Indian economy in the light of Millennium Development Goals

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mdgCEZARY SZCZEPANIUK

Two years before the end date of the Millennium Development Goals, India seems to be far from achieving most of them. Millennium Development Goals are eight objectives set up in 2000 to be achieved by 2015 in order to improve general social and living conditions in the world. Among the MDGs, six seem to be crucial from the social point of view: to eradicate poverty, achieve universal primary education, promote gender equality, combat HIV/AIDS, reduce child mortality and improve maternal health. The key to understand conditions for India’s MDG progress (or rather their delay) is to analyze the country’s economy. 

India’s history offers a unique panorama of cultures, ethnicities, languages, alphabets and religions. Diversity is its first and overwhelming characteristic, also from the economic point of view, what is observed over the past 200 years. Great Britain’s military conquest of India was completed in 1857, when the East India Company, already under state control, formally transferred the legal authority over India to the British Crown. From this moment Britain’s influence over the Indian economy would last for more than a century, with certain consequences. Throughout this time Indian nation was humiliated and impoverished serving as a labour force for the British Empire. As the military conquest was from the very beginning followed by an economic integration, Great Britain went from being an importer of Indian textiles and garments to a significant exporter to India.

It was not before 1948 when the brave actions of Mohatma Gandhi and Musulman League finally helped India gain its independence, with the division of the country into two parts: India and Pakistan. After the second world war, from the 1950s to the 1980s, India followed socialist-inspired policies. Starting from 1960, the country performed a programme called ‚the green revolution’ which modernised agriculture in the country but did not solve the social problems of India’s rural areas. The economy was shackled by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and slow growth. In 1991, the state liberalised its economy and moved towards a market-based system.

Today’s India is developing into an open-market economy, with some remains of autarkic rules. Economic liberalisation, including reduced controls on foreign trade and investment, began in the early 1990s and has served to accelerate the country’s growth, with an average of more than 7% per year since 1997. These reforms were similar to the ones implemented at the same time in China, Central and Eastern Europe, and the former Soviet Union. Similarly to their experience, the reform process in India led to an increase in the income gap and stratification of the society – the Gini coefficient index for India is 38.1, where 100 means perfect inequality, and 0 perfect equality. India’s diverse economy encompasses traditional village farming, modern agriculture, a wide range of modern industries, and a multitude of services. About a half of the workforce (53%) is employed in agriculture, but services are the major source of economic growth, accounting for more than half of India’s GDP (65%).

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India has capitalised on its large educated English-speaking population to become a major exporter of information technology services and software workers. Major export commodities of India range from petroleum products, precious stones, machinery, iron, steel, chemicals, vehicles, and apparel.

An industrial slowdown early in 2008, followed by the global financial crisis, led GDP’s growth to slow, but India still remained the second fastest growing in the world among major economies. The country escaped the brunt of the global financial crisis because of cautious banking policies and a relatively low dependence on exports. Domestic demand, driven by purchases of consumer durables and automobiles, has re-emerged as a key driver of growth, as exports have fallen since the global crisis started. Moreover, India’s long term challenges include widespread poverty (30% of the population is living under poverty line), inadequate physical and social infrastructure, limited employment opportunities, and insufficient access to basic services and higher education. Over the long-term, a growing population and changing demographics will only exacerbate social, economic, and environmental problems. India, with the world’s second largest labour force, (482.3 million people) produced a GDP per capita in 2012 (per capita taking into account power parity purchase) of $3,900 what places India in 168 place in the world. In comparison, Chinese GDP per capita accounts for 8.500$, Brazilian 11.900$.

In 2013, the Global Competitiveness Report ranked India 60th in terms of competitiveness globally and 41st in business sophistication and innovation; previously ahead of several other emerging economies and now in the falling trend, behind Brazil, South Africa, and China by 31 positions. The business climate has worsened in India since previous reports, so have the technological readiness and market efficiency. Moreover. India has the lowest ratio of working women to men outside the Arab world (137th position). On the other hand, according to E&Y consultancy, the country remains the most attractive investment state, followed by Brazil and China. GCR says that Indian economy is viewed as the second most favorable outsourcing destination after the United States.

Despite India’s impressive economic growth over recent decades, it still contains the largest concentration of poor people in the world. The percentage of people living below the World Bank’s international poverty line of $1.25 a day decreased from 60% in 1981 to 29,8% in 2010. When it comes to children health currently one in every three malnourished children in the world lives in India. Nowadays country’s life expectancy at birth is 66 (an increase from 61 in 1995). According to UNAIDS Report released in 2013, India reduced HIV infections by 57% since 2001.

India faces great economic challenges and choices. Firstly, liberalization of major key sectors which remained hamstrung. Secondly, investment in basic infrastructure (roads, ports, power, water and sanitation, telecommunications), in order to reduce production costs and deepen country’s integration domestically and with world markets. Thirdly, great investment in health and education of its population. Fourthly, India has to figure out how to deal with payment for infrastructure and social investments due to deficit problems. Nevertheless, India proves that it is possible to make progress by smart use of the technological possibilities of Internet-empowered software programming, offshore business processing, long-distance data transcription, and a host of other IT-based industries, and this is the lesson which other developing countries should take from India.

czeThe country is close to achieve the goal 4 and 5 on reducing child death and improving maternal health, but generally, it can be already stated that the entire challenge of accomplishing all the eight MDGs in India has failed.  The situation with combating HIV/AIDS improved significantly, but is still far from the expected results. About 6 mln people in India in 2005 were living with the virus. Mass poverty decreased in India as well, thanks to economic development and investments in labour force. In spite of that, still more than 300 mln people are poor in the country on the Ganges. By improving its economic competitiveness and doing business conditions India is getting closer to the improvement of general social conditions. Definitely, the fact of high ratio of inequality of women on the labour market remains worrying. It derives from the specific Indian culture and the place of a women in the family.

Let us not forget that India is the second most populated country in the world and as such requires enormous socio-economic spendings.

The full UNDP country report is available here.


Cezary Szczepaniuk graduated from University of Maria Curie-Skłodowska in Lublin with Master degree in international relations and from College of Europe postgraduate European Interdisciplinary Studies with specialization “EU as a regional actor”. His interests vary from international security, to Eastern Partnership, Ukrainian geopolitics and European Security and Defense Policy. This text was inspired by the AEGEE–Europe project: UN Millennium Development Goals – A Challenge for Today’s Youth – Case Study Trip to India.


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Cezary Szczepaniuk

Cezary Szczepaniuk, - Współpracownik CIM - absolwent stosunków międzynarodowych Wydziału Politologii Uniwersytetu Marii Curie-Skłodowskiej w Lublinie oraz podyplomowych Interdyscyplinarnych Studiów Europejskich na specjalizacji „Unia Europejska jako aktor regionalny” w Kolegium Europejskim w Natolinie. Jego zainteresowania obejmują szeroko rozumiane aspekty bezpieczeństwa międzynarodowego, Partnerstwo Wschodnie (Ukraina, Gruzja), NATO oraz Wspólną Politykę Zagraniczna i Bezpieczeństwa UE. Cezary Szczepaniuk graduated from University of Maria Curie-Skłodowska in Lublin, Poland with Master degree in international relations and from College of Europe European Interdisciplinary Studies with “EU as a regional actor” specialization. His interests vary from international security, Eastern Partnership, Ukrainian geopolitics and French security to defence policy. He took part as an international observer in the Election Observation Mission during presidential elections in Georgia on October 27, 2013.

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