India’s Slower GDP Growth Is a Threat to Curb Its High Poverty

High-Inflation and Slower Economic Growth Effect Poverty

First Published Date: June 28, 2011 ADawnJournal.com

India is a country which stands seventh largest in area and second largest in population. As a developing country, India’s economy is the tenth largest in the world and third largest in Asia in terms of nominal GDP and forth largest in terms of purchasing power parity (PPP). India is a growing giant and its economy is growing fast. This growth rate seemed to be on the verge of 10 percent, as economists were convinced. However, recent data released show India’s economy grew by 7.8 percent in the fourth quarter of 2010-2011 ending in March. This slower GDP growth rate will likely to effect the reversal of India’s high poverty level.

7.8 percent growth is the lowest rate in five quarters. The same three-month period of the previous fiscal year had a growth rate of 9.4 percent. The GDP for the full 2010-2011 fiscal year stands at 8.5 percent, which is lower than estimated 8.6 percent, but an increase from 2009-2010 rate of 8 percent.

High inflation, which is currently running at 8.7 percent, is one of the major causes to weaken economic growth. Indian prime minister recently stated that 2011-2012 growth rate prediction of 9 percent would likely to be missed. To curb high inflation, India’s central bank raised interest rates nine times in the past fifteen months. However, these rate hikes slowed down manufacturing sector investments, which likely impacted industrial output.

India needs high (such as double-digit) growth to tackle its high poverty. However, to fight inflation, this growth has to be sacrificed. India is under economic expansion for 20 years; however, the poverty level hasn’t improved significantly. One in every two children in India is still malnourished. India needs high economic growth to run various essential projects aiming to curb poverty for millions of poverty-stricken population. With high inflation and slower economic growth, things are not looking bright at this moment.

Some Facts About Chile’s Economy

Economy of Chile

First Published Date: September 7, 2011

Chile, a country in South America, is considered the economic miracle of Latin America. In only two decades, between 1988 to 2008, its economy doubled and then tripled, which means its economic growth increased 600 percent. According to the 2011 Index of Economic Freedom, Chile has the 11th freest economy on earth and Chile has the highest degree of economic freedom in the Central and South America region.

It took Chile almost three decades of endeavour to reach today’s position. Chile has a market oriented economy characterized by high volumes of foreign trade, sound economic policy, and reputed financial system. It’s no wonder that Chile enjoys the highest sovereign bond rating in South America. Chile was the first South American country to join the Organization for Economic Cooperation and Development (OECD) in 2010. In 2006, Chile became the highest nominal GDP per capita country in Latin America.

Chile was one of the few nations that handled the 2009 global economic downturn well and also the financial havoc caused by the 2010 earthquake. Its economic growth was 1.5 percent in 2009 cent and 5.2 percent in 2010. By law, the Chilean government is required to a fiscal surplus of 0.5 percent of its GDP. This used to be 1 percent before 2008 and was waived for 2009.

Chile’s independent Central Bank targets to keeps its inflation within 3 percent. However, inflation reached closer to 8 percent in 2007 and 9.9 percent in 2008. But inflation decreased to 2 to 2.7 percent in 2009 and 2010 – keeping it in line with Central Bank’s target range. Unemployment rate in Chile was 8 percent in 2010. Percentage of population below the poverty level stands around 14 percent. It was 46 percent in 1987 and 18 percent in 2005. Chile’s public debt to GDP percentage is 6.2 percent, which is lower than most countries. For example, United State’s public debt to GDP percentage is 99.32 percent.

Exports account for one third of Chile’s GDP and minerals account for half of the value of exports. Chile is the world’s largest producer of copper, with recorded copper reserves for 200 years and Chile’s copper alone provides one-third of its government’s revenue. Government owned CODELCO is the world’s largest copper producing company. However, Chile has beefed up its non-traditional exports as well, such as wood and forestry products, paper and pulp, wine, seafood, fish, fresh and processed fruits and vegetables. China, Japan, United States, Brazil, and the Netherlands are Chile’s largest export market.

Chile, while greatly improving its economy, still has some work to do. The country still has a great deal of poverty and a significant poverty gap, alone with environmental problems. The dependence on copper, weak employee skills and insufficient training, inadequate regulation, limited credit access, and limited product and technology infrastructure are some of the issues Chile will have to deal with as the country continues to move into the future.

Global Income Inequality is on the Rise

Global Income Inequality

First Published Date : September 29, 2011

According to a report from the Conference Board of Canada, Global income inequality is on the rise and Canada has the 4th largest gap income inequality gap among its 17 peer countries. The board uses Gini Index to measure income inequality that shows the distribution of income deviates from a perfectly equal distribution zero to a totally imperfect distribution of 1. In other word, 0 means every person has the same income and 1 means one person has all the income.  

Let’s look at some of the Board’s findings in brief:

– U.S. has the largest income inequality among its peers.
– Canada has the fourth largest income inequality increase among its peers.
– 42 percent of the total world’s income goes to the richest 10 percent.
– 1 percent of the total world’s income goes to the poorest 10 percent.
– South American and southern African countries have highest inequality.
– European countries have low inequality.
– U.S. and Canada have medium inequality.
– If you are lucky to born in a rich country (like Canada) even with a low income,    
   your   income will be higher than most of the world’s population
– Canadians with low-income are richer than 75 percent of the world’s population.

According to Richard Freeman, an economics professor at Harvard, globalization and market capital raised living standards for billions and lowered inequality worldwide, but increased inequality within most countries.

China’s Economy Heading for a Soft Landing

China’s Economy Will Slow Down

First Published Date : November 3, 2011 ADawnJournal.com

China’s economy, the second largest economy in the world, will grow in the future, but possibly at a much slower pace. The latest data, at least some of them, point out the slower pace compared with the robust pace in the past decades. Chinese economic growth slowed to 9.1 percent in the 3rd quarter, while the previous quarter had 9.5 percent growth.

China’s GDP increased to 10.4 percent in 2010. However, 2011 GDP growth is expected to be 9.4 percent or even below 9 percent. The Chinese manufacturing index showed positive growth last month, but employment growth failed to show any significant improvement. To offset the slower economic growth and external demand for Chinese manufacturing products, the Chinese government is planning to boost support for employment growth in the local small business and service sectors.

There are concerns in the credit market as the Chinese government’s recent tighter liquidity control showed significant sharp drop in new lending, pushing the credit costs upward. This caused profit margins to slim for the Chinese firms. Trust loans and the margin deposit went down below regular level in the last quarter.

Based on various data and analysis, the economic outlook for China is mixed at this moment. On one side, we have GDP and export figures showing an imminent economic slowdown. On the other, we have gains in local consumption and fixed-asset investments caused by minimum wage increases and other factors.

The middle class population is estimated to be approximately 250 million in China. However, their consumption level is still low when compared to other nations. However, in recent years domestic consumption has been on the rise and the Chinese government is looking to use this consumption growth to build a sustainable economic growth for years to come.

The Importing and Exporting of China

China Import and Export

First Published Date : March 31, 2011 ADawnJournal.com

China is the second largest economy on the planet and that has a lot to do with its surplus workforce and high amount of natural resources. Currently, China is also one of the world’s largest importers and exporters, something that is helping to fuel the country into the future.

In 1998, China had a global trade of $324 billion and that same year, China reduced its import tariffs from 35 per cent to 23 per cent and then again to 17 per cent. This allowed China to join the World Trade Organization, which has completely changed the country. Only 10 years after making those changes, China now has a global trade value of $2.4 trillion. It took six years (1988 to 1996) to go from $100 billion to $200 billion in global trade, and only seven years to go from $200 billion to $500 billion. From there, it was only three years before China passed the $1 trillion mark.

Currently, China imports mostly capital goods and industrial supplies, most of which are high-technology equipment and most of those come from Japan and the United States.

Due to the high amount of surplus workforce in China, about 80 per cent of the country’s exports are manufactured goods, and most of these are textiles and electronic equipments, along with chemicals and agricultural products.

To attest to the high amount of exporting and importing going on in China, of the five busiest ports on the planet, China has three.

The United States is one of the largest trading partners of China, with the trade surplus reaching over $200 billion. A big reason for this is because of Wal-Mart, which is the seventh largest trading partner with China, ahead of the United Kingdom.

China also trades a great deal with Russia, amounting to over $40 billion. In the past few years, the exports of machinery and electronic goods to Russia has grown immensely, as has its exports of high-tech products. Russia is also the eighth largest trading partner with China, and China is Russia’s fourth-largest trading partner. China mainly gets energy such as oil from Russia, with most of it coming from train, or through pipelines like the proposed Eastern Siberia-Pacific Ocean pipeline.

Within China, there is the China Council For The Promotion of International Trade, which helps to promote China’s international economic and commercial interests. The group does this by developing co-operation among businesses and exchanges with countries around the planet. The group also compiles data, works with diplomatic agencies and is active to ensure that there are no trade issues.

China is a growing nation and one that will soon be the largest economy on the planet. As time goes on, its trade with other growing superpowers will increase, especially India, Russia, Brazil and the European Union. At the same time, trade with the United States may fall as the economy of the United States struggles to remain a dominant power within the international community.