Effect of Global Challenges on India

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India is an expansive country estimated to cover 1.27 million sq. miles. This is about a third of the US land coverage. The administrative capital is New Delhi with a population of 12.8 million. Other major commercial cities are Mumbai, Bombay, Chennai, Calcutta, Bangalore, and Hyderabad. The entire population is 1.17 billion people with 29% of them living in urban areas. India is governed by a federal government headed by New Delhi (US Department of State, Par2).

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The Indian GDP stands at $1.21 trillion. In recent years, the economy has been experiencing a high growth rate of above 6%. The three major sectors driving the economy are agriculture, industry, and services. Agriculture accounts for 18%, industry accounts for 29%, while the service sector is the largest and accounts for 54% of the GDP. The country engages in major export trade with the most important trade partners being China, the US, U.A.E, EU, Japan, and Russia (US Department of State, Par3).

The economy is the 12th largest in the world and is only number three in Asia being led by Japan and China. Since 1997, poverty levels have reduced by about ten percent, and more importantly, the middle class will grow ten-fold by the year 2025. Some notable hindrances to smooth business operations are foreign investment controls, cumbersome bureaucracy, and corruption. However, major economic reforms in areas such as intellectual property rights, monetary and fiscal policies, reduction in tariffs, and other controls continue to propel the economy.

Recent reports from the corporate world depict encouraging levels of optimism. Business confidence remains high and a sizeable number of companies continue to beat expectations.

At the moment, India’s economic development remains robust. It remains the second-fastest growing economy after China. The good economic performance is driven by the performance of three major sectors: Agriculture, trading services as well as industrial production. A critical point of consideration is that among the three sectors, agriculture, which employs the largest percentage of the population, earns the least. This presents obscene disparities between the poor and the rich despite their excellent economic performances.

Global challenges

Throughout the world, some common challenges continue to elicit discontent. The need to ensure that people are adequately empowered socially and economically is the major driving force, which guides the actions of a vast majority of governments in the world.

In the year 2000, world leaders came together and developed the popular eight-point millennium development goals. The goals reflected the importance of socio-economic improvement of social welfare.

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A very important twist of the social-economic conditions is the high inequalities prevalent. India remains one of the most economically unequal countries. New Delhi and Punjab have very low poverty levels while states such as Bihar and Orison have poverty rations as high as 60%. The main cause of the inequalities is the difference in the occupations in the different states. While in New Delhi the people are mostly engaged in the manufacturing and service sector while those in Bihar largely engage in Agricultural activities, which have dismal returns, which fluctuate to a much larger degree in comparison to manufactured goods and service products. About 78% of the Indian population remains poor. Worse still, 40% of the world’s poor are said to be living in India. This is a big contrast with the reports that India is an emerging economic superpower.

The country has managed to maintain an economic growth rate of beyond seven percent over the past five years. Maintaining further growth is the current challenge facing the economy. Being a huge country with a multiplicity of factors that determine growth, understanding and accurately implementing efficient economic stimulators is continually proving to be a difficult task especially in the face of the global recession.

As mentioned above, India is a large country with the second largest population from China. Building sufficient developmental trends led to the promotion of export-led economic growth. The high economic growth witnessed as resulted from the growth of both the manufacturing sector and more importantly, the services sector. High literacy rates coupled with cheap labor as well as technological advancement have seen the growth of a vibrant service sector whose customer base is largely composed of companies in the western nations. Again exports of products like Zinc, steel, and sugar lead with the major destination being the US. Statistics show that in November 2006 Indian export revenues were up 57% in comparison with the previous year and stood at an estimate of US$9.68 billion in comparison to the previous year whose November value stood at US$ 6.16 billion (Marien, 2009, Par 4).

Technology centers such as Chennai and Bangalore are home to some super-rich Indians who can drive expensive cars and afford expensive homes. The poor are bought off and pushed further from these cities to pave way for spas, five-star hotels, golf courses, and luxury townships. This is happening in a country where 78 million homes located in rural areas cannot access electricity. The recent high economic growth rates witnessed in the recent past seem to have done little to change the situation. Analysts believe that the high level of inequalities in India threatens the long-term security of the nation (Trade chakra. Poverty in India, 2004).

India is a member of the World Trade Organization. The organization is aimed at using trade as a tool for economic development, especially for developing economies. This being the case, India is set to be a beneficiary of trade talks under the WTO. It is however increasingly becoming clear to analysts that the effect of membership to the WTO is not as intended. The developed countries are using the WTO to further suppress the developing countries. A case in point is in Agriculture. As the agreements of WTO seek to ban subsidizing agricultural production, developing countries like India have a problem increasing outputs to feed the increasing population while the developed nations continue to heavily subsidize their farmers. However, there are some benefits with fewer trade restrictions for members of the WTO. The country can successfully pursue the export-oriented strategy to development since export products can access larger markets (Sujoy, 2009, Par 7).

The country is also a member of the ASEAN a regional agreement with the neighboring countries which has seen the scrapping of a host of tariffs for goods circulating in the region. India being a comparatively advantaged country is better able to export products to the neighboring countries hence improving revenues. Raw materials can also be cheaply sourced around the region without paying for duties. These factors have boosted the efficiencies in production in the region hence improving the international competitiveness of Indian exports.

Gender disparities prevalent in India have grave implications. Dependency rates remain some of the highest in the world. The men who are working cannot substantially save to accumulate wealth and pull out of the cycle of poverty. The implication is that the poor remain poor due to self-limitations.

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Environmental concerns coupled with energy needs to drive the economy remain a major challenge for India. The expectation that the Indian population will soar to the level of over 1.26 billion by the year 2016 is worrying. The pressure on natural resources is expected to increase even further. Scarcity of water, exhaustion of the soil, air and water pollution, and deforestation, which already affect many areas in the country, will increase. The country has however made drastic steps in several areas. Draught is more regular and the already poor masses get even poorer due to low outputs. The government is however making solid attempts to stem the overreliance on the scarce natural resources. Nuclear power generation is under development as an alternative to hydro and geothermal power sources, which are not sustainable. However, despite the efforts, pressure continues to mount on the limited resources. It is also proving to be very expensive to acquire the requisite technologies and equipment in a bid to employ environmentally friendly production processes (Azad India Foundation, 2009).

The economic might of the Indian Economy has booked its leadership a place in the G20 summit. The involvement in the resulting international politics is raising unique challenges for the country. Being a country from the East, the expectations by the neighbors has been that the country would undoubtedly be in support of the Asian and other Eastern countries in all matters of international politics. However, the economic interests of the country have hindered this king of connections with the country. This means that the country is viewed by most of the immediate neighbors as an enemy instead of an ally. The continued tensions with Pakistan only serve to expose the country to attack from the anti-western movement based in the east.

In this light, the development of sound foreign policies has been a challenge. The competing needs for security as well as the need to achieve economic development by amassing resources and harnessing wealth creation create grave challenges for India. Disagreements with neighbors have seen heightened security threats. The latest was the bombing of a Mumbai hotel by militants from Pakistan. On the other hand, India cannot contemplate cutting ties with the west. This is because the west is the greatest source of the scarce capital that is scarce in India. Once foreign capital flows into India, it employs abundant labor hence reducing unemployment levels (Sarvalingam & Sivakumar, 2009, Par 3).

On the other hand, the west is a very lucrative market for Indian products. The high incomes in countries like the US offer expanded market opportunities for Indian manufacturers and service providers. It thus becomes very difficult for a country in search of more opportunities to engage in offensive talk or actions against the source of the developmental requirements.

The global recession is a phenomenon, which results in a slowdown of economic activities. The resultant effect is an increase in the level of unemployment. The ongoing economic slowdown, which started in the US and other western countries, has not spared India. The years 2007 and 2008 have been the worst. The interconnectivity and globalization processes have exposed the Indian economy to the effects of the economic recession. The indirect effects come in the form of lost markets as incomes in the west. This causes a reduction in demand for goods including those from India. The reduced demand for goods results in the loss of employment in the Indian economy.

A different aspect of the effect of the global recession has been in the flow of capital. With bleak global prospects, it has become less appealing for investors to move in and invest in India for export purposes. The slowed inflow of funds results in a reduction in the development of opportunities for employment for the local population. The lower business opportunities led to the drastic reduction in share prices, which in effect means a reduction in the investor’s value. Such effects reduce the confidence of investors, which could have a long-term effect on the future growth of the economy.

The most critical catalyst to development is still neglected In India. Analysts believe that India is about 20 years behind schedule in infrastructural development. The major cities are overly congested; workers have to spend hours on the never-ending traffic jams, companies have to spend millions in ensuring effective mobility of staff members, prices in real estate have skyrocketed in the past few years. All these factors have the potential to derail the much-needed economic growth for the economy.

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Even as India charts the path towards becoming an economic power, other nations are on the same track. Countries like Brazil, China, Mexico, South Africa as well as some Asian countries like Malaysia and Singapore are also on the rise. The threat here lies in the fact that most of these countries have applied similar tactics to catalyze economic development. There is heavy reliance on foreign direct investments as a source of capital. Also, the tourism industry is a significant contributor to economic development. This implies over-reliance on finite resources from the west. With the many rising economies, competition is heightened and countries such as India have to offer more incentives to increase their share of these resources an act that may not favor the local population.

Despite the numerous social, political as well as economic challenges facing India, the country remains on the path to prosperity. The confidence expressed by investors surpasses all expectations. The government is focused on improving the business environment for investors to continue flowing in. The political leadership has adopted a non-biased stand on international matters in a bid to establish a balance between economic development needs and security issues. Relationships with Russia as well as the US have been warm. Challenges across the border in countries like Myanmar continue to pose threats. On the economic front, the poor feel marginalized and denied their rightful share. This is a major concern for the authorities and the corporate world.

More focus should now be directed to the redistribution element of economic development. A lot still has to be done in alleviating the extreme poverty levels rampant in most rural areas. A critical function in improving the economic status of the rural poor is ending the over-reliance on agriculture by the vast majority of the poor. The religious and cultural aspects that define gender inequalities also need to be comprehensively addressed. Environmental concerns should be addressed in two parallel ways. First, the population explosion should be checked by improving the educational standards of girls as well as investing in adult education especially on matters concerning reproduction. Secondly, efforts to establish alternative and greener sources of energy should be sustained. Nuclear energy has emerged as one of the best alternatives to hydroelectric power due to its sustainability. Membership to ASEAN continues to improve the cooperation among the Asian countries on the economic, political, and security fronts.

Reference List

Azad India Foundation, 2009. Poverty in India. Web.

High Maternal Mortality Rates in India. 2005. Web.

Marien, M., 2009. Global Challenges for Humanity. Web.

Mukerji, A., 2006. Social Inequality Threatening India’s Economic Stability. Web.

Sarvalingam, A., & Sivakumar, M., 2009. A Study About Poverty, Health, Education And Human Deprivation In India. Web.

Sujoy, D., 2009. India grapples with high maternal death rate. Web.

Trade chakra. Poverty in India. 2004. Web.

US Department of State. Background Note: India, 2009. Web.

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