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Published byRosaline Fleming Modified over 8 years ago
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Sara Hsu
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India and geography Independence from Britain in 1947 Nehruvian Socialism
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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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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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