Group: India 1
6 December 2012
I. Introduction 3
II. Corruption 4
III. Infrastructure 8
IV. Agriculture 14
V. Trade 20
VI. Time Series Analysis 25
VII. References 40
I. Introduction This report aims to provide an in-depth review of India’s challenges and the opportunities that exist in terms of increasing the overall level of development. By dividing our report into four main categories, we will show specific issues and challenges that exist—by addressing these challenges, we are providing possible actions that India’s government can prioritize in order to generate sustainable growth as well as overall economic and social development for the next ten years.
Impact of corruption on India’s Growth
These results are from a KPMG Bribery and Corruption survey in 2011. It demonstrates the ways in which India’s growth can be substantially harmful to the GDP growth in India. Opportunities for growth and investment will be severely curtailed if India continues to be perceived as corrupt. The World Economic Forum’s Global Competitiveness Index from 2010 showed that among business related freedoms such as trade and fiscal, freedom from corruption is specifically important in determining a country’s ability to compete in the international market.
Impact of Corruption on Investment
Although survey respondents differed in their response to the depth of impact caused by corruption, 97% of respondents stated that corruption is a factor in limiting investment. Without steady investments into the country, sustainable growth is unlikely. Additionally, if steady investments only occur in selective industries or sectors, the resulting skewed growth will result in further dysfunction of subsidized markets.
Does corruption negatively impact the capital market?
This chart shows that 93% of KPMG’s respondents agreed that corruption negatively impacts the capital market. India’s corruption is said to stem from several factors. Taxes are high, and the bureaucratic system imposes regulations that are excessive. The regulatory bodies that exist have the power to prevent any person or entity from conducting business. This system, where individuals have the ability to search and question, creates an environment in which officials can extract bribes in order for allowing normal business operations to continue. A study conducted by Transparency International in 2005 found that more than 62% of Indians had first-hand experience in paying bribes or influence peddling for the successful completion of jobs in public offices. In its 2008 study, the number went down to 40%. Regardless of this reduction, high-level corruption threatens India’s stability, and therefore its sustainability. Among the largest sources of corruption in India, social spending schemes and entitlement programs are at the top of the list. The Mahatma Ghandi National Rural Employment Guarantee Act and National Rural Health Mission are examples of such programs.
Physical-Infrastructure Dimension In the late 1980s and early 1990s India began an explosive growth in their pursuit of infrastructure. From this time to know much about Indian infrastructure has changed for the better, “twenty years ago, just 42 percent of India’s households had electricity. Today, that’s up to 66 percent.” (Washington Post1) Then we have to infer whether this applies to the law of diminishing returns. This infrastructure boom may look fortuitous for India but this could be misinterpreted. India has a long way to go with building infrastructure. And this cant be only focused in one area of infrastructure as “India requires a large amount of infrastructure across many sectors such as transportation, telecommunications, power,