Contradictions in development: growth and crisis in Indian economy

Since the pro-market reforms were launched, the Indian economy has grown from 5% in the 1980s to around 10% in 2011 before slowing down dramatically to less than half that rate in recent years. From launching of reforms until 2011, it did manifest some vivid and impressive signs of India moving towards high growth and increase in living conditions of its population. The purpose of this article is to access the likely effects of the reform measures on economic growth and poverty. Because the mainstream approach suggests that the reforms can be expected to increase economic growth and incomes. It seems that India’s growth has been led by the services sector, which includes real estates, IT, telecommunications, and banking, which contributes nearly 50% to the GDP in 2012. Manufacturing, which experienced remarkable growth and transformation in the East Asian economies, had rather grown much slower. The agriculture sector, which still employs nearly two-third of the India’s workforce, remains stagnant. The study suggests that education and health have been neglected in India and this will compromise productivity and growth

Challenges for Industrialisation in India: State versus Market Policies

The study is important because there currently seems to be a gap in the literature, since most published research has highlighted India’s overall GDP growth rates. Little academic research has been done on the importance and performance of industrial sectors in a developing economy like that of India. The industrial sector there has languished at around 16% of GDP, which is much less than that of China or of any other country at India’s stage of economic development.The neoliberal reforms of 1991 in India removed tariffs and barriers to foreign trade and investment. India reduced the role of state and public sector, and dismantled controls, while increasing the role of the market and private sector within the economy. As a result, foreign capital investment and foreign exchange reserves improved. However, job expansion did not occur and there has been no corresponding decline in the share in agricultural employment. Even the much heralded IT sector’s dramatic expansion over the last two decades has provided jobs directly to less than a million people.This study argues that it would be misleading to think that a large country like India could industrialise and modernise its economy whilst the unequal distribution of land and rural assets, and the dismal performance of the agricultural sector remains. This study concludes that more than two decades have passed since the neoliberal reforms were launched, but industrial growth has still not witnessed rapid expansion, especially in manufacturing areas. It seems, then, that neoliberal policies have failed to create jobs and thus improve the living conditions of a significant proportion of the population

Economic Policy – State Versus Market Controversy

There was a wide ranging debate in the 1950s and 1960s in the developing countries about the role of the state in their economy when these countries attained independence, with developing their economies and eradicating poverty and backwardness being seen as their key priority. In the post-World War II period, the all-pervasive ‘laissez-faire’ model of development was rejected, because during the pre-war period such policies had failed to resolve the economic crisis. Therefore, Keynesian interventionist economic policies were adopted in most of those countries. This is a theoretical paper, which is based on a review of published papers in the field of economic policies, especially about the debate on the role of the state and market. In this study, a wide range of data sources are presented, which includes statistics generated by a number of organisations that are not agencies of a particular government. This is useful since data are compiled by a wide range of organisation such as IMF, World Bank and WTO. Secondary data would help our study to answer the research questions. There seems to be greater potential for examining statistical data produced by various organisations that are relatively independent of the national government.The study finds that more than two decades of pursuing neoliberal policies has reduced the progressive aspects of the state sector. The on-going crisis in terms of high unemployment, poverty and inequality provides an opportunity to critically reflect on past performance and on the desirability of reviving the role of the state sector in a way that will contribute to human development

The Political Economy of Free Trade, WTO and the Developing Countries

This paper examines the existing literature on trade liberalisation and itseffect on the economies of developing countries. It will also briefly examine the theory of comparative advantage which is seen as justification for global trade liberalisation under the auspices of the World Trade Organisation. This process is also associated with greater openness, economic interdependence and deepening economic integration with the world economy. The study is important because once again the international institutions strongly advocate trade and financial liberalisation in developing countries. The proponents of trade liberalisation argue that multilateral trade negotiations would achieve these goals, and poor countries particularly would benefit from it. However, such policies may increase vulnerability and make developing countries further hostages of international finance capital. Adoption of open market policies in agriculture would also mean the abandoning of self-reliance and food sovereignty, which may have wider consequences in terms of food shortages, food prices and rural employment

Foreign Capital Investment into Developing Countries: Some Economic Policy Issues

This paper analyses the role of foreign capital in the economic development of developing countries, particularly South Asian and East Asian countries. Mainstream economists suggest that foreign investment would benefit developing countries by increasing the availability of capital, and through their positive impact over productivity and the general economic wellbeing of the host country. After the Second World War, the rapid economic growth first of Japan and later on of South Korea, Hong Kong, Singapore, and Taiwan has been widely cited in support of foreign capital. It is true when we look at the records in terms of the removal of poverty, job creation, educational achievements and improving the overall living conditions. I find however, that such discussions have ignored the experiences of developed countries in their early phase of industrialisation. In addition there is a lack of attention to the analysis of the issue of capital inflows in the context of neoliberal economic reforms and financial deregulation. After the global financial crisis in 2008, capital inflows to developing countries have witnessed a sharp decline. Foreign investments are highly sensitive to foreign exchange rate fluctuations. Thus, under such a situation, it is difficult to build a long term industrialisation strategy

Reflections on Chinese Political Economy

he aim of this paper is to discuss the reasons for the rapid growth in the Chinese economy over the last three decades. China has been growing fastest in human history, which has an impact on the global economy and also various challenges that the country faces. It is seen as heralding a major shift in the international division of labour through changes in its output and employment pattern. China is described as becoming the “work-shop” of the world as a result of the expansion of its manufacturing production. Its impact on other Asian economies and also on the world economy has the potential to be enormous. Market reforms and opening up of the Chinese economy to trade and foreign capital since the early 1980s, have unleashed entrepreneurial energies. China’s development policies can be best understood if these are looked at from an institutional economic perspective. This article is based on a review of published papers in the field of economic policies, focusing on the debate concerning the respective roles of the state and the market. A wide range of data sources are presented, including statistics compiled and generated by wide range of organisations such as IMF, World Bank and WTO that are non-governmental agencies. Secondary data of this type provides greater potential for addressing the research questions than statistics produced by the national government. This study finds that corporate debt has risen in recent years in China, a large part of these loans having been financed with investment in trust products issued by the banks. In addition, a huge amount of credit has been channelled into the real estate sector, and seems to be heading towards the housing and estate sectors, meaning that most of this is speculative. Investments are financed by credit; which clearly needs to be repaid. If these levels of debt become unsustainable this could pose a major challenge for the Chinese economy

Growth and Crisis in India’s Political Economy from 1991 to 2013

Since the pro-market reforms were launched, the Indian economy has grown from 4.7% in the 1990 to 9% in 2011 before slowing down dramatically to nearly half of that rate in recent years. From launching of reforms until 2011, it did manifest some vivid and impressive signs of India moving towards high growth and increase in living conditions of its population. The purpose of this article is to access the likely effects of reform measures on the society, because the mainstream approach suggests that the reforms can be expected to increase economic growth and incomes. However, this study finds that the mainstream economists ignore the role of domestic aggregate demand and inequality. India’s growth was led by the services sector, which included real estates, IT, telecommunications and banking, and contributed nearly 50% to the GDP in 2012. Manufacturing, which experienced remarkable growth and transformation in the East Asian economies, had rather grown much slower. The agriculture sector, which still employs nearly two-third of India’s workforce, remains stagnant. The study suggests that education and health have been neglected in India and this will compromise productivity and growth

Agrarian Crisis and Transformation in India

This paper examines the changes taking place in the agriculture sector in India, especially since the launching of neoliberal reforms in 1991.Indian agriculture continues to employ the vast majority of the people but in recent years it has experienced a slowdown in growth rates. This sector is experiencing unprecedented crisis with low productivity, high rural unemployment and food insecurity. In the past, availability of credits to farmers, along with subsidies on new inputs were as important determinant of investment in agriculture. Since the nationalisation of commercial banks in India in 1969 and until 1980 the country followed the policy known as ‘social and development’ banking. However, with the launch of liberalisation policies, the government became very critical towards such policies, and it was argued that the banks should function on a commercial basis. India has experienced GDP average growth rates of 7% for the last nearly a quarter century. However, emphasising the overall growth rate can be misleading, as it does not tell us about the sectoral composition of growth. The growth rate in agriculture sector has been much slower. With the modernisation and development of manufacturing and services, the agriculture sector has declined, as happened in the East Asian economies. However, in India the decline in the agricultural contribution to GDP is not accompanied by a similar degree of employment expansion in the manufacturing sector