Chap i Eco Development

8/8/2019 Chap i Eco Development

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Chapter 1 ECONOMIC DEVELOPMENT

CONTENTS

(a) INDEX OF DEVELOPMENT(b) CHARACTERISTICS OF AN UNDER DEVELOPING

ECONOMY

(c) INDIA AS A DEVELOPING ECONOMY


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Concepts of economic development&

human developmentWhat is economic development?

Why do we need economic development?

What is the cost of economic development?

What is human development?

Does economic development help humandevelopment?

If yes, in which way?


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CHAPTER I ECONOMIC DEVELOPMENT

contents

a) DEFINITION OF UNDER DEVELOPMENT

b) UN CLASSIFICATION C) WORLD DEVELOPMENT REPORT

d) CHARACTERISTICS OF AN UNDERDEVELOPED ECONOMY


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DEVELOPING ECONOMIES(Definitions)

A country which has good potential prospectsfor using more capital or more labour or more

available natural resources, or all of those, tosupport its present population on a higher levelof living.

- Prof Jacob Viner

A country characterized by chronic mass poverty and obsoletemethods of production and social organization.- M Eugene

Stanley

..those countries which have real per capita incomes less than

a quarter of the per capita income of the United States.


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UN CLASSIFICATION

ACCORDING TO UN CLASSIFICATION

THOSE COUNTRIES WHICH HAVE REAL PERCAPITAINCOMES LESS THAN A QUARTER OF THE PERCAPITAINCOME OF THE UNITED STATES ARE CONSIDERED AS

UNDERDEVELOPED COUNTRIES UN PUBLICATION PREFER TO DESCRIBE THEM ASDEVELOPING ECONOMIES BECAUSE THOUGH THEY ARESTILL UNDERDEVELOPED, THE PROCESS OF DEVELOPMENTHAS BEEN INITIATED IN THESE COUNTRIES.

THEREFORE WE HAVE TWO TYPES OF ECONOMIES NAMELYDEVELOPING ECONOMIES AND DEVELOPED ECONOMIES.


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WORLD DEVELOPMENTREPORT

World bank has classified the various countrieson the basis of gross national income percapita(2005)

Low income countries with GNI per capita $875and below.

Middle income countries with GNI per capitaranging between $875 and $10725

High income countries which are members ofthe OECD have GNI per capita $ 10725

and above.


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INDIA AS AN UNDER DEVELOPING ECONOMY

(Characteristics)

LOW PERCAPITA INCOME

Occupational pattern

Heavy population pressure

Prevalence of chronic unemployment and under

employment

Low rate of capital formation

Maldistribution of wealth / assets

Poor quality of human capital

Prevalence of low level of technology

Poor economic or anization


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Chapter 1 B

CHARACTERISTICS OF A DEVELOPINGECONOMY (INDIA)


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MODERN DEFINITIONS OF DEVELOPMENT

A modern definition sees development as a process of change allowing

basic needs to be met.A. Improving quality of life: social justice,health,well-

being,education,freedommoving from easily quantitative criteria to less

easily defined qualitative measures

B.

sustainable developmentusing resources in a responsible way, without damaging theopportunity for future generations to satisfy their own needstraditional measures have no place here as economic output orenergy used may not signify green development

sustainable developmentpreserves the quality of the environmentsustains traditions customspreserves resources

maintains/improves levels of health and education


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Economicdevelopment

indices

18 Jan 2008 R. Shanthini

care of theenvironment

stablejob

well paidjob

long life

life free ofavoidablemorbidity

lowinflation

low infantmortality

high GDPper capita

adequatehousing

good

incomedistribution

good

educationlevel

adequate

nutrition

freemarkets

civilliberties

Source: Montenegro, A., An Economic Development Index,

http://129.3.20.41/eps/dev/papers/0404/0404010.pdf


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TRADITIONAL MEASURES OF ECONOMIC DEVELOPMENT

1. GNP (gross national product) per capita / GDP (gross

domestic product) per capita

2. purchasing power parity per capita

3. energy consumption

4. workforce engaged in agriculture / manufacturing /servicesectors


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DIFFERENCE BETWEEN ECONOMIC GROWTH

AND DEVELOPMENT

Charles P.Kindleberger asserts that

Economic growth refers to rise in output orincreases in the countrys real output of goods

and services over a period of time or moreappropriately product per capita.

Economic development implies changes in

technological and institutional organization ofproduction as well as distributive pattern ofincome.


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Defining Economic Growth

Economic growth is the increase in theamount of the

Goods and services produced by aneconomy over time.
http://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economics


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ECONOMIC DEVELOPMENT(Determinants)

ECONOMIC AND NON ECONOMICFACTORS

Capital Formation.

Capital-Output ratio.

Growth of population.

Building human capital.

NON ECONOMIC FACTORS

SOCIAL,POLITICAL AND PSYCHOLOGICAL FACTORS.


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INDIAN ECONOMY :IN THEPROCESS OF DEVELOPMENT

INCREASE IN NATIONAL INCOME

INCREASE IN INVESTMENT

INCREASE IN INDUSTRIAL,AGRICULTURAL ,SERVICE SECTORS

INCREASE IN SOCIAL OVERDUES

HUMAN RESOURCE DEVELOPMENT TECHNOLOGICAL PROGRESS.


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India has a very mixed economy,ranging very old-fashioned agriculturaltechniques to the state-of-the-art

Information Technology Industry thathas transformed Bangalore into the ITcapital of Asia.

Recently India has enjoyed massiveeconomic growth, people are flockingto invest in India and our people aregrowing steadily richer.

This huge accumulation of wealth hasled to the widespread use of thepopular slogan India is Shining!

Congratulations should go to this man:Manmohan Singh who as FinanceMinister and now as Prime Minister isorchestrating the massive liberalizationthat has led to Indias economic boom


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INCREASE IN NATIONAL INCOME

Agriculture sector gives employment to 58% of Indian population & contributes 22% toGDP

Manufacturing sector, the growth rate was 8.98% in 2005 & 12% in 2006

Communication sector has been registered 16.64% growth

Gross capital formation in GDP is concerned there has been a significant rise from 22.8%in the fiscal year 2001 to 35.9% in the fiscal year 2006

Gross Rate of savings as a proportion to GDP increased from 23.5% to 34.8 %(2001 to2006

Indian economy has grown by more than 9% for the three years running from 2005 to 2008but slowed down in 2009 Witnessed a decade of 7% GDP growth

Increase in life expectancy, literacy rate & food security

The growth rate of service sector was 11.18% in 2007 and now it accounts 53% to GDP by

employing 23% of the total workforce The Industrial sector has also grown by 10.63% in this century and is now 25% of GDP by

providing jobs to 17% of the total population


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Some Encouraging Statistics..

India is the second fastest growing major economy with a 9.2% increase in GDP per year India is already the third largest economy in the world at PPP

India has seen a huge amount of foreign direct investment in the country, totaling 67.72billion dollars and is said to be one of the preferred options for FDI

Indias poverty level is decreasing by 10% annually

Indian companies have gone on a buying rampage, with Tata Steel acquiring Corus, Mittalbuying Arcelor and Tata looking set to buy Jaguar and Land Rover from Ford.

Every year Indias middle class is increased by 40,000,000 new members which showsthat the wealth is truly entering society

The Bombay Stock Exchanges value has been consistently rising, currently worth 1.61trillion dollars, the largest in South East Asia.

Unemployment has dropped by 2% annually, and illiteracy and mortality rates have alsobeen falling, indicating that India is not only growing but developing too.


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Indias growth has been fuelled mostly by the Services Sector. India hascomparatively little industry, the secondary sector employs only 12% ofthe workforce while services employ 28% and the primary sector 60%.

Most agree that Indias growth has almost entirely been achieved by the

private sector. This has been most noticeable in the IT industry, which hasa value of 50 billion USD, and is growing at almost 30%.

Many foreign firms conduct Business Process Outsourcing (BPO) whichincludes call centres and business solutions programs in India, largelythanks to Indias massive English-speaking workforce.


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Some Corporate Achievements inIndia

The Tata Nano,the worldscheapestproduction car

KingfisherAirways, voted

the best airline ofsouth-east Asia

The HCLlaptop, thecheapestproductionlaptop

The InfosysIT trainingcampus

the largest inthe world

A i l l S I f


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Agricultural Sector: Important for

economic growth and reducing

poverty 70% of population,75% of poor are inrural areas

Agriculture: mainsource of livelihood for60% of population

Contributes about 20%

to GDP Essential role in

national food security

0% 20% 40% 60% 80% 100%

Ker

Pun

WB

TN

Har

Guj

Ass

Mah

Kar

UttnAll India

AP

Oris

Raj

UP

Jha

MP

Chh

Bih

Labor Employed in Agriculture, %


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Education

Our literacy rate is 64% makingus the 145th in the World, justabove war-torn Sudan and justbelow genocidal Rwanda.

Literacy is defined as The abilityto sign ones name so completeliteracy is likely to be even less.

Though there is good news: in2006 there were an estimated

82% of Indian children enrolledin school

Guns are more importantthan books: 2.9% ofGDP is spend on

defence compared to2.6% on education. Is itguns or education thatwill really make Indiashine?


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Introduction:

India is fast dashing towards its dream of

conversion into developed country by 2020.

Many of the highly paid software wizards in

the globe have their origins in India, and

hence the emergence of service sector has

taken a steep positive slope in India. A well developed country needs a well

established service sector.


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History:

Since 1960s, there has been a steadydecline in the contribution of agricultureand primary sector to Gross Domestic

Product (GDP), and its place has beentaken by service based enterprises.

Thus, service sector encompasses the

major areas of trade, finance, insurance,communications, public utilities,transportation, health care, education,

business and personal services.


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Country % of GDPManufacturing

% of GDP Services % of Employmentin Service Sector

USA

JapanUKAustraliaCanadaIndia

21

2932222429

74

5869727047

80

6077757960

Economies of advanced contries like USA, UK,

Germany, Japan, Canada, & Australia have changed from goodsdominated to services dominated. In several countries including

India, the service sector accounts for more employment in

comparison to other sectors.


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A statistics concerning the growth of India's

service sectors are listed below:

The software services in Indian economy increased by

33% which registered a revenue of USD 31.4 billion

Business services grew by 82.4%

Engineering services and products exports grew by 23%

and earned a revenue of USD 4.9 billion

Services concerning personal, cultural, and recreational

had a growth of 96% Financial services had a rise of 88.5%

Travel, transport, and insurance grew by 23%


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According to recent estimation, forecastination, it

was visualized that by March-April, 2006 the contributionof Service sector to the Indias GDP would be at 55%.

This makes clear that we are living in Service Imperative

Era. The enormous growth potential in the service sector

has lead to the great visualization of Developed India 2020 by many Indians.


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Drivers of Growth

manufacturing16%

trade14%

communication11%

agriculture(crop)

10%

construction10%

real

estate,ownershipofdwellings&business

services8%

banking&insurance8%

other services7%

transport byothermeans

6%

Rest10%

ContributiontoGrowth(2002 -3to2007 -8)


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Growth Expectations

GDP Growth

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2004-05 2005-06 2006-07 2007-08 2008-09* 2009-10*

GDP Agriculture and allied activities Industry Services


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Chapter 1c

CONTENT

INDIA AS A DEVELOPING ECONOMY

n a: mong e op- oun r es n


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n a: mong e op- oun r es nterms of GDP at constant prices

205 223319 347

103 91

116117

104 109

155

168

0

100

200

300

400

500

600

700

1999-00 2002-03 2005-06 2006-07

USDB

illion

Services Agriculture Industry

The Indian economy has witnessed an unprecedented growth. Booming Indian services and

industry sector are providing the required impetus to the economic growth

The sound

performance of each

industry segment is

leading to the overall

robust performance

of the Indianeconomy

Indian economy is

the 4th largest in

terms of PPP USD

4.1 trillion in 2006

Indias GDP

witnessed high

growth and was the

second fastest

growing GDP after

China

Growth in sectors (2006-07):

Industry: 10.9%

Services: 11%

Agriculture: 2.7%

Fastest GDP growth of 9.4

percent in 2006-07, since last 18

years

ContributionofServices -

increasedfrom 49

percent to 55percent

India's GDP: 2002-07

424484

534590 631

0

100

200

300

400

500

600

700

2002-03 2003-04 2004-05 2005-06 2006-07

USDB

illion

GDP at Cons tant Prices

4%

8.5% 7.5%

8.4%9.4%


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Service Sectors in India

Trade Hotels and Restaurants Railways Other Transport & Storage Communication (Post, Telecom)

Banking Insurance Dwellings, Real Estate Business Services Public Administration, Defense.

Personal Services Community Services Other Services

G th E t d i I di


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GDP USD 590 billion

GDP growth rate 9 %

Services contribution 54 %

FDI limit not 100 percent in majorindustry sectors such as Telecom,Semiconductors, Automobiles,etc.

Balance of Trade USD (-)46.2billion

Investment goal USD 250 billion

20062006

GDP USD 750 billion

GDP growth rate 9.5%

Services contribution 60 %

FDI limit is expected to be close to100 percent in major industrysectors such as Telecom,Semiconductors, Automobiles,etc.

Balance of Trade Shouldincrease with surging exports ascompared with imports


20082008

GDP USD 900 billion

GDP growth rate 9%

Services contribution 60-65 %

FDI limit is expected to be 100percent in major industry sectorssuch as Telecom,Semiconductors, Automobiles,etc.

Balance of Trade Should bepositive with increased level ofexports as compared with imports


20102010

Growth Expected in India

To sustain the GDP growth of more than 8 percent, India requires an investment of USD 1.5 tr illion in the

next five years

I di A t di D hi


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India: Astounding Demographics

Per Capita Income

393

461519

583

651

0

100

200

300

400

500

600

700

2002-03 2003-04 2004-05 2005-06 2006-07

USD

2

9

48

221

726

9

17

74

285

710

20

33

120

404

613

2001-02 2005-06 2009-10(E)

Rich (Above 115,000)

High Income (57,000 115,000)

Consuming class (23,000 57,000)

Working class (10,200 23,000)

Needy (Below 10,200)

Annual Household Income

(in USD)

* In PPP terms

Population(million)

Increasing per capita incomecoupled with an emerging middleclass has provided the necessary

impetus to consumerism in India

Growth in the higher

income categories of

Indias population

has created an

affluent section of

society, which has

significant level of

purchasing power

Increasing per capita

income and large

population moving

into middle class

has led to high levelof consumerism in

India

DEMOGRAPHIC TRANSFORMATION OF INDIA


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Experts view

According to reports, the productivity trends of different sectors ofIndian economy and its subsequent growth is estimated to bearound 8% and above until 2020. Further, at this rate, the Indianeconomy will become the second largest economy in the world afterChina. Further, the World Bank has ranked India as one of the top

economic reformers worldwide. It simplified business registration,cross-border trade, and payment of taxes, eased access to creditand strengthen investor's interest. The sectoral trends of Indianeconomy indicates robust growth of Indian industries especiallymanufacturing, construction, and service industry.

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Chap i Eco Development