Economic growth a global trend……………

 

MS Swaminathan wrote an interesting article in the Times of India on 16/3/08. The article basically spoke about the high growth rates that India and many other countries experienced for about a year or so. He argues that the sudden high growth rate that we experienced is not only because of the government’s economic policies and efficiencies; it was actually a global trend which was originating from America. We know at the moment most Americans are living beyond their means, this is reflected in the sub prime crisis, the housing market slump and the mounting losses of financial companies due to increasing number of loan defaulters.  The demand for goods and services had tremendously increased for the past 2 years, which resulted in America having a trade deficit of $700 billion. China being the biggest exporter of electronic goods to America and India exporting various other goods and mainly services, thrived because of this one factor of excessive consumption in America. And because there was huge demand for goods there was automatically a huge demand for raw materials and semi finished goods which came from Africa and other less developed countries.  Hence even these countries immensely benefited. Therefore Swaminathan says that every country remotely associated with America enjoyed high economic growth, the African countries which were growing at 3% also started growing at 5%, similarly in India economic growth was 6% to 7% for many years it suddenly became 9%. If the above reasoning is true, then we have to ponder over a very important question, what is going to be the state of the Indian economy if there is a recession or slow down in the US economy which is very likely. There has already been a dip in the industrial production rate for the last 3 months. And the industrial production also determines the government’s collection of the excise duty. As it is as per the Union budget 2008 excise duty has been reduced from 18% to 16%, combine this with a fall in industrial production and it results in a loss of revenue for the government.   

 

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4 comments on “Economic growth a global trend……………

  1. Hello there. I was sent a link to your blog by a friend a while ago. I have been reading a long for a while now. Just wanted to say HI. Thanks for putting in all the hard work.

    Jennifer Lancey

  2. Economic growth rate cannot be considered to indicate social development. In Andhra Pradesh, Visakhapatnam district has highest rate of GDP but that economical development is mostly concentrated on Visakhapatnam city and sub-urban areas. And also extreme poverty is seen in tribal areas of the same district and people often die with diseases as there are no enough hospitals in rural areas and they are unable to afford for better treatment in hospitals in towns. Visakhapatnam city is international tourist destination and well connected with flight services but more than a thousand villages in the district are not connected with busses and most of those villages are tribal hamlets. Global capitalism made city life more luxurious but village life became more horrible.

  3. I agree, that economic growth is just one of the indicators of how the economy is performing. Moreover economic growth benefits only a certain a certain segment of the population. The second aspect is that global capitalism tends to increase the urban rural divide, because all resources tend to get diverted towards the urban areas. Even with regards to the stock index, whenever a particular area is hit due to natural calamity, the stock index of that place invariable goes up, supposedly showing some kind of progress, but its actually disaster which is reflected.

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