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Emerging economies case study - India

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Introduction

´╗┐Characteristics of Emerging economies countries : 1. low-income 2. rapid-growth 3. use of economic liberalization as their primary engine of growth. 2 groups: 1. developing countries in Asia, Latin America, Africa 2. the Middle East and transition economies in the former Soviet Union and China. Emerging economies are countries that GDP per capita is lower than developed countries. However, they have a rapid growth, their standard of living and their economic structure converge towards those of developed countries. The number of people living in high growth economies or in countries with per capita incomes at OECD levels has increased fourfold over the last 30 years ? from 1 billion to 4 billion, according to the Growth Commission. The rapid integration into world markets by six of the largest non-OECD economies (Brazil, Russia, India, Indonesia, China and South Africa, together known as the BRIICS) was an important component of globalisation during the past two decades. India GDP Growth Rate The Gross Domestic Product (GDP) in India expanded 7.7 percent in the second quarter of 2011 over the previous quarter. ...read more.

Middle

The main factors behind this booming emerging market are the economic liberalization and the perfect competition market, the high standard of living and per capita income, the development of medical facilities and infrastructure, the increase in foreign investments and so on. Over the few years, there has been a significant growth of the Indian market which has resulted in the high Gross Domestic Product (GDP). The average annual growth rate ranges between 6 to 7 %. The growth rate of GDP was around 6.7 % during the financial year 2008-09 Problems Facing Indian Economy 1. Inflation. Fuelled by rising wages, property prices and food prices inflation in India is an increasing problem. Inflation is currently between 6-7%. A record 98% of Indian firms report operating close to full capacity (2)With economic growth of 9.2% per annum inflationary pressures are likely to increase, especially with supply side constraints such as infrastructure. The wholesale-price index (WPI), rose to an annualised 6.6% in Janu 2007 (1) ...read more.

Conclusion

If they are dependent on rising property prices it could be problematic. Furthermore if inflation increases further it may force the RBI to increase interest rates. If interest rates rise substantially it will leave those indebted facing rising interest payments and potentially reducing consumer spending in the future 6. Inequality has risen rather than decreased. It is hoped that economic growth would help drag the Indian poor above the poverty line. However so far economic growth has been highly uneven benefiting the skilled and wealthy disproportionately. Many of India?s rural poor are yet to receive any tangible benefit from the India?s economic growth. More than 78 million homes do not have electricity. 33% (268million) 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. (3) 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 ...read more.

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