An Example Of Transition Economy Economics Essay

An Example Of Transition Economy Economics Essaywell-nigh 1.21 billion people currently living in India, which is about 17.4% of the globular population or one, can say 2.4 per cent of world gain national product in US dollar terms and 5.5 % in PPP terms.The universal wellbeing too is linked to progress in India as reflected in the eager global interest in India. But, India seems to instigate and disappoint at the same time.Where some countries raced ahead in the development process, India lagged behind. It took 40 long years for Indias real per capita gross domestic product to paradigm from 1950-1951 to 1990-91. But, for India 1991-92 was a significant moment in modern economic history because of a severe balance of payments catastrophe prompted far accomplishment economic reforms, unlocking its addition potential, and the result was that in only 15 years, Indias per capita in hap doubled again by 2006-07. If India will maintain its current egress rate then, Indias per capita income could definitely double by 2017-18 in next some years.The key policy reforms since 1991-92, reviewing the economic progress made so farPolicy Reforms before 1991Macroeconomic crisis of 1991 patent a turning point in Indias economic history for two reasons.First, fiscal arrears driven external payment mishap with a dip in unconnected turn reserves to below US$ 1 billion in 1991.Second, concurrently efforts were made towards wide ranging structural reforms surrounding areas of trade, management of exchange evaluate and industry, general finance as well as financial sector.The main objective was to create a competitive environment to improve produce and efficiency. New industrial policy fostered competition byAbolishing monopoly restrictionsTerminating the phased manufacturing programmers100% foreign direct investmentImport of foreign technologyDe-reservation of sectors till then reticent for the public sector.Only five industries are under licensing presently, mainly on account of environmental, health, safety and strategic consideration and two industries are reserved for the public sector and those industries areATOMIC ENERGYRAILWAY TRANSPORTReservation of industrial products for the small scale sector is still an enduring issue. FDI i.e. Foreign figure Investment up to 100% is allowed under the automatic route in most sectors, but with a few exceptions.The home sector is being in the hands of private sector. Because of the large requirements of funds for infrastructure, 100% FDI has been allowed in all infrastructure sectors. There are unmitigated tax holidays to encourage the business of development, operation, and tutelage of infrastructure facilities.The monetary policy framework and its operating procedures in India have evolved over time with the changes in the macroeconomic structure and financial markets development. by and by the deregulating of the financial sector, the perceptual constancy of money demand became deduce. Because o f that, Reserve Banks switched from monetary targeting framework, to a multiple indicator approach. In this approach, many indicators available on a exalted frequency basis. The various indicators areRates of return in different marketsMovements in currency, credit, fiscal position, inflation rate, exchange rate etcRefinancing and transactions in foreign exchangeThe objective for the financial sector was to provide operational litheness and functional self-sufficiency to all the financial institutions so that they could allocate resources much efficiently. nearly of the important initiatives in the financial sector wereReduction in statutory preemptions so as to release greater fundsInterest rate deregulation to enable price discoveryAllowing new private sector banks to create a more competitive environmentThe trade policy reforms comprisedwithdrawal of the three-figure restrictions on exports and importsphasing out of the system of import licensingLowering the level of nominal tariffs and its dispersion as well.India embarked on a well sequenced opening up of the swell account. Its framework was based on a preference for non-debt creating capital inflows like foreign direct investment and foreign portfolio investment.Economic Progress after 1991After 1990, India saw gradually breaking free of the low growth trap which was known as the Hindu growth rate of 3.5% p.a. Real GDP growth was emergenced from 5.7% p.a. to 7.3% p.a. in 1990 to 2000s. The main reason of this growth acceleration was that the growth rate of industry and services incrementd. Till the end of 1990, the green revolution had died down.The growth patterns altered the structure of the Indian economy with a decline in the share of agriculture from 28.4% to about 15 per cent in 2009-11. There was an increase in services, including construction, from 52% to 65%. The share of industry has remained unchanged at around 20 per cent of GDP.Real economyItems199-20002001-20102004-2008Share in GDPAg riculture28.4%19.4%18.9%Industry20.1%20.0%20.1%Services51.5%60.6%61.1%The growth acceleration was accompanied by a astute lift up in the rate of growth of gross fixed capital formation which had more than doubled from an annual average of 7.2 per cent in the 1990s to 15.7%.The structure of Indian economy also underwent a change. Exports and imports of goods and services have more than doubled from 23% of GDP to 50 per cent in 2011.The high growth was achieved in an environment of price stability as headline wholesale price index inflation dropped to an annual average of 5.5% in the 2000s from 8.1 per cent in the 1990s. Subsequently, in the post-crisis period the inflation swerve has reversed with the headline WPI inflation averaging over 7% and the consumer price inflation crossing double digits during 2009-11.The uptick in food price inflation was particularly sharp during 2009-11.InflationItem1991-20002001- 20102004-20082009-2011(Annual Average Percentage change)Wholesale Price Index8.15.45.57.1Food Articles10.25.85.213.3Fuel Group10.68.97.37.2Non-Food Manufactured Products6.84.05.04.0CPI- Industrial Workers9.55.95.010.6CPI- Industrial Workers Food9.86.25.512.5No power on earth can stop an idea whose time has come.India has launched wide ranging structural reforms and has made noteworthy economic progress over the historical two decades. Some of them areIndias industrial environment has become more competitive and openInfrastructural gaps have been sought to be bridged through public-private initiatives with both domestic and foreign sources of fundingCurrent account has become fully convertible while capital account which is virtually free for non-resident.As interest rates deregulated, banks gained operational autonomy for commercial lending. If India could maintain the current pace of growth it will elevate millions out of poverty and augment the global economy. While India has come a long way, maintaining the current pace would itself be challenging a nd require continued reform efforts.India will continue to face stagflation-type situation for some more time. The main reason for this arethe governments loose fiscal policy and persistent strong rise in real rural wage growth without an increase in productivity growthStagflation means when economic growth of a country stagnates while inflation is rising. RBI lowered the economic growth undertaking for the current fiscal to 6.5 percent from its earlier estimate of 7.3 percent, stating rising government expenditure poses risks to economic stability.Its inflation forecast for the fiscal ending March, 2013 has also been raise to 7 percent from earlier projection of 6.5 percent. According to reports, monetary policy has a limited role in this stagflation-type environment. Moreover, the inflation outlook remains challenging. Indeed, prone the lamentable progress of the monsoon, in reality food and overall inflation will likely accelerate in the coming months.Measures to control Indi an stagflationIndia may have progressed on paper and on screen but do we see the progress on the streets of India?There are millions of people still hold up in India on an income of less than one dollar a day. India can never be considered a developed country unless and until the poverty, hunger and pain of the poor on the streets and those living in the slums is curbed.Lately the government of India has come up with several developmental plans and no doubt it has helped boost the economy of the Country in some ways. But the long term impact of these plans do not seem to serve the purpose, or what should be the purpose of any government, that is, prosperity of the vernacular man. Investment is pouring in from within the Country and abroad, but the poor man is getting poorer.In order to be considered a developed Country, India call for to focus on the common man.It is not only the Governments role to make India a developed nation. People of the country should also take responsibi lity.Improve infrastructureLiberalize financial marketsIncrease agricultural productivityIncrease quality and quantity of universitiesMore importance to rural householdProper health facilities in rural and urban areasRaise educational executionCitizens must do charity with enough disposable incomeJob creationRaise educational achievementIntroduce a credible fiscal policyImprove governance