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PopulationPopulation
Population(m) 1,095Population(m) 1,095 Population growth (’01-05) 1.5% Population growth (’01-05) 1.5% Second most populous countrySecond most populous country 81% Hindu, 13% Muslim, 2% Christian, 81% Hindu, 13% Muslim, 2% Christian,
2% Sikh2% Sikh Official Languages: English, Hindi, 14 Official Languages: English, Hindi, 14
others others
GeographyGeography
South AsiaSouth Asia 3,287,590 sq 3,287,590 sq
kmkm 28 States28 States Borders China, Borders China,
PakistanPakistan
HistoryHistory
550 bc independent kingdoms550 bc independent kingdoms Invasions from Central AsiaInvasions from Central Asia 33rdrd century Gupta dynasty “golden age” century Gupta dynasty “golden age” Islamic Invasions Islamic Invasions Mughal DynastyMughal Dynasty European Traders/ColonizersEuropean Traders/Colonizers British Rule (1857)British Rule (1857) Independence 8/15/47Independence 8/15/47
PoliticsPolitics
World’s Largest DemocracyWorld’s Largest Democracy Indian National Congress (INC)Indian National Congress (INC) Emergency Rule (Indira Gandhi ’75-77)Emergency Rule (Indira Gandhi ’75-77) Janata PartyJanata Party Bharatiya Janata Party (1996)Bharatiya Janata Party (1996) INC (2004)INC (2004)
EconomyEconomy
1010thth Largest GNP Largest GNP 44thth Largest GNP (PPP) Largest GNP (PPP) GDP Growth 8.1% 2005(4)GDP Growth 8.1% 2005(4) Per-Capita Income (PPP) $3100Per-Capita Income (PPP) $3100 Agriculture accounts for 21% of GDPAgriculture accounts for 21% of GDP Major Industries include; mining, petroleum, Major Industries include; mining, petroleum,
diamond polishing, films, textiles, IT and diamond polishing, films, textiles, IT and business process outsourcing (BPO) services, business process outsourcing (BPO) services, pharmaceuticals and chemicals, and pharmaceuticals and chemicals, and handicrafts. handicrafts.
Indicative PlanningIndicative Planning
Instituted as a response to perceived Instituted as a response to perceived failures of the market system in attaining failures of the market system in attaining socially desirable objectivessocially desirable objectives
No formal obligation to fulfill objectives of No formal obligation to fulfill objectives of the planthe plan
Authorities rely on ‘indirect government Authorities rely on ‘indirect government levers’ (taxes, subsidies, etc.)levers’ (taxes, subsidies, etc.)
The Lewis two-sector The Lewis two-sector ModelModel
Agricultural Labor is redundantAgricultural Labor is redundant ‘‘Commercial’ sector is efficientCommercial’ sector is efficient Purchasing capital goods results in Purchasing capital goods results in
increased demand for industrial laborincreased demand for industrial labor Agricultural labor becomes more Agricultural labor becomes more
productive and produces a surplusproductive and produces a surplus
N-M Approach pt. 2N-M Approach pt. 2origins of Indian planningorigins of Indian planning
Didn’t Curb power of wealthy interestsDidn’t Curb power of wealthy interests Mahalanobis’ 2-sector model akin to Lewis’ Mahalanobis’ 2-sector model akin to Lewis’
modelmodel Sought to industrialize the economy by Sought to industrialize the economy by
increasing production of capital goodsincreasing production of capital goods Development economics was dominated by the Development economics was dominated by the
idea of overcoming the ‘savings constraint’idea of overcoming the ‘savings constraint’ Similar in Similar in approachapproach to USSR to USSR Fabian InfluenceFabian Influence Planning Commission Set up in 1950Planning Commission Set up in 1950
Origins of Origins of ImplementationImplementation
Defense of India Act (1939)Defense of India Act (1939) India Act (1946)India Act (1946) Many other acts Many other acts PRIOR PRIOR to independenceto independence War-time controls set up by the BritishWar-time controls set up by the British Suited to regulation and controlSuited to regulation and control Industrial Policy Resolution (1948)Industrial Policy Resolution (1948) Industries Act (1951)Industries Act (1951)
The PlansThe Plans
11stst plan (’51-56) – Not so ambitious plan (’51-56) – Not so ambitious 22ndnd plan (’56-61) – Inspired by Mahalanobis, plan (’56-61) – Inspired by Mahalanobis,
move towards industrial growthmove towards industrial growth 33rdrd plan followed by one year plans – no plan followed by one year plans – no
significant changesignificant change 44thth plan (’69-74) -- based on input-output model plan (’69-74) -- based on input-output model 55thth plan – 7 plan – 7thth plan – included concerns for the plan – included concerns for the
redress of povertyredress of poverty
The CrisisThe Crisis
In 1990-91 gross fiscal deficit reached In 1990-91 gross fiscal deficit reached 8.4% of GDP8.4% of GDP
Inflation peaked at almost 17%Inflation peaked at almost 17% External debt reached 23% of GDPExternal debt reached 23% of GDP Low foreign exchange reservesLow foreign exchange reserves Resulted in $2.3bn loan from IMFResulted in $2.3bn loan from IMF
The ReformsThe Reforms
Consisted of decontrol of private Consisted of decontrol of private investment, opening the economy to investment, opening the economy to foreign trade and foreign investment, foreign trade and foreign investment, financial sector reforms, etc.financial sector reforms, etc.
Controls on Private Controls on Private InvestmentInvestment
Removal of industrial licensingRemoval of industrial licensing Allowance of private companies into Allowance of private companies into
industries once reserved for the stateindustries once reserved for the state Little done about small-scale sector rulesLittle done about small-scale sector rules Little done about state-level controlsLittle done about state-level controls
Openness to TradeOpenness to Trade
Lowering of Import TariffsLowering of Import Tariffs Domestic v. external liberalization – Domestic v. external liberalization –
gradual approachgradual approach Lowering of quantitative restrictionsLowering of quantitative restrictions Devaluation of Rupee 20:1-31:1 from Devaluation of Rupee 20:1-31:1 from
’91-’93’91-’93
Price ControlsPrice Controls
Hydrocarbon pricesHydrocarbon prices Electricity prices (not changed)Electricity prices (not changed)
Labor Market ControlsLabor Market Controls
• Still in effectStill in effect
Public Sector ReformsPublic Sector Reforms
Outright privatization was eschewed in Outright privatization was eschewed in favor of more ‘cautious’ reformfavor of more ‘cautious’ reform
Partial PrivatizationPartial Privatization Board for Industrial and Financial Board for Industrial and Financial
ReconstructionReconstruction Allowance of Private Investment in Allowance of Private Investment in
InfrastructureInfrastructure
Financial SystemFinancial System
Banking ReformBanking Reform Capital Market ReformCapital Market Reform
East Asian ‘Miracle’ East Asian ‘Miracle’ economieseconomies
Stable business environmentStable business environment Fiscal policies aimed at equityFiscal policies aimed at equity Pro-export exchange ratesPro-export exchange rates Progressive liberalization of the financial Progressive liberalization of the financial
sectorsector Minimal price distortionsMinimal price distortions EducationEducation
Indian Reforms in Indian Reforms in comparisoncomparison
Macroeconomic stabilizationMacroeconomic stabilization More rigid Labor MarketsMore rigid Labor Markets Education is not compulsoryEducation is not compulsory
ConclusionConclusion
Reforms were largely successfulReforms were largely successful Fail to address underlying problemsFail to address underlying problems Gains are not widespreadGains are not widespread Much remains to be doneMuch remains to be done
QuestionsQuestions
What are the effects of government What are the effects of government policies towards children in terms of policies towards children in terms of economic growtheconomic growth
What role does primary education play in What role does primary education play in attracting investment to labor-intensive, attracting investment to labor-intensive, unskilled industriesunskilled industries