Page 10 - DECO303_INDIAN_ECONOMY_ENGLISH

Unit 1: Nature of Indian Economy

rural poor are yet to receive any tangible benefit from the India’s economic growth. More Notes
than 78 million homes do not have electricity. 33% (268 million) of the population live on
less than $1 per day. Furthermore, with the spread of television in Indian villages the poor
are increasingly aware of the disparity between rich and poor.
7. Large budget deficit: India has one of the largest budget deficits in the developing world.
Excluding subsidies it amounts to nearly 8% of GDP. Although it is fallen a little in the past
year. It still allows little scope for increasing investment in public services like health and
education.
8. Rigid labour laws: As an example Firms employing more than 100 people cannot fire
workers without government permission. The effect of this is to discourage firms from
expanding to over 100 people. It also discourages foreign investment. Trades Unions have
an important political power base and governments often shy away from tackling
potentially politically sensitive labour laws.

Self Assessment

Fill in the blanks:

5. …………………… has one of the largest budget deficits in the developing world.
6. Many of India’s rural poor are yet to receive any …………………… from the India’s
economic growth.

Notes Punjab State is predominantly an agricultural state with two-third of its population
directly or indirectly dependent on agriculture. And thus helps in increasing the Indian
Economy.

1.3 India — How Bad can Things get in India?

Experts say a full-blown financial crisis like the one that devastated the so-called “Asian tigers”
in 1997 is unlikely.
But some of India Inc’s marquee names are in big trouble.

“You don’t have the kind of [foreign] debts you had during the Asian Financial Crisis,” Franklin
Templeton’s Mark Mobius told GlobalPost. “The balance of payments [problem in India] may
be similar, but it’s a different scenario. It’s a matter of losing an opportunity rather than being
hit by incredible debt that you can’t pay.”
During the Asian financial crisis of 1997, Thailand’s short-term foreign debt eclipsed its foreign
reserves by nearly $10 billion, before it went to the International Monetary Fund for a bailout.
Indonesia’s forex reserves were only enough to cover about half of its short-term foreign debt.
South Korea’s cache of dollars dwindled to a measly 25 per cent of its $100 billion in short-term
borrowings – enough to cover just two weeks of imports.
Prime Minister Manmohan Singh sought to reassure the nation that India is not facing a similar
situation, in the lead up to the release of official growth figures for the quarter ended in June and
the fiscal deficit figures for July later in the day.
“Foreign exchange markets have a notorious history of overshooting. Unfortunately this is
what is happening not only in relation to the rupee but also other currencies,” Singh said in a
speech before the parliament.

LOVELY PROFESSIONAL UNIVERSITY 5