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Open Economy - A Progressive Economic System
Free Trade and Capitalism:
Around the world, most of the economies are following capitalism i.e. no restrictions on the promotion of trade and use of ‘ease of doing business'. As the demand for goods and services is growing, capitalism is the best way to fulfill the demand and provide opportunities to traders, contractors, service providers in the economic growth of the economy. The world of today is best known for its ‘Free Trade’, also known as ‘Globalization’. India with its new industrial policy open trade for the whole world in 1991 and it nurtured technological innovations and today Indians are known around the world for their technological skills. No doubt, capitalism is the best way to ensure a high rate of economic growth. In ‘Free Trade’, the economies or markets balance the demand and supply of goods and services and as per the demand, the entrepreneurs are motivated to use the resources.
The era of Globalization promoted Privatization and fixed the inefficiencies of the public sector by incorporating the Public-Private Partnerships (PPPs). However, the major drawback, capitalism, and globalization brought, is the domination of economically powerful nations upon weaker countries of the world.
Why ‘Free Trade’ is best for Economic Growth?
It is fact that money is a great tool for motivating people for doing more work, due to greed the workers, laborers, entrepreneurs, executives work more and earn rewards or bonuses from the increase in revenues. The competition is increased and the people performing well are awarded high-paying jobs and assignments. The same had happened during the last three decades in India. However, the biggest concerns which are coming today, are environmental concerns. Due to the over-exploitation of economic resources, the developing economies are facing environmental concerns with the rising levels of various types of pollution.
Development of India:
India meets its capital and technology transfer requirements from developed nations including America, Russia, Japan, etc. Every year most Indian citizens get employment opportunities from these developed nations. Due to the support of these nations, India stays protected from terrorism and uplifts its standards of defense on the national boundaries. The Prime Minister of India visits the developed nations to strengthen the relationships and further seek the support of these nations for the upliftment of Indian citizens. The industrial policy was implemented in 1991 to increase liberalization and opened the Indian market to Multinational companies. The policy was implemented due to the pressure of sustaining good relationships with the developed nations. Due to plenty of resources, India is still growing instead of being exploited by foreign companies.
Development of China:
China is the second-largest economy in the world and is known for its competitiveness in offering products and services around the world. The political stability in China and promotion to socialism than capitalism made the nation stand separate from the other nations of the world. The major economic problem of China is poverty and with the help of reforms, it is continuously targeting the economic problem. The poverty alleviation programs of China are helping people to uplift themselves and get rid of the vicious circle of poverty.
By improving the exports of the nation, China is providing opportunities to the rural poor people to generate opportunities for self-employment. The high-quality and cost-efficient products are prepared and exported by China. The second critical problem is the large population of China. Around one-fifth of the world’s population resides in China. Instead of such critical problems of population and poverty, China is doing remarkable work in ensuring the rate of economic growth by taking necessary initiatives.
Trade War by the United States of America:
Threat to open economies:
Role of open economies in economic progress:
China's progress in other countries:
India's initiatives for economic growth:
Post-Covid Indian Economic Development
Post-Covid Indian Economic Development
-Dr.
Lalit Kumar
Covid-19 Pandemic and Indian Economy
The Indian economy was affected by more than 25 Million Covid Cases in the first and second waves of the Covid-19 pandemic and this affected the economic development of India also. During the financial year 2020-21, the first quarter GDP Growth Rate was negative 24.4% and this was due to the crisis and pandemic situations of Covid-19. The lockdown to contain the spread of the Covid-19 pandemic impacted very adversely and factories, trains, transportation, and construction everything was stopped. Definitely, the demand in these sectors was waiting for the opening of lockdown.
In the second quarter of the year, the economy recovered, and the GDP Growth rate was negative 7.4% and during this quarter the recovery was in the construction
and manufacturing sectors due to demand in these industries. The recovery
further expanded up to 20.1% in the second quarter of 2021-22. The bounce back
in GDP Growth Rate showed the whole world the potential of the Indian Economy to fight the Covid-19 pandemic.
Strategy for Economic Development:
No doubt, India is committed to improving its brand position and with the
help of the Start-Up initiative, it is gaining popularity around the world. The
innovation mindset is the need of the hour to improve its brand position. The
challenges to tackle the problems such as Non-Performing Assets (NPAs),
Expenditure on Defence, Expenditure on containment of Covid-19 pandemic, and
Vaccination; may be considered both a threat and an opportunity. It depends upon
the strategy of India for its Economic Development to grow in the post-covid
times. The biggest plan, India is focusing on today, to promote Artificial
Intelligence and the Internet of Things (IoT) in its approach to boost the whole
economy.
Digital Transformation in Each State of India:
The State Governments under the guidance and directions of NITI Ayog promote digital transformation initiatives with the flow of data and information at a higher speed among the economic sectors. The increasing number of incubation centers,
tech start-ups, and re-engineering of Government processes to serve public
services at a higher speed; not only improve the economic status of each state of
India but also increase the potential of effective and efficient use of public
financial resources.
Preventing Businesses and Safeguarding Jobs:
The countries around the world including the United States and Russia;
prevented businesses and tried to safeguard the jobs of citizens in the
companies with the announcement of relief packages. The United States announced a package of around 10% of its GDP to prevent the businesses suffered from Covid
while the United Kingdom announced almost 15%.
The Indian businesses also require tax rebates, holidays, cheaper loans to invest money in purchasing raw materials, and payment of salaries of the employees. The rebuilding economy in the future requires a strategically planned approach for improving the supply of goods and services and containing inflation due to scarcity of resources. How to save jobs and make a business self-sufficient to meet its requirements, is a great challenge.
*Copyright © 2021 Dr. Lalit Kumar. All rights reserved.
This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was published on 18th September 2021 and last updated on 21st September 2021. The writer can be contacted on lalitkumarsetia@gmail.com
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