Economics 6 Marks Question

Yes, China's rapid industrial growth is traced back to its reforms in 1978, which were introduced in phases. In the initial phase, reforms were initiated in agriculture, foreign trade and investment sectors. Commune lands were divided into small plots which were allocated to individual households for use and not ownership. They were allowed to keep all income from the land alter paying stipulated taxes. This led to an increase in agricultural productivity. In the later phase, reforms were initialed in the industrial sector. Private sector firms, and township and village enterprises, were allowed to produce goods. Enterprises owned by government (known as Stale Owned Enterprises-SOEs), were made to face competition at this siege to enhance their efficiency. Dual pricing was involved in reforms. Prices were fixed in two ways; farmers and industrial units were required to buy and soil fixed quantities of inputs and outputs on the basis of prices fixed by the government and the real were purchased and sold at market prices. Market mechanism gained strength over the years as the proportion of goods or inputs transacted in the market increased with rise in aggregate production. This contributed to greater efficiency. Special economic zones were set up in order to attract foreign investors for aiding in capital formation in the country for expanding output.

'Liberty indicators' are those indicators which represent the degree of civil and political freedom to individuals in a country. They are also needed along with indicator of income, health and education in the human development index. One such indicator has actually been added as a measure of 'the external of democratic participation in social and political decision-making' but it has not been given any extra weight. Some other 'liberty indicators' are measures of 'the extent of constitutional protection given to rights of citizens' or 'the extent of constitutional protection of the Independence of the Judiciary and the Rule of Law' which have not been introduced In HDI till now. Without including such indicators and giving them adequate weightage, the construction of a human development index remains incomplete and its usefulness remains limited, e.g., Government allows the labour, capital and goods to move freely in the economic system.

The sectoral contribution towards GDP in 2003 and 2013 in India and China:

	2003		2013
	India	China	India	China
Agriculture	23	15	18	10
Industry	26	53	25	44
Service	51	32	57	46

In 2003, the contribution made by agriculture sector was 23% and 15% in India and China respectively. It confirms that India was an agrarian economy.
The contribution made by secondary sector was in China was 53% which is almost double the contributions made by India i.e. 26%. This indicates that industry sector is far behind in India as compared to China.
In 2003, the contribution made by service sector was 51% and 32% in India and China respectively. It shows that the contribution made by service sector in India was higher.
We can see from the table that in India the main contributing sector is service and in China it is industry sector. It indicates that the structural transformation in both the countries in India and China is different. From an agrarian economy India is directly switching to service sector whereas China is moving to industry as other developing countries are moving on their growth path.
In 2013, the contributions made by agriculture and industry sector have reduced and contribution made by service sector has increased in both countries.

The following are the various means through which the nations are trying to strengthen their own domestic economies:

1. Nations are forming various regional and economic groupings like SAARC, European Union, G-8, G-20, ASEAN etc. in order to strengthen their economies. These groups provide a common platform to the member countries to raise their voice in a unified manner on common issues to safeguard their common interests.
2. Further, they are also interested in knowing the developmental process adopted by their neighbouring nations, so as to analyse their strengths and weaknesses. Accordingly, they formulate policies to accelerate social progress and cultural development among the member countries.
3. Moreover, nations also resort to liberalising their economies. This minimises the government interference in economic activities. The economy is governed by market forces, i.e. demand and supply forces.
4. Nations also resort to the process of globalisation to open up their economies to provide wide international market to their domestic producers.

The above table reveals that trade with Pakistan and China has grown over the years. But what is disturbing, is the fact that imports have grown more than the exports. Also, imports from China have grown at a staggering rate of 106%. This statistic helps in proving the perception that there is sudden increase in dumping of Chinese goods into India. This definitely will affect our secondary sector adversely.

Regional and economic groupings are formed by nations to strengthen their economies by close cooperation and by knowledge sharing. Regional and economic groupings such as the SAARC, European Union, ASEAN, G-8, G-20, BRICS etc helps the member countries to know the development strategies and measures adopted by other member countries. This enables them to analyse their strength and weakness and, thereby, formulate policies to accelerate social progress and cultural development among its member countries. This is particularly considered essential by developing countries as they face competition not only from developed nations but also amongst themselves in the relatively limited economic space enjoyed by the developing world.

The important demographic indicators of Indian, China and Pakistan are tabulated as below.

Country	Estimated Population (in million) (2015)	Annual Growth of Population (2015)	Denstty (per sq. km)	Sex Ratio (2015)	Fertility Rate (2015)	Urbanisation (2015)
India China Pakistan	1311 1371 188	1.2 0.5 2.1	411 146 245	929 941 947	2.3 1.6 3.7	33 56 39

The important demographic indicators are as follows:
Total Population: China is the largest populated country in the world followed by India. The above table depicts that China’s population in 2000-01 was approximately 1303.7 million and that of India and Pakistan was 1103.6 million and 162.4 million respectively.
Annual Growth Rate of Population: Although China is the largest populated country but a strong positive point for China is that, its annual growth rate of population is just 1% per annum while that of India and Pakistan is 1.7% and 2.5% per annum. With such a high growth rate it would not be wrong to expect that in the forthcoming decades India will surpass the total population of China.
Density of Population: In spite of the fact that China is highly populated and geographically occupying the largest area among the three nations, its density of population is the lowest. It is as low as 138 persons per square kilometer of area compared to 358 and 193 persons in India and Pakistan respectively. Lower the degree of density of population the lower is the pressure on the country’s natural resources and higher is the probability of sustainable development.
Sex Ratio: This ratio counts the number of females per 1000 males. The sex ratios in all the three countries are almost same with China having a marginally higher sex ratio of 937 females per 1000 males. This depicts the low economic and social status of women in India and Pakistan.
Fertility Rate: This rate refers to the number of children a woman gives birth to during her lifetime. China enjoys an upper hand in this case. The fertility rate of Chinese woman is only 1.8 whereas those of India and Pakistan are 3.0 and 5.1. This implies that in India and Pakistan a woman usually gives birth to approximately 3 and 5 children. This is the most important concern for both India and Pakistan, as with such a high fertility rate, population in the coming decades will surpass that of China.
Urbanisation: Lastly, China is comparatively more urbanised than India and Pakistan. The rate of urbanisation in China is 36.1% while that in India and Pakistan is 27.8% and 33.4% respectively. A The degree of urbanisation depicts the standard and quality of living of people of a particular country. Also, this confirms the shift in the economic structure of an economy. Higher degree of urbanisation reveals higher industrialisation and development of tertiary sector in the economy.
Thus to sum up, although China is the largest populated country but its other demographic indicators are stronger than those of both India and Pakistan. It would not be wrong to expect a decline in China’s population in the coming decades due to implementation of various policy measures and also due to low annual growth rate of population.

1. SAARC: South Asian Association for Regional Cooperation (SAARC) was established on 8th December, 1985 to encourage cooperation among member countries in the fields of agriculture, health, population control, anti-terrorism measurs, rural development, science and technology and narcotics control Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Sri Lanka and Pakistan are its members. It was formed on the proposal of Zia-Ur-Rehman, the then President of Bangladesh. Its head quarter is in Kathmandu.
2. ASEAN: Association of South East Asian Nation (ASEAN) was created on 8th August, 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand with objectives to accelerate economic growth, social progress, regional stability and to resolve their differences peacefully. Subsequently, Brunei, Cambodia, Laos, Myanmar and Vietnam also joined this association. It is headquartered at Jakarta.
3. European union: It is a political and economic union of 27 member states that is primarily located in Europe. It was formed to develop an internal single market regulated by a same set of laws to ensure free movement of people, goods and services between the member nations. A common currency 'Euro' circulates in all the member nations. Austria, France, Germany, Italy, Spain and Sweden are important member nations. Brussels is the defacto capital of the European Union.
4. G-8: It is an inter-governmental political forum of the industrialised economies of the world, which are democratic in character. Initially, formed in 1975, with six member countries, viz. France, Germany, Italy, Japan, the United Kingdom and the United States, this association came to be known as G-8 with the inclusion of Canada in 1976 and of Russia in 1997. However, in 2014 Russia has been expelled from the membership of G-8, temporally. This forum represents about 65% of the world economy.
5. G-20: It is an international form comprising of the governments and Central Bank governors of 20 major economies. It was founded in 1999 with an objective to study, review and promote high-level discussions of measures to promote international financial stability. The members include 19 individual countries, viz. Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, The United States, alongwith the European Union.
6. BRICS: BRICS is the acronym representing association of five major emerging national economies, viz. Brazil, Russia, India, China and South Africa. All the member countries are leading developing or newly industrialised countries and are characterised by their Fast growing economies and those who significantly influence their regional affairs. It was formed in 2011 and works on the principles of non-interference, equality and mutual benefit.

1. China has been able to maintain a double-digit growth rate for more than two decades. In the decade the growth rate of China was pegged at 10.3 percent, India had a growth rate of 5.7 percent and Pakistan had a growth rate of 6.3 percent during the same period. In the 1990s, there is a marginal decline in India and China's growth rates, whereas Pakistan met with drastic decline.
2. The trends in output growth rate in all the sectors show that India's agricultural sector showed a decline in growth from 3.1 percent in 1980s to 2.3 percent in 1990s. The industrial sector also showed a decline from 7.4 percent to 5 percent. However, the service sector showed an increase from 6.9 percent to 8.4 percent during the same period.
3. Pakistan's agricultural sector showed a decline from 4 percent to 2.7 percent, the industrial sector showed a decline from 7.7 percent to 3.4 percent and the service sector showed a decline from 6.8 percent to 4.4 percent during the same period.
4. China showed a decline in growth of agricultural output from 5.9 percent to 4.1 percent, and service sector showed a decline from 13.5 to 8.4 percent and the industrial sector showed a decrease in growth rate of output from 10.8 percent to 8.1 percent.

1. HDI Ranking:

Country	Ranking in the world
China	81
India	128
Pakistan	136

2. Infant Mortality Rate:

Country	IMR Per thousand
China	30
India	63
Pakistan	81

3. Maternal Mortality Rate:

Country	MMR Per Lakh
China	45
India	450
Pakistan	320

4. Safe Drinking Water facility:

Country	% of Population
China	11%
India	12%
Pakistan	10%

5. Improved Sanitation:

Country	% of Population
China	45%
India	69%
Pakistan	55%

6. Below Poverty Line:

Country	% of Population
China	34.7%
India	16.6%
Pakistan	13.4%

1. SAARC: The South Asian Association for Regional Cooperation, or SAARC, proposed by Ziaur Rehman, the then-president of Bangladesh, was established on December 8, 1985. It is an association of eight countries of South Asia: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

SAARC encourages cooperation in agriculture, rural development, science and technology, culture, health, population control, narcotics control and anti-terrorism

2. European Union: The European Union (EU) is a union of twenty-five independent states based on the European Communities and founded on 15 November, 1993 to enhance political, economic and social co-operation. The formation of EU, marked by a common market, common currency, abolished passport control, and customs checks were also abolished at many of the EU's internal borders, creating a single space of mobility for EU citizens to live, travel, work and invest.
3. ASEAN: Association of Southeast Asian Nations (ASEAN) is a political and economic organization of countries located in Southeast Asia. ASEAN was formed on August 8, 1976 by Thailand, Indonesia, Malaysia, Singapore and Philippines, as a display of solidarity against communist expansion in Vietnam and insurgency within their borders. These countries meet annually.
4. G-8: The Group of Eight (G-8) countries consists of Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States. Together these countries represent about 65 per cent of the world economy.
5. G-20: The Group of 20(G-20) is a group consisting of 19 of the world's largest economies, together with the European Union. The G-20 was formed as a new forum for cooperation and consultation on matters pertaining to the international financial system. It studies, reviews, and promotes discussion among key industrial and emerging market countries of policy issues related to the promotion of international financial stability.

1. Parameters of Human Development:

• Gross enrolment ratio.
• Adult Literacy rate.
• Life expectancy rate.
• Infant mortality.
• Per capita income.
• Growth in Real GDP.

2. India and Pakistan have achieved success in the following common areas:

• Both India and Pakistan have succeeded in more than doubling their per capita incomes. This is a remarkable feat considering that the population has increased fourfold in case of Pakistan and threefold in India.
• The incidence of poverty (defined as Sl per day) has also been reduced significantly although the number of absolute poor remains astoundingly high. However, the level of poverty is lower in Pakistan.
• Food production has not only kept pace with the rise in population but has surpassed it. Both countries, are self-sufficient in food. Food self-sufficiency has been accompanied by improved nutritional status. Daily calorie and protein intake per capita has risen by almost one-third, though malnourishment among children is still high.

Following are the similarities in the developmental strategies of India and Pakistan followed for their respective developmental paths:

1. Both countries have started their developmental path at the same time, after their independence i.e. in 1947.
2. Both the countries followed same economic pattern i.e. mixed economy which is the combination of public and private sector.
3. Both countries started their development through Five Year Plans and emphasised initially on public sector.
4. Till 1980s, both countries had similar growth rates and per capita income.
5. Both the countries have introduced economic reforms to strengthen their economies at the same.

China’s rapid economic development is an aggregate outcome of the introduction of the reforms in phases since 1978. The following are the various factors that led to the rapid growth in the economic development in China:

1. In the initial phase, reforms were initiated in agriculture, foreign trade and investment sectors. The system of collective farming known as Commune System was implemented. Under this system, land was divided into small plots that were allocated to the individual households. These households were allowed to keep the remaining income from land after paying the taxes to the government.
2. In the later phase, reforms were initiated in the industrial sector. During this phase, the private firms, village and township enterprises were allowed to produce goods and services and to compete with the State Owned Enterprises.
3. The dual pricing were implemented. This implies that the farmers and the industrial units were required to buy and sell a fixed quantity of inputs and output at the price fixed by the government and the remaining quantities were traded at the market price. Gradually, with rapid increase in aggregate production in the later years, the quantities traded in the market increased by many folds.
4. The reforms also included setting up of Special Economic Zones to attract foreign investors and to encourage its exports.

Therefore, the aggregate focus of all these economic reforms resulted in rapid industrial growth and economic development in China.

The developmental initiatives taken by Pakistan for its economic development are:

• Pakistan follows the mixed economy model with co-existence of public and private sectors.
• In the late 1950s and 1960s, Pakistan introduced a variety of regulated policy framework (for import substitution industrialisation).
• The policy combined tariff protection for manufacturing of consumer goods together with direct import controls on competing imports.
• Green Revolution led to mechanisation and increase in public investment in infrastructure in select areas, which finally led to a rise in the production of foodgrains.
• Nationalisation of capital goods industries took place in the 1970s.
• Pakistan shifted its policy orientation in the late 1970s and 1980s when the major thrust areas were denationalisation and encouragement to private sector.
• During this period, Pakistan also received financial support from western nations and remittances from continuously increasing outflow of emigrants to the Middle-east that helped the country in stimulating economic growth.
• All this created a conducive climate for new investments. In 1988, reforms were initiated in the country.

The reasons for the slow growth and re-emergence of poverty in Pakistan are:

• The Pakistan was mainly dependent on Public Sector Enterprises. Pakistan relied largely on the policy of protection by assigning central role to the Public Sector Enterprises. The operational inefficiencies of the system along with the misallocation of scarce resources resulted in slow economic growth rate arid poverty.
• The agricultural practices in Pakistan were not modernised and there remained heavy dependence on rainfall and traditional methods of farming, thereby reducing agricultural productivity and output.
• The major portion of the foreign exchange earnings of Pakistan was in the form of remittances from Pakistani workers in the Middle-east and exports of highly volatile agricultural products. This can be regarded as one of the reasons for the slow economic growth. This is because the inflow of foreign exchange in the form of remittances substituted the need for development of manufacturing sector to earn foreign exchange by exporting manufactured goods.
• There was an increasing dependence on foreign loans for meeting t foreign exchange requirements. Pakistan faced increasing difficulty in repaying these loans along with the mounting interest obligations in the years of agricultural failure. The increasing burden of huge foreign loans impeded the economic growth prospects of Pakistan.
• Pakistan failed to attract any substantial amount of foreign investment due to political instability, lack of international credibility and infrastructure bottlenecks.