Tag: Economy

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Analysis

India’s Economic Transformation

Introduction

India’s Independence did not only awaken individual dreams, but also opened development opportunities — economically, socially, and politically. On the 15th of August 1947, the Indian peninsula had a new beginning as a country but there were many monumental tasks to be completed by the then-newly formed government. India’s independence was in itself a turning point for India’s economy and its transformation. Seventy-five years later, India seeks to join the $5 trillion club soon. As former prime minister Manmohan Singh put it: “The brightest jewel in the British Crown” was the poorest country in the world in terms of per capita income at the beginning of the 20th century. 

Pre-Independence

Before independence, the much prevalent British dominance drained the country of its natural resources, capital, and labour. India was hopelessly poor as a result of the constant deindustrialization by the British. The vivid social diversity and the exponentially growing unemployment and poverty rates questioned India’s survival as a nation itself. Cambridge historian Angus Maddison’s work shows that India’s share of world income shrank from 22.6% in 1700 (almost equal to Europe’s share in 1700 of 23.3%) to 3.8% in 1952. 

After Independence

Then prime minister, Jawaharlal Nehru, introduced an economic model that envisaged a dominant role of the ruling government as an all-pervasive entrepreneur and financier of private businesses. The Industrial Policy Resolution of 1948 proposed an economic system that would blend elements of a market economy with elements of a planned economy, free markets with state interventionism, or private enterprise with public enterprise: a mixed economy. Earlier, the Bombay Plan, proposed by eight influential industrialists including J.R.D Tata and G.D. Birla envisaged a substantial public sector with state interventions and regulations in order to protect indigenous industries. The political leadership believed that since planning was not possible in a market economy, the state and public sector would inevitably play a leading role in economic progress. 

The Planning Commission was set up in 1950 to oversee various aspects of economic planning, including resource allocation, implementation and appraisal of the five-year plans, and more. The five-year plans focussed on economic and social growth, modeled after those existing in the USSR. India’s first five-year plan was launched in 1951, and it centralized agriculture and irrigation to boost agricultural outputs as India was running out of its foreign reserves on food grain imports. The first five-year was successfully accomplished, with the economy growing at an annual rate of 3.6%, beating its primary target of 2.1%. 

Though shortly after, India suspended the five-year plans, drawing up annual plans between 1966 and 1969 instead. This was because India was not in a state to commit to long-term provision of resources. The diversion of capital to finance the war with Pakistan, the below-par growth outcomes of the Third five-year plan, and the then-ongoing war with China, had altogether left the Indian economy with little. The approaching monsoon showers worsened food shortages, causing a steep spike in inflation. The government needed to import food grains and seek foreign loans, and this posed a serious threat to India’s political economy: spiking inflation hand-in-hand with increasing foreign debt. 

India’s Economy Now

Though in recent years, the rise of the Indian economy is best depicted in BSE’s Sensex; the 30-share benchmark index. The 30 component companies represent segments of all the sectors of the economy. From a small 1,955.29 points in 1991, the Sensex touched an all-time high of 40,312.07 points on June 4, 2020. Even with the rising taxation on capital gains and investments, India is a country obsessed with cash-driven gold and real estate. These are slowly veering towards investing in a more formal and organized equitable market. Over the past decade, numerous start-ups have budded across the country as young entrepreneurs experiment with investments, technology, and sophistication all side-by-side. The rise of these start-ups has created an ecosystem of new partnerships, venture fundings, along with diversified patterns of consumption in Indian society.

Sources

  1. https://www.ciiblog.in/economy/the-evolution-of-the-indian-economy-since-independence/
  2. https://www.degruyter.com/document/doi/10.1515/9780804791021/html
  3. https://www.dailypioneer.com/2020/sunday-edition/changing-scenario-of-indian-economy–1947-2020.html
  4. https://oxford.universitypressscholarship.com/view/10.1093/oso/9780190128296.001.0001/oso-9780190128296-chapter-13

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Analysis

A look at Bhutan’s carbon-negative economy

An introduction to Bhutan

Bhutan is a small country in the Himalayas, located right in between India and China. It is a bit ironic that India and China are two of the most populated countries on Earth, but there are less than one million Bhutanese. A Buddhist country by constitution, Buddhism plays a central role in Bhutan. Healthcare and education are completely free, and although Bhutan is officially a democracy, the King — who is required to retire at the age of 65 — still plays a central role in Bhutan. These things all make Bhutan unique, but the way in which Bhutan’s economy is structured is also very unique.

What it means to be carbon-negative

Bhutan is the only country in the world that is carbon-neutral. Actually, Bhutan’s economy is carbon-negative, which means that the forests in Bhutan absorb more carbon dioxide (around seven million tons of carbon dioxide a year) than the country of Bhutan produces (only around two million tons of carbon dioxide a year). In fact, over 70% of Bhutan is covered in trees, and their constitution demands that at least 60% of Bhutan’s land will always be covered by forests, making Bhutan a “carbon sink.”

In addition to mandating that 60% of Bhutan will always be covered by trees in the constitution, Bhutan has taken a series of other steps to ensure that its economy will remain carbon-negative, to keep the promise Bhutan made at the United Nations Climate Change Conference in Copenhagen in 2009. These steps include banning log exports, providing free electricity for rural farmers, and using Bhutan’s many rivers to generate hydroelectric power, which is exported to Bhutan’s neighboring countries. This means that Bhutan is not only promoting the use of renewable energy sources within its own borders but also in its neighboring countries.

GDP vs. GNH

Bhutan’s GDP was roughly 2.5 billion US dollars in 2019, but this is not the most important indicator for the Bhutanese government. Instead, Bhutan focuses on “Gross National Happiness,” GNH for short, which is defined as “development with values.” Although economic development is important to the Bhutanese government, sustainable economic growth and ensuring the happiness of their population is equally, if not even more important to Bhutan. With mental health issues on the rise around the world, introducing the concept of GNH to other countries could be an important step. 

Conclusion

Bhutan is unique in many different ways. Although it is a very small country and actually one of the smallest economies in the world, Bhutan has big ambitions for the future. Bhutan is hoping to produce zero net greenhouse gas emissions and to produce zero waste by 2030 and was aiming to export enough electricity produced by hydropower to offset 17 million tons of carbon dioxide. If you are interested, I strongly recommend you to watch the TED talk at the link below (the second source).

Sources

  1. https://www.gvi.co.uk/blog/bhutan-carbon-negative-country-world/#:~:text=Bhutan%20absorbs%20roughly%20seven%20million,millions%20of%20tons%20each%20year.
  2. https://www.youtube.com/watch?v=7Lc_dlVrg5M

Categories
Analysis

The Economic Situation of Italy

Italy’s economic context

In 2020 Italy’s economy was severely affected by the COVID-19 global crisis, in relation to the fact for which this country was the first in Europe to be influenced by the pandemic consequences.

IMF and GDP growths and losses in WEO’s view

The IMF (International Monetary Fund) estimated a GDP (gross domestic product) loss of 10.5% in 2020 after an output contracted by 18% in the first half of the year.

In fact, the rebound of construction and industrial contributions could not offset the loss of other sectors (especially services and tourism, which accounts for 13% of GDP alone), despite government support. In 2021, a substantial carryover effect should have underpined a GDP rebound of 5.2%, followed by further growth of 2.6% in 2022 (IMF’s October 2020 forecast), though the situation is still uncertain under the nowadays time of the pandemic and the tightening of containment measures in the last quarter of 2020.
In its most recent January 2021 update of the World Economic Outlook, the IMF has revised its GDP growth projections for Italy to 3% in 2021 and 3.6% in 2022 (representing a difference from October 2020 WEO( world economic outlook) projections of -2.2% and +1%, respectively).

Government revenues should benefit from the rebound in economic activity in 2021, so that the deficit is expected to decline to 3.4%. The historically-high debt-to-GDP ratio spiked to a worrying 161.8% in 2020, though it is set to slowly decline to about 156.6% in 2022, thanks to nominal GDP growth and more favourable interest expenditure.
Inflation stagnated in 2020 (0.1%) due to downward pressure from oil prices and private consumption, and should remain subdued in 2021 and 2022 (0.6% and 0.9%, respectively – IMF).
 
Main Indicators 2020 (e) 2021 (e) 2022 (e)
GDP (billions USD) 1.00 2.00 2.00
GDP (Constant Prices, Annual % Change) -10.6 3.0 3.6
GDP per Capita (USD) 30 35 36
General Government Balance (in % of GDP) -3.8 -3.4 -2.9
General Government Gross Debt (in % of GDP) 161.8 158.3 156.6
Inflation Rate (%) 0.1 0.6 0.9
Unemployment Rate (% of the Labour Force) 11.0 11.8 10.8
Current Account (billions USD) 59.64 63.21 68.59
Current Account (in % of GDP) 3.2 3.0 3.1
•Source: IMF – World Economic Outlook •Database: October 2020
•Note 1: (e) Estimated Data
•Note 2: The GDP growth projections for 2021 and 2022 (Constant Prices, Annual % Change) were updated by the IMF in January 2021

Agriculture and economics by 2020

Italy is one of the main agricultural players in the EU, being the biggest European producer of rice, fruits, vegetables and wine.

The agricultural sector represents 1.9% of Italian GDP and is reliant on the import of raw materials utilised in agricultural production due to the country’s limited natural resources (Italian imports of raw materials are responsible for more than 80% of the country’s energy). The country has 12.6 million grounds of agricultural land and its main crops include cereals (particularly wheat), corn, barley, rice and oats. Italy is also the first world producer of wine. In order to respond to the COVID-19-related crisis, the Italian government set up specific schemes for the agro-food sector allocating more than € 1.1 billion.
Nevertheless, in the second quarter of 2020 the primary sector recorded a 12.8% decrease compared to the previous quarter (Italian Council for Agricultural Research and Analysis of Agricultural Economics).

Categories
News

Biden Calls for $1.9 Trillion Coronavirus Relief Package

President Joseph R. Biden Jr., who was inaugurated last week, proposed a $1.9 trillion relief package to both help Americans get through the pandemic and to provide extra funding for COVID-19 testing and vaccine distribution across a United States that has been crushed by the virus. His plan calls for $1,400 checks for each person in most households, $400 per week for the unemployed through to December, expanded paid leave, and increases in child tax credit.. This package along with the smaller one released in December would mean that most Americans will be receiving a combined total of $2,000 each. Unlike past packages, all dependent adults, such as college students, will be eligible for payments since Biden has emphasized that he believes that these people, whether they have kept their jobs or not, are in need of help. This portion of the package that directly supports households makes up about half of the plan’s total cost, with much of the other half of it going to vaccine distribution and testing in local and state governments throughout the US. In addition to expanding eligibility, this package will also raise child tax credit from $2,000 to $3,000 for this year as with $600 additional dollars for children under 6 years old. The plan will also provide the poorest households with the full benefits of this. The child tax credit currently provides parents with a credit of up to $2,000 per child under 17 years old on their taxes. Simply put, it means that if you are a parent of two children under 17, you would pay up to $4,000 dollars less in taxes when it is time to pay them. The package will also focus on extending student loan forbearance, which will pause loan payments, provide $350 billion for state and local governments, and dedicate $50 billion to increasing testing and vaccine distribution. Overall this enormous plan covers a lot of issues in the United States that this pandemic has either created or exacerbated. However, this enormous plan is still the starting point for the new president and his attempts to fight a pandemic and an economic recession simultaneously. Mr. Biden has said that he plans to outline another proposal dedicated to economic recovery and combating climate change in February.