Indias Economy - Indias Role as Regional Power - Assignment Example

India’s Economy, An Analysis Macro & Micro Economics March 25, Concerning India’s becoming an economic superpowerInterview of Arab Goswani to Hillary Clinton on her views about India’s role as regional power, published at Times of India on July 18, 2009. Viewed from Times of India on February 25, 2015 Introduction Hillary Clinton said in the interview of Arab Gosmer, a correspondent of Times of India on July 18, 2009 that India will become not only a regional power but a global power. Clinton says “I consider India not only a regional power but a global power…. I think India has the opportunity to resolve problems regionally and work with other nations to solve some of the global challenges…. How India decides to do that is up to India.” This paper will analyze Clinton’s views from the view point of a middle income and a low income group of India. The middle income group in India represents 28.4 million households or a total of 154 million (Meyer, Birdsall, 2012), 3.37% lives in rural area while 11.79% are in the urban area. The low income group as per 2009-2010 survey showed that there are 269.3 million poor people who reside in the rural part of India.(Rao, 2013) Middle income (MI) point of view MI Would probably agree with Clinton if it is based on a report ( see Chart 1), that China is going to outperform the United States by 2050, while India comes trailing behind the United States (Global Sherpa 2011). The MI group would probably be of the same opinion When Clinton said, Source: Global Sherpa 2011 to be a regional power, “How India decides to do that is up to India”. In this view, MI would take into consideration its huge number of population as a source of sustainable future. Population of India today, stands at 1.236 billion ranking third as the most populated country in the world. From this, comes the working group that gives growth to the economy, MI would argue. The MI group would probably see that the economy is growing and blissful to them because their income is greater now. (see Table l.) Table 1. BRIC’s Economic Indicators Indicator BRAZIL RUSSIA INDIA CHINA Population (2014) 202 mil 142 mil 1.236 bil 1.356 bil. GDP (US$, 2013) 2.416 TRIL 2.536 TRIL 4.49 TRIL 13.39 TRIL. GDP PER CAPITA ( US$2013) $12,100 $18,100 $4,000 $9,800 GDP Avg. Growth Rate (2013) 2.3% 1.3% 3.2% 7.7% Merchandise exports(2013) $244.8bil $515bil. $313.2bil $2.21tril Data came from CIA WorldFact (2014) They would see growth in exports, and the fall of oil prices favorable to the country. As the country is dependent on oil for its fuel and industrial uses, the drop in oil prices would mean savings on subsidy in the government. (Kumar, 2015). They would concur that it as a blessing for the economy as it “helps macro-economic management (both budget and fiscal) by improving the inflation, fiscal and current account deficits” As India is a net importer of its domestic requirement, a fall of one dollar in the price of oil saves the country RS 40 billion. MIs have reason to be happy as the exports are growing, a little behind with Brazil that means more income opportunities for people MI would probably be in agreement with Clinton that India is powerful in the military capacity because in 2007, it is the biggest buyer of weapons, and has a defense budget of $46.8 billion.(the economist. 2013) Chart 2. The biggest buyer From five of the Asian countries (see Chart 2), it appears that India is one of the world’s largest military spender. MI would suppose a powerful military army is good sign of defense of the country, and that it is ready for any military aggression from other countries. Source: the economist, 2013. Low Income Group Point of view Low Income (LI) would probably be a disappointment to Clinton as they see things differently. India has many domestic problems that need to be reckoned with before being called a global economic power. The data on GDP per capita(see Table 1) is a clear indication that India has the lowest ranking GDP among the BRIC countries. GDP per capita is a basis for comparison of country’s standard of living. The LIs are most probably unhappy to see them ranked as lowest, and due to that, could not be considered a super power. While for MIs drop of oil prices is a blessing, same is not true for oil exploration companies who have invested US $2 trillion already (Kumar 2015). The loss to industry of sustained oil price cut would lead to bankruptcy, or shut down as production is no longer viable. The foreseen events are the eventual bankruptcies, unemployment, sovereign defaults resulting to economic global slowdown that would impact exports of India. LIs almost certainly is not proud that the illiteracy in India is very high because out of its 1.2 billion population, only 62% is literate. It is not possibly happy that there is gender discrimination, in education particularly, as there are more males (75.2%) than females (50.8%) who are literate. LIs are most likely discontented that there is discrimination in employment in favor of males. Women have lower participation in employment in India, that is even lower than China. (Thomas 2013) In all likelihood, LIs view this and would concur with Thomas 2013, that “ social constraints, and dearth of employment opportunities has kept woman out of the labor market, leading to a huge opportunity cost to the nation.” In some instances, as study of Thomas 2013 would show, the low labor participation of women is due to social constraints and low labor costs. As noted by Thomas 2013, wage disparities exist in Japan and Korea but still there is a large female labor participation than India. Clearly, there are some predicaments that the government has to address, LIs would counter. LIs would possibly feel sorry that India is doing an employment waste. Bihar (2013) noted a “symptom of colossal failure” because although there is a manufacturing boom, jobs available are for the unproductive service jobs like security guards for every ATM, apartment buildings, office and shop and that young workforce sits idly while economic opportunities pass by. LIs should possibly think investors are worrying as growth is going slow, at 4.5%, which is half of its peak in 2000s (Bihar 2013). Likewise industry output is 27% which is much lower compared to other Asean economies that have 40-47% output. LIs would probably admit of having of strong labor force of 487.3 million as of 2013, that comes to be the second highest number of labor force in the world.(CIA Worldfact). The labor force is distributed to 49% agriculture, 20% industry, and 31% services. However, in all probability, LIs are maybe frustrated that among the 22 countries surveyed, India is the second to the last country that is paying the lowest minimum wage (Boesler,2013). Minimum wage in India is only $0.28 per hour, while China pays $0.80, Russia pays $0.97, Brazil pays $1.9. LIs would see a big wage gap between Indian professionals and that of the low wage workers. Professionals receive an average monthly salary (entrance pay) of $24K. (Khanna. 2002). This condition is to be perceived of producing two economies wherein one is the urban rural represented by the educated middle class; and the other is the deprived sector composed of the poor, the socially deprived groups of men and women. LIs perhaps would not agree with Clinton …”that India is mature… and could decide by itself”, because some decisions of the government are lacking in perspectives particularly, in the low poverty line level. In 2010, India appears to have the highest level of people living below poverty line, that is: Poverty line in India is 29.8%; Brazil is 21.4%; Russia has 11%; and China scoring the lowest at 6.1%. (CIA Worldfact 2014). This means the poor people in India has not felt the fruit of the positive growth. LIs thinking, I believe is aligned with Clinton’s when she said: “What the government is doing is finding space to eradicate poverty, increase agriculture productivity, create more jobs, the bread and butter issue that will enable India to grow” . LIs would most likely agree on this statement, but would comment that planners should focus on how to revive the economy. Conclusion The point of view of the low income group is more encouraging in that Clinton should not be reassuring on her sentiments that India will become a global power. The outlook of India’s long term growth is moderately positive due to the presence of young population, savings and investment, and its increasing assimilation to the global economy. However, there are issues India has to make up before it could be called a super-power. India has to resolve poverty, corruption, and discrimination against women and girls. India has to provide adequate infrastructures. It has to take measures in slow expansion of education, and to spend for the poor state of health facilities.. To drive growth, government must spend for infrastructure deficiency to have better roads, ports, reliable source of potable supply of water, invest in education so that the young people will learn skills so they could join the industrial workforce. . Now is the proper time for the government to spend more, and invest in education, infrastructure, health and sanitation. In a sense, it good to appear as a world super power, but in many aspects, India is not ready yet. India has spent a lot for military arms, but it seems government is not yet prepared in terms of military tactics. It is equipped in terms of military capabilities, it comes next to China in terms of men, battle tanks, surface combatants, budget, etc. but analysts feared India does not enjoy formal alliances such as with America. To be a global economic power is an accolade meaning it has managed the country in all aspects and is prepared to meet the world squarely in economics, security, and humane aspects, in which India at this moment, failed to achieve. India inevitably, will become an economic superpower given the strength of its population that is the source of its sustainability. References Bihar, 2013. Wasting Time. The Economist. Retrieved from Boesler,2013. Heres How Americas Minimum Wage Stacks Up Against Countries Like India, Russia, Greece, And France. Business Insider. Retrieved from http://www.businessinsider.com/a-look-at-minimum-wages-around-the-world-2013-8 CIA, Worldfactbook, 2014. India, China, Russia, Brazil: Economy. Central Intelligence Agency U.S.retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/in.html Global Sherpa Global Sherpa, 2011. BRIC Countries – Background, Latest News, Statistics, and Original Articles. Retrieved from http://www.globalsherpa.org/bric-countries-brics Goswani, 2009. I consider India a global power: Hillary Clinton . Retrieved fron http://timesofindia.indiatimes.com/india/I-consider-India-a-global-power-Hillary-Clinton/articleshow/4793136.cms Kumar, A. 2015. How falling prices impact India’s economy. Retrieved from http://zeenews.india.com/exclusive/how-falling-oil-prices-impact-indias-economy_1531868.html Meyer and Birdsall, 2012.New Estimates of India’s Middle Class. Center for Global Development. Retrieved from http://www.cgdev.org/doc/2013_MiddleClassIndia_TechnicalNote_CGDNote.pdf Rao, 2013. India’s poverty level falls to record 22%: Planning Commission. Live mint. Retrieved from http://www.livemint.com/Politics/1QvbdGnGySHo7WRq1NBFNL/Poverty-rate-down-to-22-Plan-panel.html The Economist, 2013. Know your own strength. India as a great power. http://www.economist.com/news/briefing/21574458-india-poised-become-one-four-largest-military-powers-world-end Thomas, 2013. A woman shaped gap in the workforce. The Hindu. http://www.thehindu.com/opinion/op-ed/a-womanshaped-gap-in-the-indian-workforce/article4287620.ece Rao, 2013. India’s poverty level falls to record 22%: Planning Commission. Live mint. Retrieved from http://www.livemint.com/Politics/1QvbdGnGySHo7WRq1NBFNL/Poverty-rate-down-to-22-Plan-panel.html Read More