India on the Move Harvard Case Solution & Analysis

 Reasons of Indian Economy run into such Difficulty

Since the beginning of the 1980 s, Indian real GDP growth has been impressive, averaging 5.9% per year during the period 1980 to 1990 and 6.2% during 1990 to 2001. In past, during 1950 to 1980 it averaged only 3.7% per year. Instead of getting significant growth the Indian economy does not meet the goat of 8% growth and there are several reasons behind the difficult economic position of the India.

The geographic existence of the India, the difference of opinion regarding Kashmir issue with Pakistan, two major wars with Pakistan about the issue of Kashmir results in the economic difficulty in India. The greater allocation of the budget in defense and nuclear plan also creates the economic problem for India.

In addition to its demographic position, the India is also facing the problem of government structure instead of claiming a second largest democracy in the world after the Britain. The culture of corruption among the politicians and several corruption scandals also hit the country’s economy badly.

Due to the poor government structure and lack of proper planning results in the decrease of the annual growth in agriculture sector. Decrease in growth of agriculture also decreases the export and annual GDP of exports from 6.5% to 3.6%. India’s largest population rely on agriculture and it is considered as a backbone of the Indian economy therefore decrease in the exports and GDP also put pressure on the economy of India and also increases deficits on foreign reserves.

 Appraisal of the Policies

During the decade of 90 s India faces the problem of political instability due to the poor leadership qualities of the politicians and poor government structure.  Introduction of quota system for a one group only creates the further discrimination among the different political groups and results in the collapse of the two government in 1990 and 1991.

Due to this political instability the deficit of the foreign reserves increases and Indian economy faces the decrease in approximately 1 billion dollar in reserves which results in the need of funds from the International Monitory Fund on very high interest and also on a condition that India will formulate its economic reforms according to the Washington Consensus which requires several legislative needs which should be fulfilled in order to attain the funds.

Therefore in order to satisfy the Washington Consensus several steps being taken by the government in order to stabilize the political conditions and to create macroeconomic balance in India. Following this mission the government of India planned to reduce restrictions upon import, relax tax structure for foreign investment investors, sell nonstrategic interest and pass the more flexible act regarding takeovers and mergers in order to make the Indian economy more global and market oriented.

These measure by the government help to reduce the deficit, increase the amount of imports and exports and also establish the Indian stock Exchange board in order to monitor the capital market of the India.

Important interactions b/w the Political and Economic policy

The political instability creates the problems in the Indian economy, following th4e Washington Consensus imposed by the IMF results in the interaction between the political and economic policy. Good economic policy of any country could not be possible without aligning with the political stability. Therefore the increase in deficit, interest and inflation rate causes the interaction between the politician on macroeconomic front in order to decrease the deficit, increase of the tax base and reduction of inflation and capital expenditure in order to attain the better economic conditions.

Principal threats to the Sustained Growth of the Indian economy

Indian economy emerge as the most suitable economy for overseas investor due to political reforms and advancement in technology. Instead of these positive changes the Indian economy also have certain threats for the foreign investors like corrupt government culture, tight relations with its neighbor Pakistan, presence of different political and religion groups and the devaluation of the Indian Rupee as compared to the US dollar creates threats to the sustained Indian growth and for the foreign investors.India on the Move Case Solution

Present-day India

As compared to the past, the present political economic and political condition is more favorable for domestic and foreign investors. Form last few years Indian economy seeks a sustained economical growth which also helps the India to decrease the deficit and it also increases the foreign reserves which ultimately strengthen the Indian Rupee against the US dollar.........................

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