Unit 6 Indian Economy PDF

CHAPTER- 10 COMPARATIVE DEVELOPMENTS OF INDIA, CHINA AND PAKISTAN INDIA is the largest democracy of the world with a secular and liberal constitution. CHINA which has recently started moving towards a more liberal constitution with its command (socialist economy). PAKISTAN h...

CHAPTER- 10 COMPARATIVE DEVELOPMENTS OF INDIA, CHINA AND PAKISTAN INDIA is the largest democracy of the world with a secular and liberal constitution. CHINA which has recently started moving towards a more liberal constitution with its command (socialist economy). PAKISTAN having an autocratic militarist political power structure. DEVELOPMENT PATH OF INDIA, CHINA AND PAKISTAN India, China and Pakistan have many similarities in their development strategies. All the three nations started their development path at the same time. India and Pakistan got independent in 1947 and people's republic of China was established in 1949. All the three countries have started planning their development strategies in similar ways. India announced its first five-year plan in 1951, Pakistan in 1956 and China in 1953. India and Pakistan adopted similar strategies like creating a large public sector and increase expenditure on social development. Till 1980s, all the three countries had similar growth rates and per capital Incomes. COMPLETE STRUCTURE OF CHINA HISTORICAL BACKGROUND China has one of the oldest people and continuous civilization consisting of states and culture. The People's Republic of China (PRC), commonly known as China was established in 1949. GEOGRAPHY China is situated in eastern Asia bounded by the pacific in the east. It is the third largest country in the word next to Canada and Russia with 9.6 million square kilometers. POPULATION AND LANGUAGE China is the most populous country in the world with 1371 million people as per 2015 data and a growth rate of population is 0.5% per annum. Most Languages in China belong to Sino - Tibetan language family. There are also several major dialects (ordinary language for people) within Chinese language itself. ECONOMY China has been the world’s largest economy. After the establishment of People’s Republic of China, all the controls were brought under government control. Following are the points related to economy of China. 1) Great Leap Forward Campaign In 1958 campaign was initiated by MAO to modernize China’s economy. The aim of this campaign was to transform agrarian economy into modern economy by rapid industrialization. People were encouraged to set up industries in their backyards. In rural areas, communes were started. Under commune system, people collectively cultivate their lands. In 1958 there were 26000 communes covering almost all the farm population. QLF Campaign met with many problems. A severe drought caused havoc in China killing about 30 million people. 2) Great Proletarian Cultural Revolution In 1965, MAO introduced this revolution (1966 - 1976), under which students and professionals were sent to work and learn from the countryside. When Russia had conflicts with China, it withdrew its professionals who earlier had been sent to china to help in industrialization process. 3) Reforms Introduced In China China introduced reforms in 1978 in phases; IN THE INITIAL PHASE reforms were initiated in agriculture, foreign trade and investment sectors. In agriculture, commune lands were divided into two small plots and then allocated to individual households only for use, not ownership. They were allowed to keep all the incomes from land after paying taxes. IN THE LATER PHASE reforms were initiated in industrial sector. Private sector firms, township and village enterprises are now allowed to produce goods. Enterprises owned by government were facing competition at that stage. 4) Dual Pricing The reform process also involved dual pricing. This means fixing the price in two ways. Farmers and industrial units were required to buy and sell fixed quantities of inputs and outputs at a price fixed by government. For other transactions, inputs and outputs were purchased and sold at market prices. 5) Special Economic Zones (SEZ) In order to attract foreign investors, special economic zones were set up. COMPLETE STRUCTURE OF PAKISTAN HISTORICAL BACKGROUND Pakistan (Islamic Republic of Pakistan), gained independence on 14 august 1947. In 1971, a civil war in East Pakistan resulted in the independence of Bangladesh. Pakistan’s history is characterized by periods of economic growth, military rule and political instability. GEOGRAPHY Pakistan is Located in south Asia and. borders central Asia and middle East. Its borders are with China in the north, towards west and north west are Iran and Afghanistan, towards east and south east borders are with India. The country has an area of 796095 square kilometers. Total cultivated area is 221300 square kilometers and area under forest is 42300 square kilometers. POPULATION AND LANGUAGE Pakistan is the 6th most populous country in the world with 188 million people as per 2015 data with a population growth rate of 2.1% per annum. 1/3rd population lives below poverty line. It has second largest Muslim population in the world after Indonesia. National language is Urdu and official language is English. ECONOMY Following are the points regarding economic system of Pakistan: 1) Mixed Economic System Pakistan follows mixed economic model with co-existence of public and private sectors. 2) Introduction of Various Policies In 1950 and 1960, Pakistan introduce various regulated policy frameworks for growth of domestic industries. Tariff imposed on imports for protection of domestic good. 3) Green Revolution In case of agriculture, introduction of Green revolution and increase in public investment in infrastructure lead to rise in production of food grains. 4) Role of Public Sector in Early 1970’s In the early 1970s, nationalization of capital goods industries took place i.e. capital goods industries under government control 5) Role of Private Sector In Late 1970’s In late 1970s, government adopted the policy of de-nationalization and encouraged the private sector and offered various incentives to them. It created a conductive climate for new investments. 6) Financial Support In Late 1970’s Pakistan also received financial support from Western Nations. Remittances from emigrants to the middle East. This help the country in stimulating economic growth. 7) Reforms In 1998, various reforms were initiated in the country. COMPARISON OF DEMOGRAPHIC INDICATORS OF INDIA, CHINA AND PAKISTAN (YEAR 2015) 1) POPULATION China is the most populous country in the world with 1371 million people and India is the second most populated country with 1311 million people. Population of Pakistan is very less i.e. 188 million people. Data belongs to year 2015. Out of every six persons living in this world, one is Indian and another one is Chinese. Population of Pakistan is around 1/10th of India and China. 2) GROWTH RATE OF POPULATION Though China is the most populated country in the world but its annual population growth rate is just 0.5 % per annum as compared to India i.e. 1.2 % per annum and of Pakistan its 2.1 % per annum. Low population growth rate in China is one child policy introduced in late 1970s. One child policy in China reduced the growth rate but the drawback was after some decades there will be more elder people in the country as compared to young people. 3) DENSITY OF POPULATION China is the third largest country in the world and growth rate of population in China is very low as compared to India and Pakistan. Density of population in China is lowest 146 persons living in per square kilometer area. In India its 441 persons living in per square kilometer area and in Pakistan it’s to 245 persons living in per square kilometer area. 4) SEX RATIO Due to preference of son, sex ratio is lowest in all the three countries. Sex ratio is lowest in India with 929 females per 1000 males. In China and Pakistan, its 941 and 947 respectively. 5) FERTILITY RATE It is calculated as number of children born by women in the reproductive age (15 - 45) years. After introduction one child policy, fertility rate in China has fallen from 3 births per women to 1.6 births per women. Fertility rate is highest in Pakistan at 3.7 births per woman and India comes second with 2.3 births per women. It is calculated on an average. 6) URBANISATION Urbanization is highest in China i.e. 56%. In India and Pakistan, it is 33% and 39% respectively COMPARISON OF GROWTH INDICATORS OF INDIA, CHINA AND PAKISTAN (YEAR 1980 & 2015) First, you should know about PPP that is purchasing power parity. It shows the equality of purchasing power among countries i.e. quantity of goods and services that can be bought with a unit of money. All the three countries have different currencies i.e. Indian rupee, Pakistani rupee and Yuan in China. So GDP of all three countries are expressed in US $ and called PPP US $. GDP growth rate is considered as the most important indicator of an economy. China with second largest GDP is estimated to be 19.8 trillion US dollars. India's GDP is 8.07 trillion US dollars and Pakistan GDP is around 12% of GDP of India. During 1980 – 1990, GDP growth rate: China was having double digit growth of 10.3%. Pakistan's growth rate was 6.3%. India was at the bottom of 5.7% growth rate. During 2011-15, GDP growth rate: There was a drastic fall in China's growth rate from 10.3% to 7.9%. Pakistan also met with a drastic decline in growth rate from 6.3 % to 4%. India recorded and increase from 5.7 % to 6.7 % growth rate. SECTORAL CONTRIBUTION OF INDIA, CHINA AND PAKISTAN IN PRIMARY, SECONDARY & TERTIARTY SECTORS – (YEAR 2014-15) PRIMARY SECTOR In China Due to climatic conditions, area suitable for cultivation is just 10% of total land area. Total cultivation area in China is just 40% of total cultivation area of India. Till 1980, more than 80% of population was dependent on farming as livelihood. Government encouraged people to leave their fields and pursue other activities such as handicrafts, commerce and transport. Workforce engaged in agriculture was just 28% with 9% GDP contribution of agriculture in total GDP of China. In India The contribution of agriculture to GDP was 17% and proportion of workforce engaged in agriculture was 50%. In Pakistan The contribution of agriculture to GDP was 25% and the proportion of workforce engaged in agriculture was 43%. SECONDARY SECTOR In China, secondary sector contributes 43% in the total GDP, whereas in India and Pakistan, the share of secondary sector in total GDP is 30% and 21% respectively. China has been shifting employment and output from agriculture to manufacturing and then to services. But in India and Pakistan, the shift is taking place directly to the service sector. In India, proportion of workforce engaged in manufacturing sector is just 21%, in Pakistan 23% of total workforce engaged in manufacturing sector whereas in China, 29% of workforce was engaged in agriculture. TERTIARY SECTOR In both India and Pakistan, service sector is emerging a major player of development. Service sector contributes major share to their GDP. In India, service sector contributes 53% to their GDP whereas in Pakistan, its 54%. The contribution of service sector was 48% in the total GDP of China. In 1980s, Pakistan was faster in shifting there were forced to service sector then India and China. The proportion of workforce engaged in service sector in 1980. In India, 17% workforce was engaged in service sector, 12% in China and 27% in Pakistan. The proportion of workforce engaged in service sector 2014. In India, 29% workforce is engaged in service sector, 43% in China and 34% in Pakistan. So, we can conclude that the contribution of agriculture to GDP has declined. In the industrial sector, China has maintained a double digit growth rate, but in India and Pakistan, it has declined. In case of service sector, China was able to rise its growth rate but India and Pakistan was stagnant with its service sector growth rate. China’s main growth was due to secondary sector and India’s main growth was due to tertiary sector. Pakistan showed decline in all three sectors. HUMAN DEVELOPMENT INDICATORS OF INDIA, CHINA AND PAKISTAN (YEAR 2016) 1) HUMAN DEVELOPMENT INDEX HDI is an important indicator to study the human development. Higher value of HDI shows higher level of growth and development. In 2016, HDI for India, China and Pakistan was estimated to be 0.624, 0.738 and 0.550 respectively. According to their HDI, global ranks recorded by India, China and Pakistan are 131, 91 and 148 respectively. 2) LIFE EXPECTANCY AT BIRTH It refers to the average number of years for which people are expected to live. Higher life expectancy indicates longer and active lifespan. China has the highest life expectancy of 76 years. India and Pakistan have life expectancy of 68.3 and 66.4 years respectively. 3) MEAN YEARS OF SCHOOLING It is highest in case of China with 7.6 % while the corresponding figures for India and Pakistan are 6.3% and 5.1% respectively. 4) INFANT MORTALITY RATE It refers to number of infants dying before reaching the age of 1 year per 1000 live births in a year. Low IMR shows better health and sanitation. It is lowest in China with just 9 infants and highest in Pakistan with 66 infants. IMR in India is 38 infants. 5) PEOPLE BELOW POVERTY LINE It means those people who do not even have that level of income and expenditure, which is necessary to fulfill basic needs. According to international poverty rate minimum consumption should be 3.10 dollars a day. In India, 37% people are below poverty line, 32% people in China and 44% people in Pakistan are below poverty line. 6) MATERNAL MORTALITY RATE Both India and Pakistan have not been able to save women from maternal mortality. In China, for one lakh births, only 27 women die whereas in India and Pakistan, maternal mortality rate is 174 and 178 respectively. 7) GDP PER CAPITA Higher rank of China in HDI is mainly due to higher GDP per capita. In 2016, China’s GDP per capita was estimated to be 14400 US dollars. It was just 6092 US dollars for India and 4866 US dollars for Pakistan. 8) IMPROVED WATER SOURCES It refers to the percentage of population which has a reasonable access to water and is able to obtain at least 20 liters per day. China at 96%, India at 94% and Pakistan at 91% in providing improved water sources. IMPROVED SANITATION Pakistan performance in providing sanitation is better than India and China. China has provided sanitation to 77% of population, whereas Pakistan provided sanitation to 64% of population and for India it is just 40%. POPULATION UNDERNOURISHED The percentage of population which is not able to obtain adequate diet is termed as undernourished population. China has lowest percentage of population, only 9% people who are undernourished. In India, 39% of total population is undernourished and in Pakistan 45% of population is undernourished. IMPORTANT NOTE HDI is not sufficient. Along with these, we also need liberty indicators. Liberty indicators may be defined as major of the extent of demographic participation in the social and political decision making. Example of liberty indicators are constitutional protection rights given to the citizens. COMMON SUCCESS STORY OF INDIA AND PAKISTAN Both the countries have succeeded in more than doubling their per capita incomes. Incidence of absolute poverty has been reduced significantly. Food production has successfully kept pace with the rise in population. Food self sufficiency has been accompanied with improved nutritional status. COMMON FAILURES OF INDIA AND PAKISTAN The inward-looking trade policies did not allow both the countries to take advantage of globalization. The mindset of politicians has not shown a progressive change. They prefer their own controls rather than freedom of choice of producers and consumers. Tax evasion is a national hobby. Higher fiscal deficit averaging 7-8% of GDP continued for long time. Large proportion of tax revenues is spent on defense expenditures. AREAS WHERE INDIA HAS AN EDGE OVER PAKISTAN In the area of skilled manpower and R&D, India is better than Pakistan. India has shown a remarkable achievement in the export of software. The number of PhD’s produced by India every year about 5,000 which is even more than the total stock of PhD’s in Pakistan. Population growth in India is less than population growth of Pakistan. health facilities in India are far better than Pakistan. AREAS WHERE PAKISTAN HAS AN EDGE OVER INDIA Pakistan has achieve better result in migration of workforce from agriculture to industries. External trade has expanded much faster in Pakistan than India. Pakistan has perform even better than all South Asian countries. Efficiency of investment in Pakistan is higher than in India.  Pakistan has achieved better results than India even in improved water sources. AREAS WHERE CHINA HAS AN EDGE OVER INDIA China reform process began in 1980s, whereas India was still in the mid stream of slow growth process. China’s initiative was more on poverty elevation whereas India’s focus was more on GDP growth only. China abolished the immune system of farming and household were allotted individual land for cultivation, whereas Indian agricultural reforms have been for less effective than in China. China allowed 100% equity to foreign investors, establish SEZ and offered better infrastructure to foreign investors, provided FDI in retail sector also. In all these respect discussed above, India remained far behind China has emerged as the second largest economy in the world and India is lagging way behind. APPRAISAL OF DEVELOPMENT STRATEGIES OF CHINA AND PAKISTAN CHINA China introduce various reforms in 1978. Pre reforms period: a) There had been massive extension of basic health services in rural areas. b) Even with commune system, there was more equitable distribution of food grains. c) Per capita food grain output was same as like in 1950s. In 1978, China government was not satisfied with the slow pace of economic growth under the Maoist rule. Thus, number of other reforms were introduced in 1978. So, In post reforms period, a) Each reform was first implemented on smaller level and then extended on massive scale. b) Development of infrastructure in the areas of education and health, existence of small enterprises etc. helped positively in improving the social and income indicators. c) Agricultural reforms brought prosperity to a vast number of poor people. PAKISTAN The reform process leads to versioning of all economic indicators. As compared to 1980, GDP growth rate decline in 1990s. Proportion of poor was around 40% in 1960s which decline to 25% in 1980 and again started rising in 1990s. Reason behind slow growth and massive poverty even after reforms: a) Agriculture growth and food supply situation was based on good harvest and not on technical change. b) Most of the foreign exchange earnings come from remittances from Pakistani workers in the middle East and through exports of agricultural goods, but not from exports of manufactured goods. c) Growing dependence on foreign loans and difficulty in paying back. CONCLUSIONS INDIA Indian economy preferred moderately but majority of its people still dependent on agriculture. Infrastructure is lacking in many parts of the country. It is yet to raise the standard of living of more than one fourth of its population than lives below poverty line. PAKISTAN Political instability and over dependence on remittances and foreign loans are the reasons behind slow down of Pakistan economy. Pakistan is hoping to improve the situation by maintaining high rate of GDP. CHINA Lack of political freedoms and its implications for human rights are major concerns. It uses market system without losing political commitments and succeeded in increasing the level of growth and elevation of poverty. By removing commune system and allowing individuals to cultivate lands, China ha ensured social security in rural areas. Public intervention in providing social infrastructure lead to positive results in human development in China