Indian Economy

As we had often come back to discussing economic benefits/impact of sports I thought it was about time for an economic discussion forum.
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kujo
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Re: Indian Economy

Post by kujo »

PKBasu wrote: Wed Sep 28, 2005 6:02 am
puneets wrote:
PKBasu wrote:Gross National Product = Gross Domestic Product + Net Factor Income from abroad
Shouldn't we subtract the money that intl. firms make in our county ?

Edit- maybe that's what u mean by 'Net'.
Factor income from abroad can be wages, rents, interest and investment-income earned (by Indians) abroad and remitted home. To get the net figure, from this one subtracts wages, rents, interest and investment-income earned by foreigners in India and remitted abroad.
This post is the earliest reference to GDP in SI forum. I found the below definition more clear / easy to understand... :)

C is actually consumer spending,
I is investments done by businesses (and people) in machines, buildings etc.
G is govt spending on healthcare, education, infrastructure, military etc.
NX is (Exports value - Imports value) of goods and services.
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Re: Indian Economy

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This graph shows the GDP growth rate of two countries in the past 45 years. You see some big gaps now and then, but mostly they run in parallel with China having a consistently higher GDP growth rate than India. But this chart is not as impacting to view as the next one....
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Re: Indian Economy

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Here you can see the impact of those GDP growth rates on both countries' economies. Before 1980, they both had the same size of economy. But since the early 1980s, China started getting a leg up, and never relented in its pursuit of economic growth - year over year.

Few things to keep in mind:

1. Often times the government policies are a hindrance to economic growth - especially true in poorer / underdeveloped nations. If they (bad policies) get out of the way, automatically a nations economy grows at a fast clip to catch-up with it's natural position / size.

2. The benefit of compounding growth. A sustained 8% growth year over year in GDP - will double your economy in 9 years or less. Between 2001 and 2007, China doubled its GDP with a sustained 10% plus growth rate.

3. What happened in the early 1980s in China, while India was still happily celebrating its' coming out party with an Asiad games in Delhi? :)
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sanjay5goel
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Re: Indian Economy

Post by sanjay5goel »

In the long term in terms of civilizations (which is what really matters), all this economic growth blah blah is simply hogwash...

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Hare Krishna!
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Re: Indian Economy

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Not really hogwash. A nation's economic growth (or the lack of it) affects people in tremendous ways.

A relevant example is the eradication of "extreme poverty" in China in these past few years. While India continues to have that!!

What is extreme poverty? - If a household lives on less than Rs.34 per day, that is considered extreme. Both countries still have regular poverty, but the extreme has been eliminated in one.
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Re: Indian Economy

Post by arjun2761 »

Fully agree! Economic growth makes a big difference to the lives of many.

While still very low, the standard of living of most Indians is quite a bit better than it was 30-40 years ago. Hopefully, the gap between India and China will narrow further given the higher growth rate in India now and the fact that our population is younger....
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Re: Indian Economy

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What happened to the YouTube video link I had posted 2 posts above. Can't see it now 😖
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Re: Indian Economy

Post by jayakris »

Not the right thread to report this... Anyway, Abhijit Banerjee, born in Kolkata and currently a professor at MIT, just got the Nobel prize in economics with Esther Duflo (also a professor at MIT, who was Banerjee's PhD student and is his current, 2nd, wife, as per his wiki page) and Prof. Michael Kremer of Harvard. For their work on poverty. A lot of Duflo's work has been in India.
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Re: Indian Economy

Post by prasen9 »

India has the highest corporate tax rate of 48% Source. I presume this is curbing growth. It would perhaps be better to lower the taxes but broaden the base. Are there any efforts to do this?
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Re: Indian Economy

Post by PKBasu »

That is old news. India cut the corporate tax rate to 22% (or an effective rate of 25% after surcharges) a year ago. For new manufacturing units, the effective corporate tax rate is 17%.
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Re: Indian Economy

Post by prasen9 »

Thank you PKB. I had thought I had heard about something in the works but had not heard it is done. Appreciate the pointer. Is there any evidence that "new manufacturing units" are extra-good for the economy although in theory I understand that manufacturing needs parts, etc. and that leads to a "trickle down" of economic activity?
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Re: Indian Economy

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The incentive to new manufacturing units is to encourage new investments (creation of additional capacity).
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Re: Indian Economy

Post by prasen9 »

Maybe it makes sense. But, I am not convinced. If a factory is expanded to double its size, it will generate a lot of new jobs. Will it be counted as a "new manufacturing unit"? If not, and if the margins make sense, then the firm actually be encouraged to build another new site beside the existing factory instead of enlarging it. Is it the new construction we are after? Because perhaps if the unit was enlarged, the company would have been more efficient and workers would be more integrated. Now, we are forcing them to do something a bit unnatural by giving them incentives to do so.

Also, seems like we want a "manufacturing unit". Are we really going to compete in the manufacturing market? Why not incentivize someone building a new hospital? Our healthcare infrastructure is decrepit. Or a private toll road? Or a bank? Or a software company? Etc.

Not clear to me as to why this favoritism. But, then, I am not an economist. I do see people across the world are chasing manufacturing. Is it old-style thinking? Or does manufacturing actually provide a dividend not matched by any other industry? Thanks for engaging.
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Re: Indian Economy

Post by Sin Hombre »

Who is chasing manufacturing? Trump talking about it has not moved the needle.


I do not understand why India Inc doesn't invest heavily in manufacturing in Vietnam?
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Re: Indian Economy

Post by PKBasu »

India is the world's second-largest manufacturer of steel, aluminium, and cement, the largest tractor manufacturer (M&M being the largest company worldwide), the fourth-largest manufacturer of cars and refined-oil, the ninth largest producer of chemicals. So India is already a significant manufacturing nation (far ahead of Vietnam in all those industries, for instance).

One of the problems in all these industries is that China has created massive overcapacity, because its companies/ manufacturers are not subject to normal market disciplines (eg, they have unlimited access to credit if they are state-owned or -linked). India is a very significant manufacturer and needs to figure out how to persuade the world to stop China's rampant capacity creation.

Where India has really missed the boat is in labour-intensive manufacturing -- textiles, garments, shoes, toys, processed food. Ironically through most of recorded history (apart from the past 2 centuries), India was the world's largest producer of textiles and garments. Reforming the labour market is the key to India manufacturing many more labour-intensive products (and also tapping into electronics manufacturing, another area where India badly lags Vietnam -- which has gained much more from the ongoing shift of manufacturing away from China).

The reason why manufacturing is important is because it creates millions of higher-productivity jobs than subsistence agriculture. See my article: https://www.sundayguardianlive.com/busi ... ic-reforms
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