Class 12-commerce NCERT Solutions Economics Chapter 10: Comparative Development Experiences of India and its Neighbours

A major instrument to promote foreign trade activities among nations are regional and economic groupings. They are South Asian Association for Regional Cooperation (SAARC), European Union, Association of Southeast Asian Nations (ASEAN), G-8 and G-20. Developing nations not only compete globally with developed nations but also among themselves in the limited space of the developing nations. Therefore, the formation of these regional and economic grouping is important in the following ways:

1. To increase economic cooperation among nations which share economic interests
2. To understand the development strategies and measures of member countries so that it becomes easy to know the strengths and weaknesses of neighbouring countries
3. To identify common economic activities among member nations as these have an impact on human development in a common situation 

Countries try to strengthen their own domestic economies through various means as follows:

1. Regional and economic groupings are South Asian Association for Regional Cooperation (SAARC), European Union, Association of Southeast Asian Nations (ASEAN), G-8 and G-20. These groups increase economic cooperation among countries which share economic interests.
2. Nations understand the development strategies and measures of member countries so that it becomes easy to know the strengths and weaknesses of neighbouring countries.
3. Nations liberalise economic activities by controlling the interference of the government and act upon market forces. This promotes the efficiency of the nation and enhances the strength to compete in the international market.
4. Nations encourage the policy of globalisation to integrate their economies with other economies and attract foreign investment and technology transfer. 

India and Pakistan have followed similar developmental strategies for their respective developmental paths:

1. The developmental strategy was initiated in India and Pakistan after independence in 1947.
2. A mixed-economy model of growth was adopted by both economies to have the participation of the public and private sectors.
3. Both economies greatly emphasised the significant role of the public sector in the process of growth as they rely on huge investments from the government.
4. Both economies initiated reforms almost at one time to promote efficiency of the nation. Pakistan initiated reforms in 1988 and India in 1991.
5. The First Five Year Plan was announced by India in 1951-56 and Pakistan in 1956.  

The Great Leap Forward (GLF) campaign of China was initiated in 1958. Main objectives of this campaign:  

1. Establish large-scale operation of industries in the country.
2. Encourage people to set up household industrial units in their backyard.
3. Introduce many commune systems in the rural areas to encourage the participation of people for land cultivation. Nearly 26,000 communes covered the farm population in 1958.  
4. Create awareness among people about its significance in the process of GDP growth. 

Despite this, the challenges faced by China during the Great Leap Forward campaign:

1. In China, severe drought created chaos and 30 million people lost their lives. 
2. Russian people involved in the industrial process of China were asked by the Russians to withdraw from professional services. 

Yes, China's rapid industrial growth can be traced back to its reforms in 1978. China introduced reforms in two different phases, i.e. in the late 1970s and the early 1980s.

Late 1970s: 

Reforms were initiated in agriculture, foreign trade and investment sectors. In the agricultural sector, commune lands were segregated into small pieces of land and distributed among individual households for productive activities. They retained their earnings after paying the required amount of tax and thus enhanced agricultural productivity.

Early 1980s: 

1. Reforms were initiated in the industrial sector. Entry of private sector firms, township and village enterprises were opened to produce goods in the market. State-owned enterprises competed with private firms in the market and thus increased their efficiency and strength.
2. Reforms include dual pricing, i.e. prices were fixed in two different methods. Farmers and industrial units were restricted to buy and sell the fixed amount of raw materials and finished goods in the market based on the prices fixed by the government. On the other hand, the rest of the goods were bought and sold based on market mechanism. This mechanism increased the proportion of goods purchased and sold in the market over the years, and therefore, the aggregate productivity also increased.
3. Reforms include Special Economic Zone (SEZ) which was set up to attract foreign investment and trade activities. They aim to increase the foreign investment by offering high-quality infrastructure facilities and support services. They also allow duty-free import of capital goods and raw materials, simplified customs and banking procedures.  

Developmental initiatives taken by Pakistan for its economic development:

1. A mixed-economy model of growth was adopted to encourage the participation of the public and private sectors.
2. In the 1950s and 1960s, they introduced many regulated policy frameworks for import substitution and industrialisation.
3. Tariff barriers were imposed to protect the domestically produced consumer goods and to control competing imports.
4. The Green Revolution has resulted in agricultural mechanisation and thus increased the investment for infrastructural facilities in rural areas. This raised the food grain productivity.
5. Great emphasis on the significant role of the public sector was given in the process of growth as they rely on huge investment from the government. Nationalisation of capital goods industries was initiated in the 1970s.
6. In the 1970s and 1980s, denationalisation was encouraged to allow the entry of private sector companies in productive activities. They received financial aid from western nations and received incentives from the government.
7. This led to the initiation of economic reforms in 1988 to promote the efficiency of the nation. 

Important implication of the one child norm in China:

1. The one child norm was introduced in China in the late 1970s as population growth was the main reason.
2. This measure led to a decline in the sex ratio, i.e. the proportion of females per thousand males.
3. There will be an increase in the number of elderly population compared to young population in the future years.
4. This will enable the country to give social security measures with fewer workers. 

The following are the salient demographic indicators of China, Pakistan, and India:

Population:

• The population of Pakistan is very small as compared to India and China. Although China is the largest nation and geographically occupies the largest area among the three nations, its density is the lowest.
• According to 2017-18 data, population growth was the highest in Pakistan (2.05%), followed by India (1.3%) and China (0.46%).
• The reason for the low growth of the population is the one-child policy that was introduced in China in the late 1970s. 

Fertility Rate:

• The fertility rate is low in China (1.7%) due to the one-child policy. It is 2.2% in India and is very high in Pakistan at 3.6%.

 Source: World Development Indicators, 2019

 The sectoral contribution different sectors in India and China to the GDP/GVA in 2018 is as follows:

The contribution of agriculture in India was 16% while in China it was 7%. On the other hand, the contribution of the industrial sector is the highest at 41% and in India it was 30%. The contribution of the service sector is higher in India 54% and in China 52%.

Thus, in both countries, the contribution of the agricultural sector has declined. China’s growth is mainly contributed by the industrial sector and in India by the service sector.

Indicators of human development:

1. Life expectancy rate at birth (years) is the maximum age up to which an adult lives [high level].  
2. Adult literacy rate (% ages 15 and above) is the percentage of literate people [high level].
3. Infant mortality rate is the number of children who die before completing one year out of 1000 births [low level].
4. Percentage of the population below the poverty line is based on the percentage of people living on less than the international standard [low level].
5. GDP per capita is the share of national income generated or goods and services produced by an individual and it is the national income per person [high level].  
6. Maternal mortality rate is the number of registered maternal deaths because of birth or pregnancy-related complications per lakh live births [low level].
7. Population with sustainable access to improved sanitation (%) [high level] 
8. Population with sustainable access to improved water sources (%) [high level] 
9. Population undernourished (% of total) [low level] 

The rights of citizens of a country to play a role in the governance of the country are known as liberty indicators. Examples of liberty indicators:

1. Extent of democratic participation in social and political decision making
2. Extent of constitutional protection provided to the rights of citizens
3. Extent of constitutional protection of the independence of the judiciary and the rule of law 

Factors which led to the rapid growth in economic development in China: 

1. Reforms in late 1970s:
1. Reforms were initiated in agriculture, foreign trade and investment sectors. In the agricultural sector, commune lands were segregated into small pieces of land and distributed among individual households for productive activities. They retained their earnings after paying the required amount of tax and thus enhanced the agricultural productivity and social security of the people in rural areas.
2. Reforms in early 1980s:
1. Reforms were initiated in the industrial sector. Entry of private sector firms, townships and village enterprises were opened to produce goods in the market. State-owned enterprises competed with private firms in the market and thus increased their efficiency and strengths.
2. Reforms include dual pricing, i.e. prices were fixed in two different methods. Farmers and industrial units were restricted to buy and sell the fixed amount of raw materials and finished goods in the market based on the prices fixed by the government. On the other hand, the rest of goods were bought and sold based on market mechanism. This mechanism increased the proportion of goods purchased and sold in the market over the years, and therefore, the aggregate productivity also increased.
3. Reforms include Special Economic Zone (SEZ) which was set up to attract foreign investment and trade activities. They aim to increase foreign investment by offering high-quality infrastructure facilities and support services. They also allow duty-free import of capital goods and raw materials, simplified customs and banking procedures.

Thus, the outcome of all these economic reforms led to rapid growth in economic development in China.

Reasons for the slow growth and re-emergence of poverty in Pakistan:

1. Traditional method in the agricultural sector: The agricultural production method was not based on institutional basis of technology. As a result of a good harvest system, agricultural production remained unstable and highly vulnerable to climatic conditions. Good harvest relies largely on a good monsoon. If the conditions were not good, then the economic growth showed a negative trend.
2. High dependence on public sector enterprises: Great emphasis on the significant role of the public sector was given in the process of growth as they rely on huge investment of the government. As public sector enterprises lack operational efficiency and poor management of scarce resources, it led to slow progress in productivity.
3. High dependence on foreign loans: Generally, the balance of payment crisis was set right by borrowing funds from external sources such as International Monetary Fund (IMF) and World Bank. Foreign exchange earnings are one of the essential components where a country can earn through sustainable export of manufactured goods. In Pakistan, major foreign exchange was earned from the remittances of Pakistani workers in the Middle East and export of highly unstable agricultural products. There was a high dependence on foreign loans and this increased the problem to repay the loan amount.
4. Lack of political stability: Huge public expenditure was incurred on law and order to stabilise the unfavourable political situation. This unproductive expenditure caused a drain on economic resources.
5. Inadequate infrastructure: Pakistan was not able to attract foreign investment and trade activities because they lack infrastructural facility for business development.

As per Human Development Report 2018, the human development index (HDI) value was 0.647, 0.758 and 0.560 for China, India and Pakistan, respectively. This indicates higher growth and development of a nation.

1. Infant mortality rate: The infant mortality rate was as low as 8.5 per thousand in China compared to 29.9 per thousand in India and 57.2 per thousand in Pakistan.
2. Percentage of population below the poverty line: China was ahead of India in reducing the percentage of population below the poverty line to 7.0% (based on the number of people living on less than US $ 3.20 per day,2011). The percentage of population below the poverty line was 46.4% in Pakistan as compared to 60.4% in India. This implies that the economic growth in India was lesser than that in China and Pakistan.
3. Maternal mortality rate: The maternal mortality was only 27 per lakh in China compared to 174 in India and 178 in Pakistan. 

Thus, the comparative study of the indicators of HDI in 2018 observed that China was ahead of India and Pakistan. Higher HDI of China implies better performance of the nation such as high GDP per capita, population below the poverty line, access to improved sanitation, improved health facilities and good nourishment of the people. Pakistan was ahead in terms of decreasing the people living below the poverty line and in providing better access to sanitation and water.

China abolished the commune system of farming. Commune lands were segregated into small pieces of land and distributed among individual households for productive activities. They retained their earnings after paying the required amount of tax and thus enhanced agricultural productivity. This ensured social security of the people in rural areas. On the other hand, agricultural reforms are still hobbling in India. They lack infrastructure facilities for inter transport of raw materials and finished goods. Growth rate of population continued to remain high in India and required more investment to improve the standard of living of the people. The global interaction of the economy was wider in China than in India. India attempted to privatise the public sector enterprises. Despite an unfavourable political system, China used the market mechanism without losing political commitment. This market mechanism approach enhanced the social and economic opportunities for the nation. Thus, the social infrastructure facilities provided through the public intervention before the initiation of economic reforms resulted in better performance of the HDI in China.

1. First Five Year Plan of Pakistan commenced in the year 1956.
2. Maternal mortality rate is high in Pakistan.
3. Proportion of people below the poverty line is more in India.
4. Reforms in China were introduced in 1978.