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Unit 4 Macro: Focus on India - Economic Growth

Geoff Riley

24th January 2012

This is the first of a short series of blogs focusing on economic growth and development in the Indian economy, Our first blog provides some background data and study videos on India.

Sustained growth and development

India has sustained rapid growth of real GDP for the last two decades leading to rising per capita incomes and a reduction in absolute poverty. Per capita incomes have doubled in 12 years.

The annual pace of expansion in real GDP for India averages over seven per cent and using the Rule of 72, this is sufficient for India’s GDP to double in size every 10 and a half years. India has a high trend rate of growth and the extract refers to India’s supply-side advantages

Data from Timetric.

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GDP growth (annual %), India from Timetric

But India has one third of all the people in the world living below the official global poverty line. It has more poor people than in the whole of sub-Saharan Africa
By way of comparison, India’s per capita income is 1/20th that of the UK

Data from Timetric.

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GDP per capita, PPP (constant 2005 international $), India from Timetric

India appears to have recovered quickly from the global financial crisis. The government and the Reserve Bank of India acted quickly to boost demand during the crisis because their economy is much more dependent than say China on domestic sources of demand rather than exports.

Despite a strong attempt to become an open economy, exports of goods and services from India account for only 15% of GDP although this is set to rise further in the years ahead

Data from Timetric.

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Exports of goods and services (% of GDP), India from Timetric

India has followed a different path of development from many other countries. India went more quickly from agriculture to services that tend to be less tightly regulated than heavy industry. That said there are some emerging manufacturing giants in the Indian economy many of which are achieving increasing prominence on a global scale. An increasing proportion of India exports are sourced from high-technology businesses and industries as India seeks to build and then benefit from new competitive advantages in high knowledge industries.

Data from Timetric.

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High-technology exports (% of manufactured exports), India from Timetric

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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