International Development with India - Literature review Example

Executive Summary

With an approximated 1.2 billion people, India is a combination of numerous nations. The country has ten of its with populations exceeding or equaling United Kingdom’s population. As a result, to fully comprehend the present experiment in the country’s economic reforms, the study is done at the state level. The economy of India offers a disclosing contrast between the way people respond to an environment controlled by the government and the way they react to the environment that is market-based. Evidence shows that current market reforms that stimulated the personal business have resulted in greater economic development in that nation. India could generate extra economic development by nurturing entrepreneurial activities within the borders (Chakrabarti, 2013). In order to further follow the entrepreneurial technique to economic development, India should presently offer chances for education leveled precisely at the entrepreneurial skills, funding of business attempts, and networking among possible business people and their knowledgeable colleagues. Furthermore, even though the Indian administration must institute policies that support the entrepreneurial attempts, its overall responsibility must be reduced so that the power of the individual self-interest and free market can be fully understood.

Introduction

Economic development, attained mostly from productivity development, is extremely essential to both the developing and developed countries. However, although individuals recognize that increased productivity results in enhanced economic results. As such, there is no consensus among the scholars regarding either the development’s desired path or the state’s role in economic growth. Regarding the development’s path, Dixon (2015) asserts that the suitable strategy for a country relies on its main economic condition and on the government strategies and general views concerning the suitable responsibility of the nation.

India is regarded as among the upper economies of the globe based on the gross domestic product’s purchasing power parity by heading the world’s financial entities like the World Bank, IMF, and the CIA. The HDI is used to refer to the average gauge of the simple human development accomplishments in a nation. The HDI is the summarized measure used to assess the extensive progress in the three basic human development dimensions, accessibility to knowledge and standardized living. The HDI value for India in 2014 was 0.609, which placed the nation in the middle category of human development. As such, this placed it at position 130 out of 188 territories and nations. From 1980 to 2014, the HDI value of India improved to 0.609 from 0.362. This was an upsurge of 68% or the average yearly upsurge of approximately 1.5% (Dixon, 2015).

With the 0.609 score on HDI, the nation stands below the 0.63 average score for nations in the category of the medium human development. However, it is slightly above the nations from South Asia 0.6 average score. Based on the most recent ranking, Bangladesh and Pakistan are ranked lower than India. However, it is lower than nations like Iraq, Guatemala, Namibia, and Tajikistan. The HDI ranking is topped by Norway; the second is Australia, followed by Switzerland and Denmark. All rankings are centered on 188 nations. In 2014, India fared poorly on the gender inequality index, being ranked at 130th from the 155 nations. It is lower than Pakistan and Bangladesh that are ranked 121st and 111th, respectively (Jones, 2011). The GII is centered on empowerment, reproductive health, and the economic activity.

Also, the report on Global Human Development approximates the multidimensional poverty index (MPI). The MPI recognizes multiple deficiencies in similar families in health, education, and the standards of living. Based on the index, 55% of the population in India from 2005-06 was multidimensional poor, while the other 18% lived near the multidimensional poverty. Nevertheless, since such approximations are founded on information that are nearly ten years old, the nation’s standing as of date has the potential to be more optimal than the one that is projected in the report.

Regardless of the thriving economy and the $9 Billion jobs program, the nation is badly rated on poverty indicators. In the country, about 41% of the nation’s population is living below the American $1.2 daily.” On the Global Hunger Index, the nation is ranked 45th among the 29 leading hunger stricken nations, and the nation has a third of the globe’s poor people. It is ranked below China, Sri Lanka and Pakistan (International food policy research institute, 2011). Therefore, it is evident that the nation could be categorized as a developing nation contrary to being a developed one.

Obstacles to Development

The nation has two major obstacles. First, there is the issue with labor regulations. The economies that are often developing change to manufacturing from agriculture. However, India’s transition is towards the service area. It is because to the labor regulations. For example, a company with over 100 workers is expected to seek a permit from the state to reallocate the laborers to diverse tasks, to close the company or lay off the laborers. These regulations obstruct the operations of large-scale manufacturing that can employ numerous workers producing the products that are labor intensive. Consequently, the worker’s movement to manufacturing from agriculture is almost absent (Mohan, 2013). The occurrence is evident in the labor force share of India’s agriculture at approximately 50%, which is big.

The other obstacle is infrastructure. Years of limited investment have made the nation lack critical infrastructures like roads, railways, electricity, ports, water, and airports. Particularly, shortages in infrastructure have hindered the development of the manufacturing that is export oriented and the value-added agriculture integrating into the global supply chains. In addition, the nation’s prosperity requires reliable power, optimal ports, roads, railways, and airports.

Fast urbanization and Population development combine to form difficult challenges for the cities in India. The meeting demands the urban services in such cities necessitate a capital investment of US$ 1.1 trillion over the subsequent two decades. The lack of suitable design and planning can lead to the massive urban development exacerbating existing issues of traffic safety, pollution, and congestion. Furthermore, the nation experiences a combined issue of infectious illnesses and the dramatic upsurge in the non-communicable illnesses that are presently estimated to be responsible for over half of the deaths. Such involve the chronic respiratory conditions, cardiovascular diseases, type 2 diabetes and cancer, all of which, in 2012, affected more than 60 million citizens. Besides instigating personal tragedies, such illnesses are a key economic threat. India is expected to lose over $6 trillion because of the mental disorders and non-communicable diseases by the year 2030. This is based on the study by the Harvard School of Public Health. Furthermore, the big population of India puts a terrible strain on the natural resources. The majority of the nation’s water sources are polluted by the agricultural and sewage run-off. There are gross differences in the access to safe water despite progress being made. According to the World Bank, an estimated 21% of India’s communicable diseases are associated with unsafe water, and there are 1,600 mortalities daily caused by diarrhea alone (Kapila, 2008).

Policies Used for Development

As it might be anticipated, the macroeconomic policies have a key role in the economic progress of India during the 1990s. For instance, Perkins (2012) deduces that the devaluation of the Indian rupee and the choice to raise the degree of permissible foreign investment assisted it in making substantial progress of the economy. Chang (2011) asserts that the selective capital account liberalization policy of India assisted it in attaining essential economic goals. De (2012) emphasizes the essential role of India’s judicious management of the policy of exchange rate and the fitted monetary policies. De records both the public sector enterprises’ privatization and the gradual disassembling of the planning process of the government in the market forces favor.

Three key policy directions checked in the five-year plan focused on the significance of the export-oriented development program built to create the foreign exchange. Also, there is the requirement of expanding the antipoverty attempts and the human resource development. However, as the economy of India is rapidly rejecting the socialist model, there are emerging worries that any form of advancement in the economic effectiveness and the economic development might be accomplished. It is at the expense of increased income inequalities, greater unemployment, progressive damage to the environment, and reducing real income for the middle and poor classes. Therefore, the main issue experienced by the government of India during the 90s was ways of balancing development with equity, effectiveness with the food production and distribution, employment, and poverty mitigation.

The preliminary monetary policy’s role in a developing nation is facilitating economic development with sensible price stability. The balance of payments seems to be more of restraint than objective. In addition, it is sensible to construe the stability widely as inflation regulation or maintaining the overall price-level from increasing by over few percentage points annually. Concerning the upsurge of the order as sensible lacks inherent merit eve though it is at times contended that it is essential to allow the necessary changes to the relative prices (Kapila, 2008). Generally, to attain stability, it is sensible to keep the development of the money supply to be in step with its demands. This is believed to be exclusively associated with the national income, at all rates over a medium-term and the moment the due permission is made for the secular adjustments (Chang, 2011).

Efficient co-ordination of diverse scopes of the fiscal policy, economic policy, industrial policy, monetary policy and the trade policy is eased by the long-term viewpoint to making of policy. The association between the monetary and policy is especially close as the financing plans of the Government have a vital bearing on the development of the money supply within the economy. Likewise, sensible credit and monetary policies are vital for comprehensive fiscal management. With the single ration, the Government expresses the conviction courage in its individual financial policy as being among the tools for attaining the specified economic objectives (De, 2012). In addition, it puts a unique landmark in the proficient fiscal management and complexity in the sector. Fundamentally, what the long-term fiscal policy ensures is providing the frames for financing the plans with the insinuations and laying down specific policy directions. By performing this, it adjusts the Government expenditures’ finances from the route of the ad hoc directional and places it on the path to rationally well-described goals that are according to the historically changing requirements of the economic activities could now be progressed in the relative stability environment, and its effect on the growth and investment is expected to be positive fiscal policy (Chakrabarti, 2013).

Analysis

The structural patterns of development emphasize on the mechanisms in which the immature economies change their local economic structures from the heavy focus on the traditional sustenance agriculture to the highly contemporary, highly urbanized, and industrially different service and manufacturing economy (Chang, 2011). As such, it can be said to use the equipment of the neoclassical theory of resource and price allocation and the contemporary econometrics to define the way the changing process occurs. The analysis of the patterns-of-development of the structural transformation emphasizes on sequential processes in which the industrial, economic, and the institutional structures of the immature economies is transformed with time to allow fresh industries to substitute the traditional agriculture for being the economic development's driver.

The structural changes are present in the manufacturing sector of India. Though, it appears not to be fast enough to transform the course of growth. Manufacturing seems to be the export driver and establishes the business opportunities and productive employment, but they have not occurred adequately in the economy of India. There is a low contribution from the manufacturing sector, which is about 16% of the GDP and observing near inactivity. With manufacturing sector, the technology is still at the intermediate or basic level. Also, in the manufacturing sector, growth was declining from the start of 2007 because of the shortage of investment from both the public and private sectors (Perkins, 2012).

There are corrections that need to be done to improve the manufacturing outputs. As such, the New Manufacturing policy proposes to maximize the GDP share to about 25% and maximize the labor absorption from approximately the present 50 million to over 150 million in the year 2022. Moreover, it pursues the formation of needed skill that is set in the midst of the urban poor and rural migrants to make development comprehensive. There is a maximized addition to the domestic value and the technological profundity in manufacturing, which improves the international competitiveness of the manufacturing sector in India. In addition, it guarantees the sustainability of development especially based on the energy effectiveness, better use of the natural resources and the degraded ecosystems renewal (Soundarapandian, 2011). As a result, the implications need to be considered when meeting the 25% share for the manufacturing sector.

In manufacturing, the employment growth has been gradual under the effect of maximizing the labor-saving technological changes and capital‐intensity. The growth in the industry no longer has the capacity of absorbing huge maximization in the supply of labor. From the policy viewpoint, it will need the reconsideration of the association between the service sector, the industrial and the agriculture sector. Though, it is impossible to expense the manufacturing sector’s development since there is an increased association between the economic development and management levels.

The productivity growth opportunities will end up being highly limited within the service sector. As such, there is evidence of increased prospects for the capital accumulation in the manufacturing sector. There are increased chances for realizing scale economies in manufacturing (Szirmai, 2011). Manufacturing is a vital source of essential spillover impacts and is the locus of technological change. More significantly, as there is an upsurge in income, the comparative demand for the agricultural products declines and the demands for the manufacturing goods intensifies leading to manufacturing having dynamic opportunities.

Conclusion

India’s economic development is expected to be robust, at approximately 7% over the period of projection. Public investment is picking up. There is optimal infrastructure and increased the comfort of performing business are endorsing private investments. All the same, the large non-performing loans, increased leverage ratios for several firms and complexity in passing the major structural reforms, which hold back the economy. The present account deficit is increasing as there is an increase in machinery imports but is mostly funded by increasing inflows in FDI. The fiscal policy is expected to be supportive. In addition, the public investments in the transport, energy, housing, sanitation, and the social protection sectors are vital to increasing the living standards for everyone and could be funded through tax reforms. Creating increased and optimal jobs will need enhancing the simplicity of performing business, revolutionizing the labor regulations, applying the services and goods tax and easing the land transactions.