At The Crossroad Of Economic Miracle Or

Economic D Essay, Research Paper

India at The Crossroad Of Economic Miracle Or Economic Disaster India is a country that holds its destiny in its on hands. There are many economists that would say that India is on the verge of an economical boom, and there are those who say that the country is on the verge of disaster. Through this paper, I shell enlighten the reader on both the failure and success of India’s economy, and its place in toady’s global economy.Before I start, I will first like to give the reader an idea of the physical environment of the country. India is roughly one-third the size of the United States. However , its population is well over three times of the United States, and represents 16 percent of the world’s total. Its government consists of a federal parliament system with a lower house, the Lok Sabha (House of the people), and an upper house, the Rajya Sabha (The Council of states). The executive branch has a president, vice-president, prime minister, and a Council of Minister. India’s economy is a combination of capitalist entrepreneur and socialist government control. The country of India has undergone remarkable changes since 1991. Until that date , India had spent fifty or more years as an outcast, isolated from the trade with the rest of the world. Its share of world trade had gone from two percent in the 1950’s to less than a half of a percent in the late 1980’s. At that point, India’s inflation was near the double-digits, and its strategy had discourage the production of exports, repeated shortages of exchange had made the balance of payments extremely vulnerable to external markets. India At The Crossroad Of Economic Miracle Or Economic Disaster By early 1990, India was very close to defaulting on its external debt obligations. In 1991 India implemented a new strategy that has shot its economy upward to now the fifth largest in the world. In June 1991, India ended its four decades of central planning by implementing advances in agricultural development for export, diversification of its industrial sector, nationwide distribution, and an educational system aimed at providing a large quantity of high quality human resources. India has also made extreme changes to its economic policies to simulate domestic and foreign investment and trade. Initially, growth declined, but soon after, growth increased and is continuing to.India has had an average growth rate of 5% between 1992-1995. Growth reached 7% in 1996. India’s GDP growth has been impressive (see figure 1). Its 1993 per capita estimate was only $309 million and in 1995 India’s GNP per capita was $340 million, as reported by the Worldbank. The World Factbook reported an estimated GDP per capita of $1,500 for 1995. Changes in economic policies have caused substantial industrial growth, primarily in capital goods. As a result, a large middle class has abounded almost equal to the entire U.S. population in number. India’s huge middle class consumer sector has attracted the world. Foreign investment is fifteen times great, better than before reforms, and 10% of world investment in emerging markets have been put into India. India’s export have been rising in world India At The Crossroad Of Economic Miracle Or Economic Disaster exports (see figure 2). The main items of exported are diamonds, textile, leather products, carpets, dyes and food. Their major exports to the U.S. are textile/clothing and jewels. India’s largest partners are currently the U.S. and the EU. Trading with the Asia-Pacific region is escalating. Figure 3 shows the export and import (Million USD) during the period of April 1995 to February 1996. India’s clothing and textile export far exceeds the world average of other countries. India’s large population enables it to take advantage of its huge labor force making it one of the India’s biggest resources. In recent years India has put emphasis on upgrading its educational system to produce many scientist and engineers. Expanding its quality human resources has enable India to become active in the telecommunication market. Along with growth of education and the middle class, consumerism is growing. India’s imports have increased exponentially to satisfy the growing desires of its people and to improve its infrastructure. India’s main imports are aircraft and parts, telecommunications services equipment, computer software, electric power generation, mass transportation and food processing and packaging equipment. Most of these items will be used to promote internal and external trade. Wood and paper are also imported frequently. The nation’s expenditures on goods and services have increased almost 14% each year for the past seven years. Over the past decade imports have grown by 16.5% on average. India At The Crossroad Of Economic Miracle Or Economic Disaster India has been able to attract some of the finest US companies in a very short time and it is proven that with patience and effort India can be turned into a receptive and large market not only for local sales but also for export to third world nations. India is now wide open for large-scale imports and investment in capital-intensive industries like power, petrochemicals, Tele-communication, as never before and the infrastructure projects like highways, ports and airports, water resources, construction of housing and commercial real-estate, mass consumption industries like air-conditioning and climate control, sanitary products, domestic a