India on the Move
India is a diverse land which is although enriches with resources but still faces the issues of slow economic growth and unemployment. The country got freedom in the year 1947 and since then financial controllers of this developing country have been making every possible effort to increase the pace of growth and prosperity. In the meantime, India has suffered a financial collapse, abandoned import substitution, and also moved very slowly to adopt the Washington Consensus. The turning point came in the year 2003 and after that it seems that there is now not any stoppage to the fiscal pace. But the question is why it came so late? There are few points to be discussed in this regard:
After getting freedom in 1947, Indian Government was on the move to form and implement novel development plans and policies. So getting impressed by the Soviet Union, the government implemented the Import Substitution Industrialization Model (Vietor and Thomson, 2008). The model was intended to safeguard the economy against foreign competition and thus gave the government elite authority over infrastructural operations. The base of the model was on regulations in the public and private sectors of the nation, trade policies and also foreign direct investments. All these activities are essential for any country to gain speedy and high economic growth. Unfortunately, the implemented system was not sustainable in the long run as it led to huge rate of incompetence in the industrial performance of the nation. It can be observed that the average GNP per capita even in the year 1975 was as low as Rs 754.5(Exhibit 3). There were special permission licenses for any new public sector enterprise and that too had to be obtained through a complicated set of norms. Also, the growth performance plans in the five year scope did not surpass the target from the periods of 1956-1961, 1961-1966 and 1969-1974 (Exhibit 10a). This resulted in the low “Hindu growth rate’ to as low as 3.5%.
Rao adoption of post-crisis, ‘Washington Consensus’ Strategy
Hindu-Muslims Frictions, Demographic fragmentations and Deficits
Ever since its independence, Hindu-Muslims frictions have troubled the economic and social growth of India. Further accompanied by more demographic fragmentations and fiscal deficits, India has shown a slow rate of growth in all the areas. Rather in going for advanced education and employment opportunities, every now and then people were more intensively involved in religious conflicts. This led to stagnation in the economic growth of groups of both categories. The majority of country’s economic resources and assets were used-up in demographic fragmentations. Bangladesh and Pakistan when fragmented from India, people thought that these two small nations will progress more and thus will move ahead of India. But the consequence was further addition in violent and poor nations of the world. The economy of India although incurred with major fiscal deficits and some of the major reserves went under foreign control but the major setback is for both the other nations. The country also has a listing of high fiscal deficits (Exhibit 11a). The government announces several plans to reduce the deficit but there are numerous obstacles in the pathway. The large part of India’s expenditure goes to military, providing aids to population suffering with natural disasters like floods, droughts and several other aids. For example, fertilizers alone made up 0.7% of GDP in 2011 (Victor and Thompson, 2008).
India- site for Foreign Direct Investment
The pace of Foreign Direct Investment (FDI) in India was very slow. But now FDI has made the Indian market more investor friendly. Nowadays, India is ranked amongst the top three global investment destinations by the World Bank. For a financial system like India which has incredible prospective, FDI has had a positive impact. FDI inflows enhanced domestic capital, as well as technology and skills of existing companies. It furthermore helps to set up new companies. All of these have a say to economic development. India has lot to offer to prospective FDI investors. The list comprises of political stability in a democratic nation, a vast domestic market, steadily growing economy, a large and growing pool of trained manpower, a single digit inflation rate, fairly developed social and physical infrastructure and a vibrant financial system (Bhattacharyya and Palaha, 1996). In addition to these, India is developing at a very rapid rate which is also favorable for increasing number of FDI investors.
References
Bhattacharyya B and Palaha Satinder, 1996. Foreign Direct investment in India: Facts and Issues. Indian Institute of Foreign Trade, New Delhi.
Vietor, Richard H.K., and Emily Thompson. "India on the Move." Harvard Business School Case 703-050, June 2003. (Revised March 2008.)
