India Emerging A As Leading Global Economy Flashcards
Why is India an economic power of tomorrow?
- India has captured the attention of developed economies looking for new investment and trade opportunities.
- A report by the National Intelligence Council states that by 2030, “India could be the rising economic powerhouse that China is seen to be today.”
- Since 90s, Indian Govt has enacted major economic reforms and opened itself to international markets leading to economic advances at the macro level and increase in population’s income.
What are the challenges for India’s economy in the current decade?
- Rising energy needs need to be met in ways that are cost-efficient, sustainable and environmentally compatible.
- Pressures on natural resources will increase
- Increased demand and environmental concerns will make innovation imperative.
What is the solution for the challenges of India’s economy in the current decade?
The solution will need to lie in technology that meets rising energy demands that are cost-efficient, sustainable and environmentally compatible and reduces reliance on natural resources.
What is one of the main reasons of the Indian government’s inability to stop the fall of the Indian Rupee?
One of the main reasons behind the Indian government’s inability to arrest the fall of the national currency is the critical current account deficit.
In the 2012-13 fiscal India’s CAD was measured at 4.8 per cent of the GDP.
The government has been unable to come up with any new destinations for exporting its products and this has also hampered the growth.
What are the prospects of the Indian Rupee?
- In spite of all that has been said above it will be foolish to write off the INR completely and say it shall not rise from the mud. Recent quarters have shown improvement.
- Experts are saying that the government needs to take some short and medium term steps that will help the economy get back on its feet yet again.
- It is only through continued efforts that the Indian government will be able to retrieve the situation. However, it will take a Herculean effort to help the INR get back to the 55 mark*.
*On 28 August 2013 the Indian rupee hit an all time low of 68.80 against the US dollar.
What will lead to significant growth in private consumption?
Rising income levels coupled with increasing young working-age population will lead to significant growth in private final consumption expenditure.
What are the challenges for the Indian economy?
- inflation
- poor educational standards
- poor infrastructure
- balance of payments reduction
- high levels of debt
- inequality has risen rather than decreased
- large budget deficit
- rigid labor laws
- depreciating Indian Rupee
What are the BIITS?
Brazil, India, Indonesia, Thailand & South Africa.
It’s an acronym for the most vulnerable emerging economies.
Explain “inflation” in context of the challenges of the Indian economy.
Fuelled by rising wages, property prices and food prices inflation in India is an increasing problem.
- The inflation rate in India was recorded at 6.46 percent in September of 2014.*
- Inflation Rate in India averaged 9.35 Percent from 2012 until 2014, reaching an all time high of 11.16 Percent in November of 2013 and a record low of 6.46 Percent in September of 2014*.
Explain “poor educational standards” in context of the challenges of the Indian economy.
Although India has benefited from a high % of English speakers, there is still high levels of illiteracy amongst the population.
It is worse in rural areas and amongst women.
Over 50% of Indian women are illiterate.
Things are improving – the Literacy rate of India has shown an improvement of almost 9 percent. It has gone up to 74.04% in 2014 from 65.38% in 2001.
Explain “poor infrastructure” in context of the challenges of the Indian economy.
There is need to improve water, rail and road systems and connect them with ports.
Many Indians lack basic amenities, such as running water.
Over 40% of Indian fruit rots before it reaches the market; this is one example of the supply constraints and inefficiency’s facing the Indian economy.
Explain “balance of payments reduction” in context of the challenges of the Indian economy.
This deterioration is a result of the overheating of the economy. Aggregate Supply cannot meet Aggregate demand so consumers are sucking in imports.
Explain “high levels of debt” in context of the challenges of the Indian economy.
The government debt as a percent of GDP is for India in 2014 almost 68%.
Why is the government debt as a percent of GDP an important economic indicator?
It is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields.
Explain “inequality has risen rather than decreased” in context of the challenges of the Indian economy.
It is hoped that economic growth would help drag the Indian poor above the poverty line. However so far economic growth has been highly uneven benefiting the skilled and wealthy disproportionately.
The number of India’s billionaires increased from just 2 in the 1990s to 65 in early 2014.
