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Economic Development in India

Economic Development in India. Koichi Fujita CSEAS, Kyoto University Japan. From Socialistic Society to Liberalization (1). Independence from British India (1947) Largest democratic society in the world Central government– State government (27 States)

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Economic Development in India

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  1. Economic Development in India Koichi Fujita CSEAS, Kyoto University Japan www.AssignmentPoint.com

  2. From Socialistic Society to Liberalization (1) • Independence from British India (1947) • Largest democratic society in the world Central government– State government (27 States) • Towards a ‘Socialistic Society’ by Nehru Mixed economy of market economy and planned economy Without drastic agrarian reform Heavy industrialization policy since the 2nd Five Year Plan (1956-61) By the ‘Mahalanobis Model’ Tight regulations and control through license Protection of small industries Priority to higher education www.AssignmentPoint.com

  3. From Socialistic Society to Liberalization (2) • Failure of the ‘Mahalanobis Model’ Stagnation of agriculture 2 years’ consecutive droughts in the mid-1960s Large amount of import of wheat • Introduction of ‘Green Revolution’ strategy Mexican semi-dwarf wheat (HYV) Import of chemical fertilizers Wheat revolution in the northwestern India such as Punjab By the mid-/late-1970s India attained a food self-sufficiency • Stagnation of Industrialization and Economic Development The ‘lost decade’ (until the end of the 1970s) Hindu rate of growth: per capita growth of 1-1.5% www.AssignmentPoint.com

  4. From Socialistic Society to Liberalization (3) • Partial liberalization policy by Rajiv Gandhi in the 1980s • High growth rates in the agricultural sector Diffusion of energized water pumps including STWs Almost all the crop sector attained a high growth The second wave of the ‘Green Revolution’ • Economic Crisis in 1991 Collapse of Eastern Europe and Soviet Union Gulf War Acute shortage of foreign exchange reserves Structural Adjustment Policies led by IMF/World Bank www.AssignmentPoint.com

  5. From Socialistic Society to Liberalization (4) • Full-scale economic liberalization policy Abolishment of license system Promotion of private investment Liberalization of trade policy • High economic growth rates • IT industries • Consumer goods industries • Stagnation of agriculture Farmers’ suicide Migration to urban cities www.AssignmentPoint.com

  6. Whole economy Agriculture Droughts ‘Lost Decade’ Partial liberalization Full-scale liberalization www.AssignmentPoint.com

  7. From Agrarian to Modern Industrialized Economy Still agriculture absorbs about 60-70% of labor force www.AssignmentPoint.com

  8. Agricultural Performance in India Population Production of foodgrains Government procurement Net export of food www.AssignmentPoint.com

  9. Agricultural Input Subsidies Problem in India • Chemical fertilizers Retention system: The Central Government compensates the price difference between the highest price and the factory price • Canal irrigation The State Government pays capital cost and O&M (operation and maintenance) cost and receives from farmers at less than even O&M cost. • Electricity Electricity is charged by sectors; agriculture and domestic is highly subsidized and industrial sector is penalized. Flat rate system It induces overexploitation of groundwater www.AssignmentPoint.com

  10. Social Safety-Nets in India (1) • Procurement and Distribution of Food FCI (Food Corporation of India) purchases food from surplus areas, at a price (MSP: Minimum Support Price) recommended by CACP (Commission of Agricultural Costs and Prices) every year Transport to deficit areas to sell to State Government, at a price of CIP (Central Issue Price) State Government sell food at FPS (Fair Price Shop) at a subsidized price to consumers Case of Tamil Nadu: Rice can be purchased at 1 Rs/kg 20 kg/month for 1 nuclear family 35 kg/month for 1 nuclear BPL family • Other commodities that are sold at FPS Wheat flour, sugar, kerosene, pulses, etc. www.AssignmentPoint.com

  11. Social Safety-Nets in India (2) • National Rural Employment Guarantee Scheme (NREGS) Guarantee 100 days employment for the registered rural people, at wage rate of 100 Rs./day (both male and female) • Pension System For the poor and old persons, especially old women 400 Rs./month • Girls Program If a rural household has two daughters, the government purchase bond and deposit it in the bank, which can be withdrawn when daughters become marriage age. www.AssignmentPoint.com

  12. Social Safety-Net in India (3) • Self-Help Group (SHG) 15-20 women make a saving and credit group by the assistance of some NGOs They continue their activity for some time and if their activity is good, the NGO will recommend some banks to disburse credit to the group members. If the group member repay the bank loan completely, the government gives back the half of the loan as subsidy (for only the first time loan). The first-time loan should be expended to purchase livestock such as goats, milch cows. www.AssignmentPoint.com

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