India and Jamaica

Comparison of Macroeconomic Parameters

-By Gaurav Kataria (129278102) Section B Introduction: India is developing into an open-market economy, yet traces of its past autarkic policies remain. Economic liberalization, including industrial deregulation, privatization of state-owned enterprises, and reduced controls on foreign trade and investment, began in the early 1990s and has served to accelerate the country's growth, which has averaged more than 7% per year since 1997.Little economic reform took place in 2011 largely due to corruption scandals that have slowed legislative work. India's medium-term growth outlook is positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. India has many long-term challenges that it has not yet fully addressed, including widespread poverty, inadequate physical and social infrastructure, limited nonagricultural employment opportunities, scarce access to quality basic and higher education, and accommodating rural-to-urban migration. The Jamaican economy is heavily dependent on services, which now account for nearly 65% of GDP. Jamaica's economy faces many challenges to growth: high crime and corruption, large-scale unemployment and underemployment, and a debt-to-GDP ratio of more than 120%. Jamaica's public debt burden is the result of government bailouts to ailing sectors of the economy, most notably to the financial sector in the mid-to-late 1990s.The Government of Jamaica signed a $1.27 billion, 27-month Standby Agreement with the International Monetary Fund for balance of payment support in February 2010. Other multilaterals have also provided millions of dollars in loans and grants. Despite the improvement, debt servicing costs still hinder the government's ability to spend on infrastructure and social programs, particularly as job losses rise in a shrinking economy. Comparison: We have compared India and Jamaica on various parameters. These parameters are grouped under following headings (Source for all data is CIA World Fact Book and IMF Data Base) 1. GDP: (Refer to Table 1) The Real GDP of Jamaica is quite less compared to India, but this is because of the population difference between both the countries. So it would be much more relevant to compare the GDP per capita, which would better indicate the economic situation of the country. It is seen that the GDP per capita of Jamaica is very high ($9100) when compared to India ($3700). This clearly shows that Jamaica is indeed in a better economic situation at present when compared to India and has better living standards. During the economic recession in the years 2007 to 2009, the GDP growth rate of India and Jamaica fell rapidly. Jamaica reached level of -2.9% in 2009. However, after the recession, both countries GDP growth rate has picked up. Agriculture contributes to a higher percentage of the GDP in India (17.2%) than in Jamaica (5.8%). Another issue with respect to Gross savings and Investment. India has high percentage of savings and investment as percentage of GDP as compared to Jamaica. Indias investment constituted about 35% of GDP as compared to 25% of Jamaicas.

2. Unemployment: (Refer to Table 2) Jamaicas labour r force is smaller than India as Indias population is too large as comparison with Jamaica. But unemployment rate is higher than India. Agriculture is biggest employer in India whereas Services sector is biggest employer in Jamaica. In India, job distribution and corresponding GDP has high divergence. Agriculture contributes to just 17% to GDP but it employs 52% of labour force. This makes employment market volatile as agriculture provides temporary and seasonal employment. The performance of industry sector for India and Jamaica needs to be improved. Only 14% of labour force has employment in Industry in India while 19% in Jamaica. This shows that we are not enough industrialized and there is scope to improve it. 3. Inflation: (Refer to Table 3) Both countries use consumer price index to calculate inflation. Indias inflation is higher that Jamaicas. Indias inflation has remained higher in past couple of years. Jamaicas inflation was also higher for some years but now it is decreasing. (Refer to Figure 2)

4. Human Development: (Refer to Table 4) The population below poverty line is measured on respective countries national scale i.e. these are the poverty levels which each country is claiming. Population Below Poverty line in India is about 29.8%. At the same time, in Jamaica, it is around 16.5%. This drastic difference can be because of PPP difference between India and Jamaica, GDP per capita and also with respect to inflation. Household income distribution for between lowest and highest segments of society is similar in both countries. With respect to Gini Index, it is higher for Jamaica as compared to India. But both countries need to work on it as both have above average Gini Index indicating higher disparity in income distribution. 5. Budget (Revenue, Expenditure & Debt): (Refer to Table 5) Both countries are running fiscal deficits, Indias being higher.. Interest payment, defense and subsidies are major part of Indias expenditure. Indian investments are higher compared to Jamaicas as percentage of GDP. The reason might be that India is in developing state and businesses are expanding. Owing to big geographic and demographic factors like area and population, Indias Stock of narrow money is higher than Jamaica, it is more than 275 times. The same pattern is reflected in Stock of broad money (M2) , Stock of domestic credit and Reserves of foreign exchange and gold. Jamaica has more external debt than India as it had invested in development in near past. 6. Trade: (Refer to Table 6) Both India and Jamaica are running trade deficits. Indias trade deficit is higher as compared to Jamaica. Also, Indias oil import seems much higher than Jamaica. This can be attributed to larger demography of India than Jamaica due to more consumption. Indias main trade partners are China, Russia and UAE. Jamaicas main trade partners are the USA, the UK, Canada, Norway, Venezuela, the Netherlands Antilles and other CARICOM. Both countries have negative

current account balances owing to large trade deficits. Referenceshttp://www.imf.org/external/country/index.htm https://www.cia.gov/library/publications/the-world-factbook/fields/2186.html

Appendix
Figure 1- GDP Per Capita

Figure 2- Inflation

Table 1 GDP Parameter GDP (Purchasing Power Parity) GDP per capita GDP growth rate GDP contribution India (est. 2011) $ 4,515 Billion $3700 6.8% agriculture: 17.2% industry: 26.4% services: 56.4% (2011 est.) Jamaica (est. 2011) $ 25.07 Billion $ 9,100 1.2 % agriculture: 5.8% industry: 29.5% services: 64.7% (2011 est.)

Table 2- Unemployment Parameter Unemployment Labour force (est.2011) Labour force by Sectors India (2011 est.) 9.8 % 487,600,000 Agriculture: 52% Industry: 14% Services: 34% Jamaica (2011 est.) 12.7% 25.64 million Agriculture: 17% Industry: 19% Services: 64%

Table 3- Inflation Parameter Inflation (CPI) India (2011) 8.9% Jamaica (2011) 7.525%

Table 4- Human Development Parameter Population below poverty line Household income or consumption by percentage share Distribution of family income Gini index India 25% (est. 2011) Jamaica 16.5%(est. 2011)

lowest 10%: 3.6% highest 10%: 31.1% (2005)

36.8(2004)

lowest 10%: 2.1% highest 10%: 35.8%(2005)

45.5 (2004)

Table 5- Budget Description Parameter Budget Taxes and other revenues Budget surplus Public debt Investment Savings Stock of Money India (est. 2011) revenues: $196.4 billion expenditures: $308.8 billion 11.7% of GDP -6.7% of GDP of GDP 48.5% of GDP 35% of GDP 31.602% of GDP $278.8 billion(Dec. 2009) Jamaica (est. 2011) Revenues: $3.797 billion Expenditures: $4.69 billion 25.6% of GDP -6% of GDP 125.5% of GDP 24.977 % of GDP 13.322 % of GDP $1.253 billion(Dec. 2009)

Table 6- Trade Parameter Exports Imports Oil imports Oil Exports India (est. 2011) $299.4 billion $461.4 billion 3.06 million bbl/day 825,600 bbl/day Jamaica (est. 2011) $1.613 billion $6.292 billion 90,520 bbl/day 0