Why is India Poor

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Why is India Poor?
Parth J Shah Centre for Civil Society parth_at_ccsind
ia.org
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• Population Explosion

• Lack of Education

• Corruption

• Culture / Attitudes
• Lack of Capital
• Political Instability
• Too large to govern
• Colonial legacy
• Weather / climate
• Neo-colonization
• Globalization / WTO

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Population Density and Poverty?
Some densely populated countries are poor
Some are rich
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Population Density and Poverty?
Some sparsely populated countries are rich
Some are poor
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Indias Population
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Effects of Colonisation?
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Democracy vs Dictatorship?
Success of Singapore, Malaysia, China, (Taiwan,
S. Korea)
Superiority of dictatorship
But think about the Dictatorships that are POOR!
How many Democracies are RICH?
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Democracy vs Dictatorship?
Democracy also usually entails

• Civil rights
• Free press
• Protection of minorities

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Illiteracy and Wealth?
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Culture and Attitude
Antimaterialistic
Fatalistic (Karma)
Lazy
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(No Transcript)
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Population, illiteracy, corruption, culture,
democracy, and colonisation are half-truths.
Economic and political institutions and policies
determine economic success.
The most important attribute of these
institutions and policies is
ECONOMIC FREEDOM!
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Economic Freedom Index 2000
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Economic Freedom Index 2000
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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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Per Capita Income Economic Freedom
20,000
16,000
Per Capita Income
12,000
8,000
4,000
0
Bottom
4th
3rd
2nd
Top 20
20
Quintile
Quintile
Quintile
Least free
Most free
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Real Growth in GDP Economic Freedom
2.00
1.00
Growth Rate, 1990s
0.00
-1.00
Bottom
4th
3rd
2nd
Top 20
20
Quintile
Quintile
Quintile
Least free
Most free
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Adult Illiteracy Rate (1995)
Least free
Most free
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UN Human Development Index
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0.8
Human Development
Index (out of 1)
0.6
0.4
0.2
0
Bottom
4th
3rd
2nd
Top 20
20
Quintile
Quintile
Quintile
Least free
Most free
20
Economic Freedom versus Corruption
10
9
8
7
6
Corruption Rating
5
4
3
2
1
0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Economic Freedom Rating
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Income Inequality
Percent of income accruing to the
Poorest 20
2nd 20
3rd 20
4th 20
Richest 20
50
40
30
20
10
0
Bottom 20
4th Quintile
3rd Quintile
2nd Quintile
Top 20
Least free
Most free
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India
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India Top Ten Average
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India Top Ten Legal System Property Rights
Law and Order
Protection of intellectual
property
Impartial courts
Judiciary independence
0
2
4
6
8
10
Score (out of 10)
Average of Top Ten
India
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India Top Ten Business Regulations
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India Top Ten Credit Market Regulations
27
India Top Ten Tariffs
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Freedom to Trade with Foreigners
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No country with a persistently high economic
freedom rating during the last two decades failed
to achieve a high level of 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