30). India’s Surprising economic miracle. Retrieved October, 7 2013< http://www.economist.com/node/17147648?story_id=17147648&fsrc=rss> The Hindu (2011, June 10). Exports Record an Impressive 57% Growth in May. Retrieved October, 7 2013 The Heritage Foundation (2013). Index of Economic Freedom: China. Retrieved October 7 2013 International Monetary Fund (IMF) (2013). World economic outlook database April 2013. Retrieved October 7 2013 The World Bank (2008). India Country overview. Retrieved October 7 2013 Welker, J. (2012). Models of Economic Growth and Development: Economics in Plain English. 2013. Retrieved October 7 2013 Wells, G. J. Shuey, R. & Kiely, R. (2001). Globalization. New York: Nova Publishers. Wu, Y. (2008). Comparing Regional Development in China and India. United Nations University-Wider. Research Paper No. 2008/13. Read More