A Brief Note On India And Its Impact On Its Economy

There is a fierce competition for world dominance as China is poised to overtake the United States as the preeminent world power. China’s growing gross domestic product (GDP) rivals that of the US with economists predicting the Chinese economy will surpass that of the US by 2020 (Morrision, 2014; Strauss, 2013). In 2012, China had a GDP of $8.22 trillion (World Bank, 2014a) experiencing an annual average growth rate of 9.86% between 1999 and 2012 (World Bank, 2014b); whereas the US had a GDP of $16.24 trillion in 2012 (World Bank, 2014a) with an average growth rate of 2.15% from 1999 to 2012 (World Bank, 2014b). More than half of the GDP growth in the past decade can be attributed to labor income growth among college educated employees. Even during economic recession, income growth among college graduates had a positive effect on GDP (OECD, 2012).

Although the total size of China’s economy has grown at an astonishing pace, being the second largest economy in the world by now, its real GDP per capita does not tell the same story. China is still quite far behind most developed countries by this measure. The other problem facing both countries now is growing income

The thousands of technically astute, English-speaking graduates of India’s elite universities are riding America’s outsourcing wave. Blue-Chip companies IBM, Oracle, and Intel have already established a presence in India, as have promising start-ups. India increasingly is landing high-skilled, highly paid positions for engineers, accountants and financial analysts formerly employed in the United States. West Palm Beach-based Ocwen Financial Corp. offers a case study in how companies are cashing in on India's allure. Seeking to cut labor costs, Ocwen has hired hundreds of workers during the past two years in India, where skilled workers are plentiful and wages are low. Ocwen, which once had nearly 1,000 employees at its Palm Beach Lakes

economy experiencing inflation, and a decrease in productivity as these large increases in prices would eradicate most orders by consumers5. This is because in the world of business, staying local will destroy your company. To outsource and offshore presents an opportunity to stay competitive and have the best prices. Granted, the company’s production can stay local on American soil and the product be distributed abroad, but that limits this company and overall gains for those involved in it, including those working5. This is often taken advantage of by companies seeking to save money by paying far less for a worker’s wage than if they worked inside of the United States. The median pay for a standard Information Technology (IT) Support Specialist in the United States is $45,5486 while the median pay for the same job in China is about $7,000 a year and $8,400 in India. This is a problem that needs to be regulated, brought to a higher standard, and challenged in any three of the branches of the U.S. government. However, these job’s sole purpose for being in China and India are because of these low wage costs. The current employees outsourced in China and India would lose their jobs if a decision concerning bringing jobs back to America resulted in the banning of offshoring and outsourcing jobs to these countries. That $7,000 average pay rate in China and $8,400 in India, allocated to about 14 million people amongst the two countries and more, would be catastrophic for all of the individuals and families that depend on this large source of income7. This income, as insignificant and non-survivable as an income in the United States, is of the upmost importance to these people abroad. With the number of unemployed workers in India being an estimated 17.7 million in 2017 and 0.982 million in China, it is

India has been on a growth trajectory ever since the 1990s when it opened its doors to the global economy. Today, India is one of the most competitive third world countries in the world and has among the best annual growth rates in the world. Essentially, globalization in India has grappled the country with a myriad of adaptive challenges as the country struggles to keep up with the international competition. In the push for growth, there has been a need for increased labor both skilled and unskilled. Eventually, India faces the challenge of child labor as more and more children are enrolled as workers in different industries.

In 2006, fifty percent of India’s population was under the age of twenty-five. (Kamdar, 2007, pg. 8) The number of 15-24 year olds, which is the demographic most suited to entry-level work, is nearing 250 million. This is in sharp contrast to India’s largest Asia competitor China, whose youth workforce is declining due to regulated birth rates and a spike in college enrollment. (Youth population chart, NYT, 2015) A larger base of workers for input in emerging markets leads to greater outputs of production, which is important for shifting the production possibility curve outward and building a strong

The economy of China can be difficult to understand and follow; here is an overview on the Nation’s economy. In 1820 China was the largest economy in the world, today it is the second largest. China lifted more people out of poverty than any other country, to where urban areas in China, poverty is eliminated (Project Specialist, Economic Growth and Social Inclusion Initiative, World Economic Forum). China is the world’s manufacturing hub due to the fact that it specializes in labor-intensive and export led production of cheap goods. Many US companies prefer to manufacture in China because the work is fast and cheap. “China is the world’s largest exporter and the second largest importer of merchandise goods” (Project Specialist, Economic Growth and Social Inclusion Initiative, World Economic Forum). By 2030, it is expected that China will once again be the world largest economy.

Rare are the moments in history when a nation suddenly captures the imagination of the world. For India, those rare moments have arrived. The country is achieving a high economic growth of over 8 per cent of its GDP annually, on a consistent basis.

The growth in the developing nation’s economy over the past 3 decades was heavily dependent on its low cost advantage compared to those of other countries. During this period of growth, foreign companies flocked to China to set up production facilities and factories to capitalize on this cost advantage. Raw materials are shipped to China, where factory workers build the final products and export them out to various countries (Wassener 2014).

Beginning in 1980 when China entered the global market, it experienced remarkable growth in terms of GDP and net output. Much of its growth is attributed to its large amount of exports, particularly within the manufacturing industry. As a result, its GDP per capita increased significantly and the country as a whole became considerably wealthier. More recently, however, demographic changes and increased wealth inequality are hindering its growth. Between 2008 and 2015, the World Bank estimates GDP growth decreased from 9.623% to 6.9%. While its growth remains quite strong in comparison to other developing economies within its echelon (BRIC countries), its increasingly stagnant growth evokes concern for the future of its economy and prospects.

The article chosen is an informative demonstration of how China has emerged as a leading economic power. In just a few short years China has managed to position itself as a manufacturing leader in many of the industries that are most heavily needed by the other nations throughout the world. How China has done this is a remarkable story and provides a compelling reason for choosing an article about their success as a topic for this paper. The article not only highlights China's success but also provides insight into how China is becoming a partner in the world economy much like the United States did in the 50s and 60s and how readily the rest of the world is accepting China's participation.

Throughout the past decade, China has become a ‘Manufacturing Powerhouse’ (Eloot, 2013), low salaries plus a strong supply base, makes an equation for ideal platform for exports, which china defiantly benefited from. In 2011 China became the worlds largest producer of manufactured goods and still remains to be, ‘Factory Asia now makes almost half the world’s goods’ (The Economist, 2015). This has had a positive domino effect upon the wider economy in China, living standards have doubled and the countries GDP per captia has doubled in the last 10 years ‘an achievement that took the UK 150 years to do’ (Eloot, 2013) This

India, a federal republic country, was under the colonial rule of British for around 200 years, which leads a large extent of economic resources loss. This changed till 1990s since the initiation of economic reform policies in 1991. On the other hand, China, a communist country, adopted the reform policies in 1978 which drove the economic a dramatic growth. Figure 1 indicates the development trends of these two countries in the past decades. We can easily figure out the difference between them is barely until 1990, after that, the growth rate of China is extremely larger than that of India.

Globalization seems to provide impressive benefits, but some benefits prove to be dubious. In India, for the year 2010, 96.9% of the population made incomes of less than $5 a day (Poverty in India). The situation is just as dire in the local provinces of China, with 71.6% of individuals making less than $5 a day (Poverty in China). In recent years, the large trade surplus that China has accumulated stimulates an urban industrial sector that no longer creates new jobs while at the same time restricting the government's ability to increase spending to improve services and address disparities(Poverty in China). Automation in the manufacturing and agriculture sectors generally follows the appearance of multinational corporations. This lessens the need for unskilled and uneducated workers thus raising unemployment levels. Globalization, in general, is insensitive to the cultural influences that surround it; the economic structure for globalization prefers to amass cultures and indigenous civilizations into a homogenous existence, in the name of equality and fair-trading.

For this research report, I want to further the understanding of the Indian attitude, external opportunities and threats of entrepreneurship, and how the International world and India is progressing with entrepreneurs. I have an interest in being in working internationally, after gaining more experience in the corporate/sales area of a company, which is one of the reasons I chose to explore this topic on an international level. This paper will cover some basics of entrepreneurship in India.