22, 24, 25 - The Rise of China and India

22 24 25 The - China India 1 The India Model An Economy unshackled Economic success is not new o Has been growing at 6 a year since 1980-2002 and

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China + India 1 The India Model An Economy unshackled - Economic success is not new o Has been growing at 6% a year since 1980-2002 and then 7.5% from 2002- 2006 o In the past decade the middle class has quadrupled to 250 million 1% of the country’s poor has crossed the poverty line each year Population growth has slowed from 2.2% to 1.7% presently o Presently the world’s 4 th largest economy and will soon surpass Japan to become the 3 rd - Path to economic growth is unique o Did not follow the Asian strategy of exporting labour intensive, low priced manufactured goods to the west India has relied on its domestic export rather than exports, consumption more than investment, services more than industry and high tech rather than low skilled manufacturing This means that the Indian economy is insulated from global downturns, giving it stability o Has risen despite the inefficiency of the state Boasts highly competitive private companies, booming stock market, and a modern well disciplined financial sector Lowered trade barriers and tax rates, broken state monopolies, unshackled industry, encouraged competition Has failed to create a broad-based, labor intensive industrial revolution Gains in employment have not been commensurate with overall growth Rural population has suffered and only receives about 20-30% of retail from fruits and vegetables compared to 40-50% for farmers in the USA
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China + India 2 A 100-Year Tale - Economy was stagnant between 1900 and 1950 at an average growth rate of .8% o First decade after independence, growth picked up averaging 3.8% from 1950- 1980 This coupled with an accelerated population growth, per capita income growth was only at 1.3% This was referred to as the “Hindu rate of growth” Result policies introduced by PM Nehru and his daughter PM Indira Gandhi, who introduced a mixed economy, combining the worst features of capitalism and socialism o Model was inward looking and import-substituting rather than the opposite o Denied India a share of the expansion in global trade in the post WW2 era Nehru set up an inefficient and monopolistic public sector, overregulated private enterprise and discouraging foreign investment – making India lose out on foreign technology and competition o Government attitude towards the private sector began to change in the 1980s thanks in part to the underappreciated efforts of PM Rajiv Gandhi Modest liberal reforms Lowering marginal tax rates and tariffs, giving more leeway to manufacturers, spurring an increase in growth to 5.6% Policies of the 80s continued to hurt the country, pushing it to the point of fiscal crisis by the start of the 1990s The crisis triggered critical reforms in 1991, which allowed India’s integration into the global economy – done by then finance minister and now PM Manmohan Singh o Lowered tariffs, scrapped industrial licensing, reduced tax rates, devaluated the rupee, opened India to foreign investment and rolled back currency controls Peculiar revolution
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This note was uploaded on 10/09/2010 for the course INTD 200 taught by Professor .. during the Fall '09 term at McGill.

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22 24 25 The - China India 1 The India Model An Economy unshackled Economic success is not new o Has been growing at 6 a year since 1980-2002 and

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