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Why is India Poor?
Parth J Shah
Centre for Civil Society
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Culture / AttitudesLack of CapitalPolitical Instability
Too large to governColonial legacyWeather / climate
Neo-colonizationGlobalization / WTO
Population ExplosionLack of Education
Corruption
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PopulationDensity
(persons per sq. km)
GNP per capita(2001 Dollars)
China 134 972
India 337 486
Japan 337 29,447
Germany 235 22,466
Singapore 5,540 21,644Belgium 337 22,417
Hong Kong 6,571 23,515
UK 245 24,700
Some are rich
Some denselypopulated
countries arepoor
Population Density and Poverty?
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4/32
Population
Density(persons per sq. km)
GNP per capita(2001 Dollars)
Australia 2 19,136
Canada 3 22,087
USA 30 37,822
UAE 28 26,158
Mozambique 24 197
Ethiopia 53 97
Tanzania 35 265
Population Density and Poverty?
Some are poor
Some sparsely
populatedcountries arerich
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Indias Population
Year Population(millions)
LifeExpectancy at
Birth (years)
InfantMortality per
1000 live births
Foodgrainproduction
(million tonnes)
Foodgrainproduction
indexed per
person
1901 238 23 210
1911 252 21 2041921 251 27 219
1931 271 31 174
1941 319 32 161
1951 361 42 146 52 14.4
1961 439 46 129 83 18.91
1971 548 51 129 105 19.16
1981 684 54 110 133 19.44
1991 846 58 92 168 19.86
2000 1000 62 72 200 20
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6/32
Effects of Colonisation?
Coloniser
GNP per capita
in 1995 (US$)
South Korea Japan 9,700
Malaysia Britain 3,890Botswana Britain 3,020
Tunisia France 1,820
GNP per capitain 1995 (US$)
Hong Kong 22,900 A difference ofUnited Kingdom 18,700 $4,200 per capita!
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Democracy vs Dictatorship?
Success of Singapore, Malaysia, China,
(Taiwan, S. Korea)
But think about the Dictatorships that are POOR!
How many Democracies are RICH?
Superiority of dictatorship
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8/32
Democracy vs Dictatorship?
Democracy also usually entails
Civil rights
Free press
Protection of minorities
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9/32
Illiteracy and Wealth?
Literacy Rate(1991-92)
State GDPRupees per capita
at current prices,1990-93
Kerala 90 5,768
Punjab 59 11,217
Haryana 56 9,037
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10/32
Culture and Attitude
Antimaterialistic
Fatalistic(Karma)
Lazy
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11/32
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ECONOMIC FREEDOM!
The most important attribute of theseinstitutions and policies is
Economic and political institutions and
policies determine economic success.
Population, illiteracy, corruption, culture,
democracy, and colonisation are half-truths.
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Economic Freedom Index 2000
Countries Rating Rank
GDP Per capita
(current prices)
Hong Kong 8.8 1 24,298.30
Singapore 8.61 2 23,084.00United States 8.54 3 35,859.10
United Kingdom 8.35 4 23,988.50
New Zealand 8.2 5 13,060.10
Unit. Arab Em. 7.37 19 26,930.00Hungary 6.66 51 4,839.40
Mexico 6.25 66 5,754.10
7/28/2019 Why is India Poor
14/32
Economic Freedom Index 2000
Countries Rating Rank
GDP Per capita
(current prices)
India 6.06 73 453.3
Indonesia 5.98 77 723.2Sri Lanka 5.96 77 832.3
Nepal 5.86 80 229.1
China 5.28 101 853.1
Bangladesh 5.11 107 364.2Pakistan 5.11 107 450.1
Myanmar 3.31 122 153.6
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Economic Freedom IndexComponents
Size of government; consumption, transfers and
subsidies
Structure of the economy and use of markets
Monetary policy and price stability
Freedom to use alternative currencies
Legal structure and property rights
International exchange: Freedom to trade with
foreigners
Freedom in Exchange of capital and financial
markets
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$0
$4,000
$8,000
$12,000
$16,000
$20,000
PerCapit
aIncome
Bottom
20%
4th
Quintile
3rd
Quintile
2nd
Quintile
Top 20%
Per Capita Income & Economic Freedom
Least free Most free
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-1.00%
0.00%
1.00%
2.00%
Growth
Rate,
1990s
Bottom
20%
4th
Quintile
3rd
Quintile
2nd
Quintile
Top 20%
Real Growth in GDP & Economic Freedom
Least free Most free
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0
10
20
30
40
50
Bottom
20%
4th
Quintile
3rd
Quintile
2nd
Quintile
Top20%
Least free Most free
Adult Illiteracy Rate (1995)
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0
0.2
0.4
0.6
0.8
1
HumanDe
velopment
Index(o
utof1)
Bottom
20%
4th
Quintile
3rd
Quintile
2nd
Quintile
Top 20%
UN Human Development Index
Least free Most free
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Economic Freedom versus Corruption
0123456789
10
0.0 2.0 4.0 6.0 8.0 10.0 12.0Economic Freedom Rating
Corruption
Rating
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21/32
0
10
20
30
40
50
Bottom 20% 4th Quintile 3rd Quintile 2nd Quintile Top 20%
Income Inequality
Poorest 20% 2nd 20% 3rd 20% 4th 20% Richest 20%Percent of income accruing to the
Least free Most free
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22/32
0
2
4
6
1970 1975 1980 1985 1990 1995 2000
Score(outof10)
Size of Government Legal System & Property Rights
Sound Money Freedom to Trade with Foreigners
Regulation Total
India
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23/32
0 2 4 6 8 10
Size of Government
Legal System & Property Rights
Sound Money
Freedom to Trade with Foreigners
Regulation
Total
Score (out of 10)
Average of Top Ten India
India & Top Ten Average
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J udiciary independence
Impartial courts
Protection of intellectualproperty
Law and Order
0 2 4 6 8 10Score (out of 10)
Average of Top Ten India
India & Top TenLegal System & Property Rights
7/28/2019 Why is India Poor
25/32
India & Top Ten Business Regulations
0 2 4 6 8 10
Price controls
Time withgovernment
bureaucracy
Starting
a new business
Irregular payments
Score (out of 10)
Average of Top Ten India
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26/32
0 1 2 3 4 5 6 7 8 9 10
Ownership of banks
Competition in domestic banking
Extension of credit
Interest rate regulations
(leading to neg. rates)
Interest rate controls
Score (out of 10)
Average of Top Ten India
India &Top TenCredit Market Regulations
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India & Top Ten
Tariffs
0 2 4 6 8 10
International trade
tax revenues
(% of trade sector)
Mean tariff rate
Standard deviation of tariff
rates
Score (out of 10)
Average of Top Ten India
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0
2
4
6
8
10
1970 1975 1980 1985 1990 1995 2000
Score(ou
tof10)
1
21
41
61
81
101
121
Rank(out
of123)
Score Rank
Freedom to Trade with Foreigners
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No country with a persistentlyhigh economic freedom ratingduring the last two decadesfailed to achieve a high levelof income.
Economic Freedom of the World 2002
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Whose Economic Freedom?Manufacturers
Urban and rural labour
Farmers, with or without land
Traders, retail and wholesale
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If a high degree of economic freedom was permitted, then
the rate of economic growth would have been higher
the government would have focused on education,health, and infrastructure, instead of running
bakeries, bicycle companies, or banks
the corruption levels would have been low
the overall governance would have been better.
India would have been higher on economic freedom
as well as human development index
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Why is India Poor?
Lack of Economic Freedom