This is the most important factor that affects any country’s economics. The problem with India in this regard is that India is the largest democracy in the world with a population of over a billion people. Most of the citizens of India are ignorant of good economics and consequently demand from the political leaders decisions and policies that are detrimental to the health of the countries economic health. The political bosses in the meanwhile are more than happy to oblige with populist policies as they fetch them votes thereby letting them remain in power for the next term too.On the other hand countries like China and many other countries that either are dictatorships or are communist countries have an inherent advantage in this regard as they can take tough decisions as advised by the economic gurus and thus achieve higher growth rates for their economies.
Socio-Cultural Factors The socio-cultural factors existing in any country has a great deal of impact on the growth of any country. In India’s case, the problem is that corruption is so deep-rooted that it has become a part of the way of doing business dealings.This affects the economy a great deal negatively. There are lots of factors within socio-cultural factors which effect economic growth. Trade- unionism, work-culture, education levels, work- ethics etc.
are some of them. Technological Factors How advanced a country is technologically also has a great deal of impact on its economic growth. It affects a country’s productivity and also the quality and consistency of quality of its output.In case of India, it is rapidly adapting to the latest technologies and in some cases is even ahead of most other advanced countries in putting new technologies in place. E-governance is one of the areas where India has taken huge strides. The population too in general is fast becoming computer literate, Internet savvy, and extremely willing to learn the latest. This is attracting some of the biggest names in the world to put up shop in India thus creating jobs and wealth for the country.
Legal Factors This is one of the biggest areas of concern for most Indians.The legal system in India does deliver good judgements, most people feel that justice is done in the end but it just takes too long, and the process so cumbersome. India does need to reform the legal set-up in order to deliver speedy justice, as “justice delayed is justice denied”. For most companies involved in research in India, and also most foreign investors one of the other major areas of concern is the patent and copyright law, which do not meet the WTO standards.
India has to bring in new laws by 2005 according to the negotiated agreement it has for entry to WTO.The enforcement of the laws would then become an area of concern after the laws are in place. Environmental Factors India is blessed with snow-peaked mountains, desserts, rain- forests, lush-green valleys, gigantic rivers etc. Due to mismanagement of its natural resources, faces drought in many parts, while at the same time, faces swollen rivers and floods in others.
Dams and other infrastructures have been built without much regard to the environment thus wrecking havoc and creating hardships for the people.Many countries do not do certain kinds of trade with India as they think that India is not taking adequate protection for its environment during production of such goods. Economic Factors In order to find reasons how India can achieve a higher growth rate, we must begin by first having an in depth look at the past performance of India in the last few years and then determine how India can improve its performance over the next few years. Every country, firm, person or any other entity has a Production Possibility Frontier.India has to shift the PPF curve towards the right in order to achieve further economic growth. In order to do so India has to be able to exploit its human, natural, scientific resources etc. Each of the following factors will be analysed for what Indian Govt should or should no do in order to shift the PPF towards the right. Analysis of Past Performance India’s economic performance over the last few years has drawn a lot of admiration.
It is said that we are among the fastest developing economies in the world.Unfortunately this admiration comes only from the optimists. The others continue to believe that India’s growth performance has been way below par i. e. instead of growing by 8% to 10%; we seem to be struggling at 6%. A look at India’s income statement over the last nine years brings out some of the reasons why we continue to under perform. Take the composition of expenditure for example. In FY94, interest expenditure accounted for 49% of all revenues of the government!!! At the end of the decade this ratio was put at 50%!!!With half of the resources diverted to servicing debt, little has been left to spend on infrastructure and social services, both of which are essential for strong long-term growth.
The corresponding ratio for subsidies was put at 17% and 14% respectively. And if one were to factor in the expenditure on administration, all (or more than) the government’s revenues would have been accounted for! As evident, this scenario has remained the same over the last 9 years, and as proposed in the budget for FY03, will persist in the coming year, and may even be the case for some time to come.