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ECONOMIC

GROWTH
WITH THE
EQUITY

PRESENTED
BY
ANMOL VERMA
anmolverma24@yahoo.co.in
anmolverma24@yahoo.co.in
Economic growth
• Economic growth is a term used to
indicate the increase of total GDP.
It is often measured as the rate of
change of gross domestic product
(GDP). Economic growth refers
only to the quantity of goods and
services produced; it says nothing
about the way in which they are
produced.
anmolverma24@yahoo.co.in
The World Economic growth

• Total GDP (2008): $70T


• Population (2009 est.): 6.8B
• GDP per Capita: $10,000
• Population Growth: 1.17%
• GDP Growth (2008 est.): 3.8%

GDP per capita is probably the best measure of a country’s well being

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Note. However, that growth rates vary significantly across
countries/regions. Do you see a pattern here?

Region GDP % of World GDP Per Real GDP


GDP Capita Growth

United States $14T 20% $47,000 1.3%

European Union $15T 21% $33,000 1.0%

Japan $4.3T 6% $34,200 -.4%

China $7.8T 11% $6,000 9.8%

India $3.2T 5% $2,800 6.6%

Ethiopia $66.3B .09% $800 8.5%

anmolverma24@yahoo.co.in
Currently, GDP per capita in the US is around 8 times that in China. However,
at the current growth rates, that will shrink to a factor of 1.5 over the next two
decades!

United States
$47,000(1.013)
20
GPD/Capita: $47,000
GDP Growth: 1.3%
= $60,853

China
$6,000(1.098)
20
GDP/Capita: $6,000 = $38,922
GDP Growth: 9.8%

anmolverma24@yahoo.co.in
At the current trends, the standard of living in China will surpass that of the
US in 25 years!
Per Capita Income

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As a general rule, low income (developing) countries tend
to have higher average rates of growth than do high
income countries

Income GDP/Capita GDP Growth


Low $510 6.3%
Middle $2,190 7.0%
High $32,040 3.2%

The implication here is that eventually, poorer countries should


eventually “catch up” to wealthier countries in terms of per capita
income – a concept known as “convergence”

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Some countries, however, don’t fit the normal pattern of development

Zimbabwe Macau (China)


GDP: $2B GDP: $18B
GDP Per Capita: $200 GDP Per Capita: $30,000
GDP Growth: -12.6% GDP Growth: 15%

It current rates, Per capita income is Macau will quadruple to


$120,000 over the next decade. This will make Macau the
wealthiest country in the world. Over the same time period, per
capita GDP in Zimbabwe will drop by roughly 75%to $52!!!

anmolverma24@yahoo.co.in
Elements of economic
Growth
• Poverty Reduction and increase in
quantity and quality of employment
• Agricultural Development
• Social Sector Development
• Reduction in regional disparities
• Protecting the environment

• anmolverma24@yahoo.co.in
Trends in Poverty (%): India
Year Rural Urban Total
1973-74 56 49 55
1983 46 41 45
1993-94 37 32 36
2004-05 28 26 28

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anmolverma24@yahoo.co.in
• “reduce poverty, eliminate hunger,
and raise the standard of living of
the population…”
Declaration of Nuevo León

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Employment
Sector 1961 2004-05

Agriculture 75.9 56.4

Industry 10.6 18.2

Tertiary 12.4 25.4

Total 100.0 100.0

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Problems in Employment
• Share in Output and Employment of different sectors
• Agriculture: 20% in GDP, 57% in Employ.
• Industry: 23% in GDP,18% in Employ.
• Services: 57% in GDP, 25% in Employ.
• There are 458 million workers in India in 2004-05
• Out of this 423 million workers are
informal/unorganised workers (92%).
• The share of employment in manufacturing in Malaysia
is 50%, in Korea 62%, in China 31%. On the other
hand, the share of employment in manufacturing in
India is only 12%


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Agriculture
--Deceleration in growth from 3.5% during 1981-97 to 2%

during 1997-2005. Decline in yield growth.


• -- Land and water problems, vulnerability to world
commodity prices, farmers’ suicides, 45% of farmers
want to leave agri but no where to go. India currently
produces about 50 million tonnes of fruits and 90 million
tonnes of vegetables. Only 2% of these are processed
as against 23% in China, 78% in Phillippines, 83% in
Malaysia.
• Half of those engaged in agriculture are still illiterate and
just 5% have completed higher secondary educ.
• Even in 2004-05, around 60% of rural male workers and
85% of rural female workers are either illiterate or
educated upto primary level.


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Social Development
• In social sector, significant achievements in
education and health
• However, Human development index rank is
127 out of 170 countries.
• Slow progress
• Significant regional, social and gender
disparities
• Low level and slow growth in public
expenditures particularly on health
• Poor quality delivery systems
• Privatization of Health and Education
• anmolverma24@yahoo.co.in
Regional Disparities
• Per capita income : Highest per capita income
Rs.16,679 in Punjab; lowest per capita income
state Rs.3557 in Bihar
• Female literacy varies from 33.6% in Bihar to 88%
in Kerala
• In general, richer states grew faster than the poorer
states.

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Environment
• Degradation of land, water. Increase in pollution levels
• Challenges of climate change.

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What Should be done to improve
inclusive growth?
• Equity is important for economic development
• Agricultural Development
• Economic reforms are important. But macro-poor
policies (fiscal, trade, financial, monetary etc.)
should have pro-poor focus
• Development of manufacturing sector is important for
creation of productive employment
• Equality of opportunities (education)
• Shift focus of reforms to delivery systems
• Importance of women’s economic and social
empowerment
• Rights approach (civil, political and economic)

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Conclusion
• There is a need to have a broad based and inclusive
growth to benefit all sections of society and improve
economic growth.
• It is more challenging for the country to achieve
inclusive growth than getting 8 to 10 per cent growth
in GDP
• There is also an economic argument. The measures
which raise equity also promote economic growth.
• Lastly, the political argument is that no government in a
democracy can afford to ignore large sections of
workers and non-working population.

anmolverma24@yahoo.co.in

 THANK YOU

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