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Sara Hsu.  India and geography  Independence from Britain in 1947  Nehruvian Socialism.

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Presentation on theme: "Sara Hsu.  India and geography  Independence from Britain in 1947  Nehruvian Socialism."— Presentation transcript:

1 Sara Hsu

2  India and geography  Independence from Britain in 1947  Nehruvian Socialism

3  Long coastline w/many sea ports  Bordered by Pakistan, Nepal, Bhutan, Myanmar, Bangladesh, and China  About half of land is arable; many remain farmers  Under and over-use of resources  16 of 29 states produce >90% of GDP

4  Colonized for trade reasons; British rule 1757-1947  Peasants unhappy about British rule due to dislocation, indebtedness, seizure of cultivation of assets  Mahatma Gandhi encouraged peaceful protest against British rule  Jawaharlal Nehru, Gandhi’s protégé, became first prime minister

5  Early growth under Nehruvian Socialism encouraged capital accumulation and savings, planning, strong government intervention  Foreign investment encouraged in 1950s, industrialization  First three Five Year Plans experienced growth in per capita incomes and industrial output

6 Droughts and crisis in 1960s, especially in Northern India Recession hit, and exports suffered, foreign investment was discouraged Focus on poverty reduction in 1974 & 1980 in Fifth & Sixth Five Year Plans: rural poverty programs “License raj”  “Hindu rate of growth” in 1960s and 1970s

7  Improvements in industrial policy under Rajiv Gandhi—relaxed industrial licensing and import duties on capital goods (1985)  Wider market for consumer goods  However balance of payments covered by borrowing  Industrial stagnation in 1988  Gandhi changed tack, increasing taxes on consumer goods and increasing rural employment

8  Twin deficits: growing government debt and increasing current account deficit  Slowing economic growth worsened conditions  Decline in government revenue but not a matched decline in government spending, which was financed by private borrowing  Sudden decline in foreign exchange

9  Government forced to sell gold in London to raise money  Assassination of R. Gandhi in 1991 led to political uncertainty  Rising inflation eroded purchasing power  IMF bailed out India, providing $1.8 billion in January 1991  Neoliberal reforms were implemented to liberalize the economy

10  New Economic Policy:  Devalue the rupee  Increase interest rates  Cut the union budget as well as subsidies and transfers to public enterprises  Abolish many industrial and import licenses  Liberalize trade policy  Strengthen capital markets.

11  Reform of banking system-in 1991, banks had many non-performing loans. After, new banks were allowed to more easily enter market. Prudential regulations were improved.  Building up to Y2K: by 2000, India had deregulated its telecommunications sector

12  Y2K pressured Western businesses to reprogram everything, and Indian software service providers filled the gap  Firm relocation to India by 2007: firms moved entire processes to India, and Indian firms developed foreign quality standards  Weathered the 2008 crisis well although affected through trade channels; fiscal expansion helped

13  Government restrictions that keep large companies from participating in labor- intensive industries  Extensive labor laws challenge small businesses in particular  Lack of infrastructure  Exploitation of informal sector workers  Rising fiscal and current account deficits

14  Reforms in 1990s  Interest rate deregulation  New competition  Stock exchange and derivatives markets  Microfinance sector  Commercial banks, foreign banks, cooperative banks, non-bank financial co  Lending from public sector banks has resulted in underlending to private sector

15  Land reform since Independence  Goal: Reduction of poverty  Green Revolution in 1960s  Expenditures taken on by state governments  Crop yields and rural incomes expanded since 1980s  Number of villages with banks increased  Debt remains problem

16  Fast GDP per capita growth-better than other states since reform  Agriculture-based economy  Hyderabad-technology-based industrial growth in software technology park  Anti-poverty programs, health reforms, rural development  Still lags behind in upward mobility, farmer suicides, crimes against women

17  Nehru: considered political heir of Gandhi, in favor of heavy industry, biased against competition, government directed businesses  Indira Gandhi (Nehru’s daughter) in 1966, assassinated in 1984, famine in 1965-US withdrew food aid  Rajiv Gandhi changed positioning toward free markets, reduced licenses  Narasimha Rao, 1991, liberalization, crisis

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21  India’s reform process really began in 1991 as a result of a balance of payments crisis.  Reform opened up trade and made it easier to start a business.  Most growth in India is in the skilled services (IT) sector.


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