Lecture Notes

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India and the World Economy
(Sections C and E)
Instructor Sudip Chaudhuri Room B-207; Ext 185
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India and the World Economy
• Economics I and II: – Microeconomics – Macroeconomics

• Economics III:
– Course objective: analyze economic problems of India in the context of the ongoing process of globalization 2

How is India performing? What are the main economic issues?

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Some Macroeconomic indicators
• • • • • • • • • GDP Inflation Fiscal deficit Trade and current account deficit/balance Interest rates Repo, reverse repo rates Foreign Exchange rate Foreign investment Stock market indices – Sensex, Nifty etc

• Unemployment and Poverty?
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Macroeconomic indicators
• Some of these are Means rather than Ends, e.g., Fiscal Deficit • The most important objectives of economic policy making should be creating jobs and reducing poverty, but decision makers are hardly evaluated on these basis 5

Lecture plan
Topic 1 Topic 2 Topic 3 Topic 4 Topic 5 Topic 6 Topic 7 Topic 8 Introduction India’s economic strategy: from development planning to economic reforms Growth and crises in Indian economy Trade and industrial reforms Financial sector reforms and monetary policy Fiscal policy and fiscal deficit Balance of payments, trade and capital flows Unemployment, poverty and inequality

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Examination
• Closed book end-term examination:
– – – – Lecture PPTs Class discussions Readings recommended Opinions must have factual and logical basis: • Different readings may have different approaches

• Separate question papers – Sections (A, B and F); (C and E) and (D) • Grades to be normalized

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Grade normalization target
• • • • • • • A plus: 10% of the students A only: 15% A minus: 15% B plus: 25% B only: 15% B minus: 10% C plus/F: 10% 8

Note: Actual distribution may vary across sections

Lectures
• PPTs in course web • Discussions in class room: – PPTs uploaded are not substitutes for class lectures – Apart from class rooms, students may ask questions through email (sudip@iimcal.ac.in) – Discussion sessions – 2nd week onwards?

• Clarifications:
– Most welcome to meet me in my office room
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Readings
(Uploaded in course web)
• • • • • • • Ahluwalia Nayyar World Bank Patnaik Chaudhuri Subbarao Additional readings to be uploaded in the course web

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Oxford Companion to Economics in India (Strictly for use for the course) • Uploaded strictly for use relating to the course: • See entries on: – Agricultural development, Banking, Financial sector reforms, Fiscal deficit, Fiscal policy reforms since 1991, Foreign direct investment, Foreign institutional investment, Industry, Pharmaceutical industry, Services, Software exports

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GNI per capita, 2011 $ PPP (constant 2005)
• > 50,000: – Qatar (107721) Liechtenstein, Qatar, Luxembourg (51109), Singapore, United Arab Emirates • > 30,000 - 50,000: – USA (43017), Canada, UK, most West European countries, Hong Kong, Australia, Japan • 1,000 -4,000:

– India, (3468), Nepal, Vietnam, Ghana, Bangladesh, Tanzania, Pakistan (2550) • < 1,000:

– Malawi, Ethiopia, Zimbabwe, Congo (DR), Liberia (265)
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GNI per capita, 2011, $ PPP

India China Brazil Malaysia Russia South Korea USA 0

3,468 7,476 10,162 13,685 14,561 28,230 43,017 10,000 20,000 30,000 40,000 50,000 14

Per capita GDP (Geary-Khamis International dollar 1990)
Year 1000 1500 1600 1700 1820 1850 1870 1890 1900 1913 1930 1950 1980 1990 2008 United States 400 400 400 527 1,257 1,806 2,445 3,392 4,091 5,301 6,213 9,561 18,577 23,201 31,178 China 466 600 600 600 600 600 530 540 545 552 568 448 1,061 1,871 6,725 India 450 550 550 550 533 533 533 584 599 673 726 619 938 1,309 2,975

http://www.ggdc.net/maddison/
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Per capita GDP
35,000 30,000 1990 international $ 25,000 20,000 15,000 10,000 5,000 0 1000 1600 1820 1870 1900 1930 India 16

1980

2008

United States

China

India’s Distinctiveness
• Low per capita income • But:
– Huge size...
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