Why is India Poor

7/28/2019 Why is India Poor

1/32

Why is India Poor?

Parth J Shah

Centre for Civil Society

[email protected]


2/32

Culture / AttitudesLack of CapitalPolitical Instability

Too large to governColonial legacyWeather / climate

Neo-colonizationGlobalization / WTO

Population ExplosionLack of Education

Corruption


3/32

PopulationDensity

(persons per sq. km)

GNP per capita(2001 Dollars)

China 134 972

India 337 486

Japan 337 29,447

Germany 235 22,466

Singapore 5,540 21,644Belgium 337 22,417

Hong Kong 6,571 23,515

UK 245 24,700

Some are rich

Some denselypopulated

countries arepoor

Population Density and Poverty?


4/32

Population

Density(persons per sq. km)

GNP per capita(2001 Dollars)

Australia 2 19,136

Canada 3 22,087

USA 30 37,822

UAE 28 26,158

Mozambique 24 197

Ethiopia 53 97

Tanzania 35 265

Population Density and Poverty?

Some are poor

Some sparsely

populatedcountries arerich


5/32

Indias Population

Year Population(millions)

LifeExpectancy at

Birth (years)

InfantMortality per

1000 live births

Foodgrainproduction

(million tonnes)

Foodgrainproduction

indexed per

person

1901 238 23 210

1911 252 21 2041921 251 27 219

1931 271 31 174

1941 319 32 161

1951 361 42 146 52 14.4

1961 439 46 129 83 18.91

1971 548 51 129 105 19.16

1981 684 54 110 133 19.44

1991 846 58 92 168 19.86

2000 1000 62 72 200 20


6/32

Effects of Colonisation?

Coloniser

GNP per capita

in 1995 (US$)

South Korea Japan 9,700

Malaysia Britain 3,890Botswana Britain 3,020

Tunisia France 1,820

GNP per capitain 1995 (US$)

Hong Kong 22,900 A difference ofUnited Kingdom 18,700 $4,200 per capita!


7/32

Democracy vs Dictatorship?

Success of Singapore, Malaysia, China,

(Taiwan, S. Korea)

But think about the Dictatorships that are POOR!

How many Democracies are RICH?

Superiority of dictatorship


8/32

Democracy vs Dictatorship?

Democracy also usually entails

Civil rights

Free press

Protection of minorities


9/32

Illiteracy and Wealth?

Literacy Rate(1991-92)

State GDPRupees per capita

at current prices,1990-93

Kerala 90 5,768

Punjab 59 11,217

Haryana 56 9,037


10/32

Culture and Attitude

Antimaterialistic

Fatalistic(Karma)

Lazy


11/32


12/32

ECONOMIC FREEDOM!

The most important attribute of theseinstitutions and policies is

Economic and political institutions and

policies determine economic success.

Population, illiteracy, corruption, culture,

democracy, and colonisation are half-truths.


13/32

Economic Freedom Index 2000

Countries Rating Rank

GDP Per capita

(current prices)

Hong Kong 8.8 1 24,298.30

Singapore 8.61 2 23,084.00United States 8.54 3 35,859.10

United Kingdom 8.35 4 23,988.50

New Zealand 8.2 5 13,060.10

Unit. Arab Em. 7.37 19 26,930.00Hungary 6.66 51 4,839.40

Mexico 6.25 66 5,754.10


14/32

Economic Freedom Index 2000

Countries Rating Rank

GDP Per capita

(current prices)

India 6.06 73 453.3

Indonesia 5.98 77 723.2Sri Lanka 5.96 77 832.3

Nepal 5.86 80 229.1

China 5.28 101 853.1

Bangladesh 5.11 107 364.2Pakistan 5.11 107 450.1

Myanmar 3.31 122 153.6


15/32

Economic Freedom IndexComponents

Size of government; consumption, transfers and

subsidies

Structure of the economy and use of markets

Monetary policy and price stability

Freedom to use alternative currencies

Legal structure and property rights

International exchange: Freedom to trade with

foreigners

Freedom in Exchange of capital and financial

markets


16/32

$0

$4,000

$8,000

$12,000

$16,000

$20,000

PerCapit

aIncome

Bottom

20%

4th

Quintile

3rd

Quintile

2nd

Quintile

Top 20%

Per Capita Income & Economic Freedom

Least free Most free


17/32

-1.00%

0.00%

1.00%

2.00%

Growth

Rate,

1990s

Bottom

20%

4th

Quintile

3rd

Quintile

2nd

Quintile

Top 20%

Real Growth in GDP & Economic Freedom



18/32

0

10

20

30

40

50

Bottom

20%

4th

Quintile

3rd

Quintile

2nd

Quintile

Top20%


Adult Illiteracy Rate (1995)


19/32

0

0.2

0.4

0.6

0.8

1

HumanDe

velopment

Index(o

utof1)

Bottom

20%

4th

Quintile

3rd

Quintile

2nd

Quintile

Top 20%

UN Human Development Index



20/32

Economic Freedom versus Corruption

0123456789

10

0.0 2.0 4.0 6.0 8.0 10.0 12.0Economic Freedom Rating

Corruption

Rating


21/32

0

10

20

30

40

50

Bottom 20% 4th Quintile 3rd Quintile 2nd Quintile Top 20%

Income Inequality

Poorest 20% 2nd 20% 3rd 20% 4th 20% Richest 20%Percent of income accruing to the



22/32

0

2

4

6

1970 1975 1980 1985 1990 1995 2000

Score(outof10)

Size of Government Legal System & Property Rights

Sound Money Freedom to Trade with Foreigners

Regulation Total

India


23/32

0 2 4 6 8 10

Size of Government

Legal System & Property Rights

Sound Money

Freedom to Trade with Foreigners

Regulation

Total

Score (out of 10)

Average of Top Ten India

India & Top Ten Average


24/32

J udiciary independence

Impartial courts

Protection of intellectualproperty

Law and Order

0 2 4 6 8 10Score (out of 10)


India & Top TenLegal System & Property Rights


25/32

India & Top Ten Business Regulations

0 2 4 6 8 10

Price controls

Time withgovernment

bureaucracy

Starting

a new business

Irregular payments

Score (out of 10)



26/32

0 1 2 3 4 5 6 7 8 9 10

Ownership of banks

Competition in domestic banking

Extension of credit

Interest rate regulations

(leading to neg. rates)

Interest rate controls

Score (out of 10)


India &Top TenCredit Market Regulations


27/32

India & Top Ten

Tariffs

0 2 4 6 8 10

International trade

tax revenues

(% of trade sector)

Mean tariff rate

Standard deviation of tariff

rates

Score (out of 10)



28/32

0

2

4

6

8

10

1970 1975 1980 1985 1990 1995 2000

Score(ou

tof10)

1

21

41

61

81

101

121

Rank(out

of123)

Score Rank

Freedom to Trade with Foreigners


29/32

No country with a persistentlyhigh economic freedom ratingduring the last two decadesfailed to achieve a high levelof income.

Economic Freedom of the World 2002


30/32

Whose Economic Freedom?Manufacturers

Urban and rural labour

Farmers, with or without land

Traders, retail and wholesale


31/32

If a high degree of economic freedom was permitted, then

the rate of economic growth would have been higher

the government would have focused on education,health, and infrastructure, instead of running

bakeries, bicycle companies, or banks

the corruption levels would have been low

the overall governance would have been better.

India would have been higher on economic freedom

as well as human development index


32/32

Why is India Poor?

Lack of Economic Freedom

Documents

Why is India Poor