India

Make in India

o 'Make in India' is Modi's signature initiative for transforming India into a global hub for several manufacturing and services industries. o The manufacturing sectors include automobiles, automobile components, chemicals, defense manufacturing, electrical machinery, electronic systems, food processing, leather, pharmaceuticals, textiles and garments. o The service industries are aviation, biotechnology, construction, IT, media and entertainment, oil and gas, ports, renewables, roads and energy, highways, space, thermal power, tourism and hospitality and wellness. o The long-term objective is to add as much value as possible in these industries within 'India' for maximizing growth and employment opportunities at various segments of the value chains.

India and Poverty

o A 2019 report from the United Nations indicates India has made great strides in helping to get its citizens out of poverty. o Between 2006 and 2016, the percentage of India's population in what's known as "multidimensional poverty" plummeted from 55.1 percent to 27.9 percent. o COVID threatens to send 100 million back into poverty. o In addition to COVID, Modi's government has to deal with unemployment, which is at a 45-year high; acute agrarian distress has caused serious issues in the country and impacted the banking system.

India under Modi

o A distinct feature of Prime Minister Narendra Modi's first year in office was the remarkable speed with which he moved on external engagement. o During his first twelve months as Prime Minister, he travelled to almost twenty countries in different parts of the world

Washington Consensus

o A group of guidelines that countries have to follow in order to get money and reform o Fiscal discipline - strict criteria for limiting budget deficits o Public expenditure priorities - moving them away from subsidies and administration towards previously neglected fields with high economic returns o Tax reform - broadening the tax base and cutting marginal tax rates o Financial liberalization - interest rates should ideally be market-determined o Exchange rates - should be managed to induce rapid growth in non-traditional exports o Trade liberalization o Increasing foreign direct investment (FDI) - by reducing barriers o Privatization - state enterprises should be privatized o Deregulation - abolition of regulations that impede the entry of new firms or restrict competition (except in the areas of safety, environment and finance) o Secure intellectual property rights (IPR) - without excessive costs and available to the informal sector o Reduced role for the state

Import Substitution

o After a foreign exchange crisis in 1957, the government implemented a strategy of import substitution, replacing imports with domestic production. o India would continue to model itself after the Soviet Union o By creating a wall of protective measures, imports would be made uncompetitive, and India's domestic industry would be given the opportunity to flourish. o The system placed prohibitive tariffs and quantitative restrictions on all imports. o Doesn't make sense: you cannot be the best in every sector, you might not have the ability, skills, natural resources, technology, etc.

British out of India

o An independent, democratically elected government was the goal of the INC. o Forceful ideas began to take on relevance: liberty achieved through democracy prosperity through economic growth and individual human rights sustained by law o The British colonial government granted independence to India and Pakistan in 1947, and Sri Lanka in 1948. o The boundary line that was established by the British has been in dispute for decades and led to years of war—including the first war between India and Pakistan in 1947.

India

o British presence on the subcontinent began in the early 1600s, when the East India Company, with head offices in London established trading centers along the coast of India.

British India

o By 1858, the British Crown assumed direct control of British India. Queen Victoria became the first to bear the title " Empress of India." o The Indian National Congress (INC) was formed in 1885 to seek opportunities for Indians to shape and to participate in politics and the future of their country. o In 1919, Mohandas Gandhi emerged as the leader of this movement. o Through the power of his example and his great organizational skills, he was able to build grassroots support for the INC throughout British India.

New economy and the First 5 Year Plan

o Despite being a democracy Nehru and the Congress party believed that a socialist approach to the economy would be the best model to follow using a similar approach to the Soviet Union that included rapid industrialization. o By 1951, a Central Planning Commission was established with Nehru as its chairman and the first Five Year Plan was initiated. o The overall focus was: § eliminating the need for foreign capital § developing self-sufficiency (Ghandi's concept of Swadeshi) § fiscal conservatism § increased national savings.

Macroeconomic Competitiveness

o From independence in 1947 through the 1970s, India's economy grew at 3.5%. From 1970 to 1980 it grew by 4.4%. o But much of this was carried out with loans and support from the Soviet Union and International Monetary Fund (IMF). o By the early 1990s the country was deep in debt and could not repay loans . o India was not open to big companies doing business there so their economy was not growing at all

British East India Company

o In the early 1800s, BEI had greater political involvement stimulated by an interest in bringing social "reform" to the subcontinent as well. o British administrators also wanted to create a special class of South Asian people who would be " Indian in blood and color, but English in taste, in opinions, in morals, and in intellect."

Economic Reform early 1990s

o In the early 1990s, Finance minister (later Prime Minister) Manmohan Singh initiated a major program of pro-market economic reforms designed to move India toward a more open, market-oriented economy. o These reforms followed much of what is called The Washington Consensus.

Collapse of the Soviet Union

o In the late 1980s the Soviet Union began to dismantle. o The Soviet economy was falling apart and there were open revolutions across Eastern Europe. o This was a dramatic setback for India. o Its model and primary source of exports and economic aid had fallen.

India we know now

o India has witnessed tremendous growth over the last two decades. o What started with the reforms initiated by Manmohan Singh first as Finance Minister and then as Prime Minister, have continued to reap benefits. o But with COVID, the prospects for the country are unknown. o The Indian economy had been growing at an annual rate of more than 7%. o The Indian Government had initiated policies and reforms aimed at encouraging investment, strengthening productivity and ensuring fiscal sustainability.

India as an economic giant

o India's phenomenal transformation from an impoverished nation in 1947 into an emerging global power whose $3 trillion economy is Asia's third largest has turned it into a major exporter of things like software and vaccines. o Millions have escaped poverty into a growing, aspirational middle class as its high-skilled sectors have soared. o This year, the economy is forecast to expand at a 7.4% annual pace, according to the International Monetary Fund, making it one of the world's fastest growing.

- Pradhan Mantri Jan Dhan Yojana

o Jan Dhan Yojana helps unbanked Indians open a bank account, get a debit card, and access to social security schemes like insurance and pension.

Evolution of India

o The British Raj was primarily political, imposing colonial rule over the sub - continent from the mid - nineteenth century until the 1940s. o Its impact lies largely in the introduction of democracy, industrial development, technology, and westernization.

India at 75

o The country is currently experiencing economic distress. o The most visible signs are increasing unemployment, economic insecurity and inequality between the rich and poor. o This seems to be Prime Minister Narendra Modi's biggest challenge as the country marked 75 years of independence from British rule in August. o The unemployment rate remains at 7% to 8% in recent months. o Only 40% of working age Indians are employed, down from 46% five years ago. o While India continues to grow well, that growth is not generating enough jobs - crucially, it is not creating enough good quality jobs. o Only 20% of jobs in India are in the formal sector, with regular wages and security, while most others are precarious and low-quality with few to no benefits. o 40% of jobs are in agriculture. o By the most recent measures, literacy stands at 74% and life expectancy at 70 years. o Dramatic progress came with those historic reforms in the 1990s that swept away decades of socialist control over the economy and spurred remarkable growth. o The past few decades inspired comparisons to China as foreign investment poured in, exports thrived and new industries -- like information technology - were born.

Modi's Policies

o The government of Nirendra Modi launched a series of flagship initiatives - Housing for All, the Atal Mission for Urban Rejuvenation and Transformation (AMRUT), Smart Cities Mission, Digital India, Jan Dhan Yojana and Make in India. § Soon after taking charge, PM Modi launched the campaign to attract foreign investment and build brand India. § Since then, the government has gradually eased restrictions for foreign investors and opened nearly 90 per cent of the country's industrial base, including the defense sectors and the railways. § India attracted $60 billion in foreign direct investments in the year to March 2017, up 8 percent from the previous year.

Economic Reform

o These reforms enabled India's economy to begin to grow more dramatically and stay out of debt. o The economy grew 5.4% between the 1990 and 2000. o The major structural changes of opening India's economy led to an impressive average growth of 8.8% between 2000 and 2010.

Bureaucracy and the Permit RAJ

o To encourage India's self-sufficiency the government instituted a number of controls in the form of licensing and highly protective trade and investment restrictions. o Nicknamed the "Permit Raj," the colossal Indian bureaucracy created a complex system of licensing that fostered both inefficiency and corruption. o The bureaucracy was created to administer the approval of permits designed to stimulate and control industry, while severely limiting foreign trade and investment.

Gender and Equality

o Women now constitute around 48% of India's 900 million voters. o Modi and the BJP promised to ensure gender equality in Indian society. o BJP promised to reserve one-third of seats in the Indian parliament and state assemblies for women. o BJP also promised that it will "ensure that the number of childcare facilities is increased three-fold.

Demonetization

§ The 2016 decision to ban the two highest value currency notes is seen as the most radical decision taken by the Modi government. § The Prime Minister's sudden announcement wiped out most of the currency in circulation and left millions scrambling for cash. § The decision was aimed at tackling untaxed or black money. § The decision overnight sucked out 86% of the cash in circulation and was debilitating for businesses of all sizes, especially small and medium enterprises and the informal sector, which could not easily switch to a cashless, digital system.