NATIONAL INCOME V.

HDI: A CASE STUDY OF NORWAY

SUMITTED BY:

NAME: VIVEK RANJAN

COURSE: B.A., LL.B. (Hons.)

ROLL NO: 1776

SEMESTER: 4TH

SUBMITTED TO:

DR. SHIVANI MOHAN

ECONOMICS-II

RESEARCH PAPER SUBMITTED IN THE FULFILLMENT OF COURSE

ECONOMICS-II FOR ATTAINING THE DEGREE OF B.A. LLB. (HONS.)

FEBRUARY, 2019

CHANAKYA NATIONAL LAW UNIVERSITY, NYAYA NAGAR, MITHAPUR,

PATNA – 800001

1
DECLARATION BY CANDIDATE

I, hereby, declare that the work reported in the B.A., LL.B. (Hons.) Project Report entitled
“NATIONAL INCOME V. HDI: A CASE STUDY OF NORWAY” submitted at Chanakya
National Law University is an authentic record of my work carried out under supervision OF.
I have not submitted this work elsewhere for any other degree or diploma. I am fully
responsible for the contents of my project report.

SIGNATURE OF CANDIDATE

NAME OF CANDIDATE: VIVEK RANJAN

CHANAKYA NATIONAL LAW UNIVERSITY

2
ACKNOWLEDGEMENT

I would like to thank my faculty DR. SHIVANI MOHAN whose guidance helped me a lot
with structuring my project. I owe the present accomplishment of my project to my friends,
who helped me immensely with materials throughout the project and without whom I
couldn’t have completed it in the present way.

I would also like to extend my gratitude to my parents and all those unseen hands that helped
me out at every stage of my project.

THANK YOU,

NAME: VIVEK RANJAN

ROLL NO: 1776

SEMESTER: 4TH

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 INDEX

TABLE OF CONTENTS

1. INTRODUCTION …………………………………………………………………. (5-6)

*AIMS AND OBJECTIVE

*HYPOTHESIS

* RESEARCH METHODOLOGY

* SOURCES OF DATA

*SCOPE AND LIMITATIONS OF THE STUDY

2. INTRODUCTION OF SCANDINAVIAN COUNTRIES AND THEIR PROBLEMS

………………………….……………………………………... (7,8)

3. DEVELOPING COUNTRIES FOCUSES MOSTLU ON ITS GDP WHICH AFFECTS

ECONOMIC WELFARE CRITICAL ANALYSIS ………………………..…. (9-15)

4. INCREASING NATIONAL INCOME AFFECTS STANDARD OF LIVING OF

PEOPLE: POSITIVELY AND NEGATIVELY……………………………..... (16-22)

5. CHALLENGES FACED BY DIFERENT COUNTRIES ……………….… (23-28)

6. CONCLUSION …………………………………………………………..… (29)

BIBLIOGRAPHY ………………………………………………………..…… (30)

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 1. INTRODUCTION

National income is the aggregate money value of all incomes earned by individuals and
enterprises. National income may also be defined as the money measure of the net aggregates
of all commodities and services accruing to the inhabitants of an economy during a year.

The Human Development Index (HDI) is a statistic composite index of life expectancy,
education, and per capita income indicators, which are used to rank countries into four tiers
of human development. A country scores a higher HDI when the lifespan is higher, the
education level is higher, and the GNI (PPP) per capita is higher.

Most countries use GDP to measure standard of living. Economists, policymakers,

international development agencies and even the media use it as an indicator of the economic
health of a nation. The advantages offered by GDP is that it is widely and frequently used and
its data requirements are readily available. Since the definition is common among countries,
consistent comparisons can be made between and among them.

GDP is criticized because it does not take into consideration other aspects that define human
well-being like life expectancy and educational attainment.

It is for these reasons that alternative ways of measuring standard of living have emerged.
One of these is the Human Development Index or HDI. Developed by the United Nations,
HDI takes into account GDP and adds other factors to measure other aspects of human
development: knowledge, longevity and decent standard of living. The main indicators used
are life expectancy, adult literacy rate and gross enrollment ratio and per capita GDP. HDI
index values range from 0 to 1. Those countries with an HDI of over 0.800 are part of the
High Human Development group. Those between 0.500 and 0.800, are considered as
Medium Human Development countries. And, those that fall below 0.500 are the Low
Human Development countries.1

OBJECTIVE OF THE STUDY

1. To understand the mindset of developing countries that why are they tends to
increasing their national income rather than HDI.
2. To know the measuring of HDI and NATIONAL INCOME.

1
https://www.nationmaster.com/blog/?p=45 visited on 14 February 2019, 10:15 PM

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HYPOTHESIS

The researcher presumes that

1. The developing country focuses mostly on national income like GDP rather than
human development which is inadequate measurement of the economic welfare.
2. Increasing national income affects positively standard of living of people like life
expectancy, education etc.

RESEARCH METHODOLOGY

This project work is solely based on doctrinal type of research

SOURCES OF DATA

The researcher will be relying on both primary as well as secondary sources of data to
complete the project

Primary source – judgements, statutes etc.

Secondary source-books, newspapers etc.

SCOPE AND LIMITATION OF THE STUDY

Though the researcher will try his level best not to leave any stone unturned in doing this
project work to highlight various aspects relating to the topic, but the researcher will sight
with some of unavoidable limitations. The limitations encountered by the researcher were the
paucity of time.

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2. INTRODUCTION OF SCANDINAVIAN COUNTRIES AND THEIR PROBLEMS

Scandinavia is a large region of northern Europe that is mainly made up of the Scandinavian
Peninsula. It includes the countries of Norway and Sweden. Neighboring Denmark and
Finland, as well as Iceland, are also considered to be part of this region.

Geographically, the Scandinavian Peninsula is the largest in Europe, extending from above
the Arctic Circle to the shores of the Baltic Sea and covering about 289,500 square miles.2

Sweden, Norway, Finland and Denmark (collectively the Nordic countries) have a
combination of high living standards and low income disparity that has captured the world’s
attention. At a time when the growing gap between the rich and poor has become a political
hot button in developed nations, the region known as Scandinavia has been cited by many
scholars as a role model for economic opportunity and equality.

The Nordic Model

The Nordic model is a term coined to capture the unique combination of free market
capitalism and social benefits that have given rise to a society that enjoys a host of top-quality
services, including free education and free healthcare, as well as generous, guaranteed
pension payments for retirees. These benefits are funded by taxpayers and administered by
the government for the benefit of all citizens. The citizens have a high degree of trust in their
government and a history of working together to reach compromises and address societal
challenges through democratic processes. Their policy makers have chosen a mixed
economic system that reduces the gap between the rich and the poor through redistributive
taxation and a robust public sector while preserving the benefits of capitalism.

The model is underpinned by a capitalist economy that encourages creative destruction.

While the laws make it is easy for companies to shed workers and implement transformative
business models, employees are supported by generous social welfare programs. The nation’s
tax structure is based on individual rather than household income, coupled with a flat-tax.
The result is a system that treats all citizens equally and encourages workforce participation.

2
Amanda Briney Updated September 12, 2018 <https://www.thoughtco.com/countries-of-scandinavia-
1434588> visited on 03 march 2019, 09:39 AM

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Gender equality is hallmark trait of the culture that not only results in a high degree of
workplace participation by women but also a high level of parental engagement by men.3

Challenges

The Nordic model faces some notable pressures to its sustainability. Two of the largest
concerns are an aging population and influx of immigrants. In terms of an aging population, a
large base of young taxpayers and a smaller population of older residents receiving services is
the ideal scenario. As the population balance shifts the other way, benefit reductions are a
likely outcome. Fortunately for their citizens, the Nordic nations have willingly chosen a path
of greater equality for all citizens and have demonstrated an ability to work through their
political differences for the greater good of all.

In terms of immigration, Scandinavia attracts a notable influx of newcomers seeking to enjoy

the generous public benefits. These new arrivals often come from nations that do not have a
long, shared history of making decisions on behalf of the common good. While native
Scandinavians tend to have a high degree of participation in the workforce as part of their
collective decision to support the amenities their society offers, immigrants do not always
share this vision. These new arrivals present a significant burden to the system and could,
ultimately, result in its demise.

Two other concerns include native citizens taking advantage of the generous benefits system
and the impact of poor global economic conditions. Again, the culture of cooperation and
shared interest in a strong social safety net has enabled these countries to adjust their benefit
programs and continue to deliver a wide range of services even in the aftermath of the Great
Recession.4

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BY JAMES MCWHINNEY Updated Oct 7, 2014
<https://www.investopedia.com/articles/investing/100714/nordic-model-pros-and-cons.asp> visited on 03
march 2019, 10:50 AM
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ibid

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 3. DEVELOPING COUNTRIES FOCUSES MOSTLY ON GDP WHICH
AFFECTS ECONOMIC WELFARE CRITICAL ANALYSIS

Gross Domestic Product (GDP) is one of the most widely used measures of an economy’s
output or production. It is defined as the total value of goods and services produced within a
country’s borders in a specific time period — monthly, quarterly or annually.

GDP is an accurate indication of an economy's size, while GDP per capita has a close
correlation with the trend in living standards over time, and the GDP growth rate is probably
the single best indicator of economic growth.

Why GDP is Important or why countries focuses on GDP

GDP enables policymakers and central banks to judge whether the economy is contracting or
expanding, whether it needs a boost or restraint, and if a threat such as a recession or inflation
looms on the horizon.

The national income and product accounts (NIPA), which form the basis for measuring GDP,
allow policymakers, economists and business to analyze the impact of such variables as
monetary and fiscal policy, economic shocks such as a spike in oil price, as well as tax and
spending plans, on the overall economy and on specific components of it. Along with better
informed policies and institutions, national accounts have contributed to a significant
reduction in the severity of business cycles since the end of world War II.

GDP Calculations

GDP can be calculated either through the expenditure approach (the sum total of what
everyone in an economy spent over a particular period) or the income approach (the total of
what everyone earned). Both should produce the same result. A third method – the value-
added approach — is used to calculate GDP by industry.

Expenditure-based GDP produces both real (inflation-adjusted) and nominal values, while the
calculation of income-based GDP is only carried out in nominal values. The expenditure
approach is the more common one and is obtained by summing up total consumption,
government spending, investment and net exports.

Thus, GDP = C + I + G + (X – M), where

C is private consumption or consumer spending;

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I is business spending;

G is government spending;

X is exports, and

M is imports.

Why GDP Fluctuates

GDP fluctuates because of the business cycle. When the economy is booming, and GDP is
rising, there comes a point when inflationary pressures build up rapidly as labor and
productive capacity near full utilization. This leads the central bank to commence a cycle of
tighter monetary policy to cool down the overheating economy and quell inflation.

As interest rates rise, companies and consumers cut back their spending, and the economy
slows down. Slowing demand leads companies to lay off employees, which further affects
consumer confidence and demand. To break this vicious circle, the central bank eases
monetary policy to stimulate economic growth and employment until the economy is
booming once again. Rinse and repeat.

Consumer spending is the biggest component of the economy, accounting for more than two-
thirds of the U.S. economy. Consumer confidence, therefore, has a very significant bearing
on economic growth. A high confidence level indicates that consumers are willing to spend,
while a low confidence level reflects uncertainty about the future and an unwillingness to
spend.

Business investment is another critical component of GDP, since it increases productive

capacity and boosts employment. Government spending assumes particular importance as a
component of GDP when consumer spending and business investment both decline sharply,
as, for instance, after a recession. Finally, a current account surplus boosts a nation’s GDP,
since (X – M) is positive, while a chronic deficit is a drag on GDP.5

What is the Human Development Index - HDI

The Human Development Index (HDI) is a tool developed by the United Nations to measure
and rank countries' levels of social and economic development. Four principal areas of

5
BY ELVIS PICARDO Updated Aug 2, 2016 < https://www.investopedia.com/articles/investing/121213/gdp-
and-its-importance.asp> visited on 02 march 2019, 11:50 PM

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examination are used to rank countries: mean years of schooling, expected years of
schooling, life expectancy at birth and gross national income per capita. This index makes it
possible to follow changes in development levels over time and to compare the development
levels of different countries.

BREAKING DOWN Human Development Index - HDI

The Human Development Index (HDI) was established to place emphasis on individuals
more precisely on their opportunities to realize satisfying work and lives. Evaluating a
country's potential for individual human development provides a supplementary metric for
evaluating a country's level of development besides considering standard economic growth
statistics, such as gross domestic product (GDP). This index can also be used to examine the
various policy choices of nations; if, for example, two countries have approximately the same
gross national income (GNI) per capita, then it can help to evaluate why they produce widely
disparate human development outcomes. One goal of the proponents of the HDI is to
stimulate public policy debate.

How is the HDI Measured?

The HDI is essentially a summary measurement of basic achievement levels in fundamental

dimensions of human development. The computed HDI of a country is a geometric mean of
normalized indexes of each of the life aspects that are examined – knowledge and
understanding, a long and healthy life, and an acceptable standard of living.

The health aspect of the HDI is measured by the life expectancy, as calculated at the time of
birth, in each country. Education is measured on two levels: the mean years of schooling for
residents of a country and the expected years of schooling that a child has at the average age
for starting school. The metric chosen to represent standard of living is GNI per capita based
on purchasing power parity (PPP), a common metric used to reflect average income.6

GDP affects economic welfare or Drawbacks

Some criticisms of GDP as a measure of economic output are:

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REVIEWED BY WILL KENTON Updated Sep 15, 2018 < https://www.investopedia.com/terms/h/human-
development-index-hdi.asp> visited on 04 Marc 2019, 10:55 PM

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 a. It does not account for the underground economy – GDP relies on official data, so it
does not take into account the extent of the underground economy, which can be
significant in some nations.
b. It is an imperfect measure in some cases – Gross National Product (GNP), which
measures output from the citizens and companies of a particular nation regardless of
their location, is viewed as a better measure of output than GDP in some cases. For
instance, GDP does not take into account profits earned in a nation by overseas
companies that are remitted back to foreign investors. This can overstate a country's
actual economic output. For example, Ireland had GDP of $210.3 billion and GNP of
$164.6 billion in 2012, the difference of $45.7 billion (or 21.7% of GDP) largely
being due to profit repatriation by foreign companies based in Ireland.
c. It emphasizes economic output without considering economic well-being – GDP
growth alone cannot measure a nation's development or its citizens' well-being. For
example, a nation may be experiencing rapid GDP growth, but this may impose
significant cost to society in terms of environmental impact and increase in income
disparity.7

Analysis of developing countries

The primary factor used to distinguish developed countries from developing

countries is gross domestic product (GDP) per capita, a tally of all the goods and services
produced in a country in one year, expressed in U.S. dollars. GDP is calculated by dividing a
country's GDP by its population. For example, a small country with a GDP of $1 billion and a
population of 50,000 has a GDP per capita of $20,000. One unofficial threshold for a country
with a developed economy is a GDP per capita of $12,000. Some economists prefer to see a
per capita GDP of at least $25,000 to be comfortable declaring a country as developed,
however. Many highly developed countries, including the United States, have high per capita
GDPs of $40,000 or above.

One major limitation of GDP is that consumer prices for the same items—say, a gallon of
milk or a tank of gasoline— vary from country to country, sometimes significantly. To
account for such differences, a variant of GDP adjusts for purchasing power parity,
converting goods valued at U.S. prices.

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https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/economic-iondicators-and-
the-business-cycle/limitations-of-gdp/a/lesson-summary-the-limitations-of-gdp visited on 03 march 2019,
10:52 PM

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Top 10 Countries by GDP (PPP)

GDP-PPP in USD trillions

GDP-PPP Rank Country
(2017 est.)

1 China $23.16

2 United States $19.39

3 India $9.47

4 Japan $5.43

5 Germany $4.17

6 Russia $4.00

7 Indonesia $3.24

8 Brazil $3.24

9 United Kingdom $2.91

10 France $2.83

While useful for a snapshot of the world’s economic powerhouses, such measures are also
crude. Countries obviously have different populations, which means that looking exclusively
at GDP can distort reality and/or be so evident as to be meaningless. Of course China (Pop:
1.4 billion) has a larger GDP than Ireland (Pop: 5 million). So what? To suggest how a
hypothetical average citizen might experience a nation’s economic output, the more relevant
statistic is GDP per capita. The population of China may be 280 times larger than the
population of Ireland. Yet the typical Irish person ($75,500) is nearly five times richer than
his Chinese counterpart ($16,700), even though despite the fact that his country is 280 times
smaller. But if GDP per capita is a useful equalizer for comparative analysis, it should also
be taken with a grain of salt. By definition, the countries with the highest GDP per capita are
those with an unusual concentration of wealth. So it’s unsurprisingly, the top 10 countries

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include geographically small royal enclaves, tax shelters, gambling havens, and other
epicenters of wealth.

In terms of overall wealth, these countries are middling: four of the 10 are in the Top 100 of
GDP; the other six are in the Top 200.8

COUNTRY STATUS HDI

Argentina Developing 0.83

Australia Developed 0.93

Brazil Developing 0.75

Canada Developed 0.91

Chile Developed 0.82

China Developing 0.72

France Developed 0.89

Germany Developed 0.91

Greece Developed 0.87

Israel Developed 0.89

Italy Developed 0.87

Malaysia Developing 0.78

Mexico Developing 0.76

Netherlands Developed 0.92

Nigeria Developing 0.51

North Korea Developing -

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https://www.investopedia.com/updates/top-developing-countries/ visited on 03 march 2019, 10:50 PM

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COUNTRY STATUS HDI

Norway Developed 0.94

Philippines Developing 0.66

Qatar Developing 0.85

Russia Developing 0.79

South Korea Developed 0.89

Spain Developed 0.87

Sweden Developed 0.90

Taiwan Developed 0.88

Turkey Developed 0.76

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 4. INCREASING NATIONAL INCOME AFFECTS STANDARD OF LIVING OF
PEOPLE POSITIVELY AND NEGATIVELY

Economic growth is the most powerful instrument for reducing poverty and improve the
standard of living of people in developing countries. Different countries case studies and
reports provides evidence that rapid and sustained growth is critical to achieve for developing
countries.

Standard of living is a complex topic with no universally objective measurement, rising

global income since the Industrial Revolution has undeniably been accompanied by global
poverty reduction, improved life expectancy, increased investment in technology
development and a high material standard of living in general.

The Human Development Index (HDI) was developed by economists in association with the
United Nations Development Programme, and this metric includes measurements of life
expectancy and education in addition to per capita income. Prior to 2010, GDP was a direct
input in the official calculation of HDI, but it has since changed to gross national product
(GNP). There are also adjustments to HDI that account for such variables as income
inequality.9

How national income affects standard of living of people positively

According to Ridley the fact that the developed countries respond better to environment
policy than the less developed countries in itself emphasis the need for development. He says
that the less developed countries should be allowed to grow.

This would help them handle the basic problems like poverty, health care, etc., this in turn
would help them to pay more attention to the environmental problems. The positive effects of
development on the world may be grouped under certain broad categories.

9
BY MARY HALL Updated Jun 11, 2018 < https://www.investopedia.com/ask/answers/060115/how-does-
gross-domestic-product-gdp-affect-standard-living.asp> visited on 04 march 2019, 09:20 AM

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Economic growth is an important factor in reducing poverty and generating the resources
necessary for human development and environmental protection. There is a strong correlation
between gross domestic product (GDP) per capita and indicators of development such as life
expectancy, infant mortality, adult literacy, political and civil rights and some indicators of
environmental quality.

Education:

Well-educated, healthy populations are of fundamental importance in raising levels of socio-

economic development. Numerous studies now document the positive correlations among,
for example, women’s education, reduced fertility, and improved child health, and also
between literacy rates and average per capita incomes.

Good education and health do not follow as an automatic consequence of economic growth
but depend on government action, especially policies that target primary-level education and
health care. The provision of high-quality basic social services benefits the poorer members
of society, who cannot afford private alternatives, as well as the economy as a whole.

One multi-country study has indicated that a 10-per cent increase in life expectancy raises the
national economic growth rate by about 1 per cent per year. Other research suggest that
increasing the average education of the labour force by 1 year raises the GDP by 9 per cent,

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although this holds true only for the first 3 years of extra education, with diminishing returns
thereafter.

Population:

World population growth accelerated after World War II, when the population of less
developed countries began to increase dramatically. After millions of years of extremely slow
growth, the human population indeed grew explosively, doubling again and again; a billion
people were added between 1960 and 1975; another billion were added between 1975 and
1987.

Throughout the 20th century each additional billion has been achieved in a shorter period of
time. Human population entered the 20th century with 1.6 billion people and left the century
with 6.1 billion.

The growth of the last 200 years appears explosive on the historical timeline. The overall
effects of this growth on living standards, resource use and the environment will continue to
change the world landscape long after.

Fertility Rates:

The most rapid fertility declines have so far occurred in countries that have achieved major
improvements in child survival rates and educational levels and have implemented family
planning programs (for example, Colombia and Kenya).

These developments, in turn, are often associated with economic growth and social changes
including improved reproductive rights, rural-urban shifts, new family structures, and new
employment patterns, especially changes in female labour force participation rates.

Demographic Transition:

Demographic experts believe that the shift from high to low birth rates, and from low to high
life expectancy, is brought about by “social modernisation.”

This complex of changes involves improved health care and access to family planning; higher
educational attainment, especially among women; economic growth and rising per capita
income levels; and urbanisation and growing employment opportunities.

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Stabilisation of the world’s population will therefore depend on continuing or accelerating
socio-economic development in the great majority of the world’s developing countries.

A number of factors could impede the demographic transition, including stagnating economic
growth, persistent poverty, or cultural factors that encourage large family size despite rising
prosperity. If the transition is stalled, global population would presumably continue to rise
throughout the next century.

In 37 years, India, for example, doubled its population, more than doubled its food
production, but increased its cultivated land acreage by only five per cent. Its area devoted to
woodland expanded by more than 20%. The tiger survived – thanks entirely to the
intensification of agriculture.

This is one example that proves that, in reality, growth in population and the subsequent
development of agriculture are positive signs as they indicate the sustenance of a species.
This idea may be further developed under production.

Production:

Over most of history – including much of the 20th century – agricultural output has been
increased mainly by bringing more land into production through conversion of forests and
natural grasslands. The limits of geographic expansion were reached many years ago in
densely populated parts of India, China, Java, Egypt, and Western Europe.

Intensification of production, obtaining more output from a given area of agricultural land,
has thus become a growing necessity. In some regions, particularly in Asia, this has been
achieved primarily through producing multiple crops each year in irrigated agro-ecosystems
using new, short-duration crop varieties.

Over the past three decades, the per capita increase in production of the world’s three major
cereal crops has been positive (up by 37% for maize, 20% for rice, and 15% for wheat) and
prices in real terms for these crops have dropped (down by 43% for maize, 33% for rice, and

19
38% for wheat). Lowering the prices of major staples directly benefits the poor who spend a
large part of their income on purchasing food.10

How national income affects standard of living of people negatively

(a) Inflation risk: If demand races ahead of aggregate supply the scene is set for rising
prices – many of the faster-growing countries have seen a trend rise in inflation – this
is known as structural inflation
(b) Environmental concerns:

• Fast growth can create negative externalities e.g. noise pollution and lower air
quality arising from air pollution and road congestion
• Increased consumption of de-merit goods which damage social welfare
• The huge increase in household and industrial waste. These externalities reduce
social welfare and can lead to market failure.

Growth that leads to environmental damage may lower the sustainable rate of growth.
Examples include the destruction of rain forests through deforestation, the over-
exploitation of fish stocks and loss of natural habitat and bio-diversity from the
construction of new roads, hotels, malls and industrial estates.

(C) Growth and the Environment: The Sustainability of Economic Growth

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http://www.economicsdiscussion.net/economic-development/advantages-of-economic-
development/21312

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Growth may lead to a rapid destruction of rain forests , the over-exploitation of fish stocks

and loss of natural habitat created through the construction of new roads, hotels, retail malls
and industrial estates. Some of the main environmental threats include:

• The depletion of the global resource base and the impact of global warming.
There are plenty of examples of the “tragedy of the commons”; the permanent loss
of what should be renewable resources from over-extraction of some of our
environmental resources.
• A huge expansion of waste and pollution arising from both production and
consumption
• Over-population (particularly in urban areas) putting increased pressure on scarce
land and other resources. More than half of the world's population lives in cities in
2009, most of them in developing countries according to the United Nations
Population Fund.
• Species extinction leading to a loss of bio-diversity - Scientists predict that at least a
third and as much as two-thirds of the world's species could be on their way to
extinction by the end of this century, mostly because people are destroying tropical
forests and other habitats, over-fishing the oceans and changing the global climate.

(D) Economic Growth and Income and Wealth Inequality

Not all of the benefits of growth are evenly distributed. A rise in real GDP can often be
accompanied by widening income and wealth inequality in society that is reflected in an
increase in relative poverty.

The Gini coefficient is one way to measure the inequalities in the distribution of income and
wealth in different countries. The higher the value for the Gini co-efficient (the maximum
value is 1), then greater the inequality. Countries such as Japan, Denmark and Sweden
typically have low values for the Gini coefficients whereas African and South American
countries have an enormous gulf between the incomes of the richest and the poorest elements
of the population.

A frequently quoted example of the impact on inequality of rapid growth is China. Between
1990 and 2012, China experienced an annual GDP growth rate of 10.2%. During the same

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period, inequality increased more than 1.6% per year as measured by the Gini coefficient,
making it among the highest in developing Asia.

One of the key reasons for high levels of structural inequality in China is the urban-rural
divide. In common with many developing countries, China has a dual economic structure
made up of an urban economy based on modern manufacturing and services, and rural areas
dominated by more traditional but less productive agriculture. According to a report
published in 2013 by the Asian Development Bank, the urban-rural divide now contributes
nearly half (about 45%) of China’s overall income inequality

Inequality has also risen in India – again against a background of sustained growth - India
enjoyed strong GDP growth between 1990 and 2012—averaging 6.6% annually. But there
was also increase in inequality, with the Gini coefficient rising from 32.5 in 1993 to 37 in
2010.11

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 5. CASE STUDY OF NORWAY AND INDIA

India
India is among the fastest growing countries in the world and has climbed up in the
Ease of Doing Business Index by four notches in 2016. While India is surging ahead
in terms of GDP growth, it is faring poorly on the human development front which
means that millions of Indians have less healthcare and education than in more
advanced countries or even in Emerging Economies like the BRICS where India’s
rank is the lowest. China’s rank is at 90 th , Brazil 79 th , Russia 49 th and South Africa
119th .
Even among SAARC members, India’s Human Development Index( HDI) rank i s
lower than Sri Lanka and Maldives and a little higher than Bhutan, Bangladesh,
Pakistan, Afghanistan and Nepal. India, however, has graduated from the low human
development category to the medium category. While this is impressive, it cannot
compensate for the ignominy of slipping when ranked according to the HDI index,
when it is shining otherwise in terms of several business indicators. 12

India climbed one spot to 130 among 189 countries in the latest human development
index released Friday by the United Nations Development Programme. Within South
Asia, India's human development index (HDI) value is above the average of 0.638 for
the region, with Bangladesh and Pakistan, countries with similar population size,
being ranked 136 and 150 respectively.

In 2016, India's HDI value of 0.624 put it at 131 rank. 13

In a hugely patriarchal country like India, one cannot expect India to score high on
gender equality. According to the United Nations' Human Development Report, India
is ranked 130 out of 155 countries on the Gender Inequality Index (GII). The gender
index takes into account reproductive health, empowerment, and economic activity.

12
JAYSHREE SENGUPTA ‘India slips in human development index despite GDP growth’ <
https://www.orfonline.org/expert-speak/india-slips-in-human-development-index-despite-gdp-growth/>
visited on 04 march 2019, 09:25 PM
13
https://economictimes.indiatimes.com/news/economy/indicators/india-ranks-130-in-uns-human-
development-index/articleshow/65812719.cms visited on 04 march 2019, 09:28 PM

23
 Pakistan (121) and Bangladesh (111) have better GII rankings despite having a lower
rank compared to India on the Human Development Index (HDI). 14

After several decades of sluggish growth, the Indian economy is now amongst the fastest
growing economy in the world. Economic growth is currently 8-9%, second only to China.

Despite several problems facing the Indian economy, many economists point to potential
strengths of the Indian economy which could enable it to continue to benefit from high levels
of economic growth in the future.

1. Demographics of India are favourable. India still has a positive birth rate meaning that the
size of the workforce will continue to grow for the foreseeable future. (unlike China) A rising
workforce helps to increase saving and investment. It also enables increased productivity.
2. There is much scope for increases in efficiency. The infrastructure of India is so bad in
places that even moderate improvements could lead to significant improvements in the
productive capacity of the economy.
3. India is well placed to benefit from globalisation and outsourcing. A legacy of the British
Empire is that India has one of the largest English speaking populations in the world. For
labour-intensive industries like call centres, India is an obvious target for outsourcing. This is
an economic development likely to continue in the future.

14
Nihal Thondepu / 02:12 pm on 15 Dec 2015,Tuesday < https://inshorts.com/en/news/india-ranks-130-in-
gender-inequality-index visited on 04 march 2019, 09:29 AM

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4. Education. India has a relatively high level of literacy for average GDP per capita levels.
The right to elementary education (from 2002 act) has helped literacy rise from 52.2% in
1991 to 74.04% in 2011
5. Positive Growth forecasts A recent study from Goldman Sachs, forecast that India could
growth at a sustainable rate of 8% growth until 2020. However, it is worth noting that this
assumed Indian would make several supply-side policies such as labour market deregulation
and improvements in education and training.
6. Comparative advantage in labour-intensive industries. India will also benefit from the
liberalisation of free trade in recent years.
7. Largest Car producer. India is one of the world’s leading producers of small cars/mopeds.
In 2013/14, India produced 21.48 million vehicles (mostly two and three-wheelers) making it
one of the biggest car producers in the world – focusing on a successful niche of cheap
motorbikes for the Asian market.
8. Growth in new companies. India has become a hub for IT start-ups, with the third highest
level of business start-ups in 2014–15
9. Attracting more FDI. Despite rigid regulations in planning and start-ups, India has attracted
$36.5 billion of FDI in 2011, a significant increase on previous years and a sign multinational
companies are increasingly valuing India’s growing economy and consumer class. This FDI
is important for financing India’s current account deficit.
10. Remittances. India has an important segment of its workforce working overseas (e.g.
Middle-East). Foreign remittances to India amounted to US$68.91 billion in 2015 – 3.5% of
India’s GDP.
11. Growth in trade Indian exports have grown from

M Tracy Hunter – 2014 CC SA 4.0

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 Foreign trade accounted for 48.8% of India’s GDP in 2015.

12. Tourism. Tourism is a growth market for India, attracting foreign currency and creating
employment. The tourism sector is forecast to grow by annual rate of 7.5% by 2025
(accounting for 7.2% of GDP)
13. Diversification of Indian economy15

Less dependent on agriculture. Service sector offers a chance for higher economic growth.

India vs China

GDP per capita (in 1990 Geary-Khamis dollars) (data range 1950-2003)There is the potential
for India to close the gap with India.

Norway

Norway is a highly developed country, and typically has a world GDP ranking in the top 30,
with a 2014 GDP at $500 million in 2014. Norway's per capita GDP is ranked ninth in the

15
https://www.economicshelp.org/india/strengths-indian-economy/ visited on 04 march 2019, 09:30 AM

26
world at $61,471. The country’s major export has been crude oil and petroleum products.
Norway is the third-largest exporter of natural gas in the world, which has helped it build a
large sovereign wealth fund of $830 billion. The export of petroleum has helped to elevate
Norway’s economy, and the country’s residents have an average gross salary of $5,166 per
month, making it one of the wealthier nations in the world. The country’s oil economy is
controlled by the government by effective regulation. Enterprises are largely state-owned and
funded.

Norway has been assigned a AAA credit rating from Standard and Poor's Financial Services
and Fitch Ratings, Inc. It has established some of the world’s most stringent anti-corruption
laws and is ranked fifth of 177 countries for its equitable court systems and enforcement of
property right laws. The country’s regulations promote business freedom and freedom in
trade; the economy of Norway was ranked 27th most free in the world in 2015 by the World
Heritage Foundation. Norway has high taxes to support its infrastructure and public systems.
The top income tax rate falls at 47.8%.

Part of what signifies Norway as a developed country is a vast majority of workers (77.6%)
are employed in the services sector rather than in agriculture or manufacturing. Norway's
HDI rank of .94 is the highest in the world.16

STAT India Norway

Business > Companies >Corporate 4.54 4.9

governance (overall rating) Ranked 20th. Ranked 16th. 8% more than India

Debt > Government debt >Gross government 66.84 IMF 34.12

debt, share of GDP Ranked Ranked 115th.
43th. 96%
more than
Norway

Debt > Government debt >Public debt, share 49.6 CIA 30.3
of GDP Ranked Ranked 112th.

16
https://www.investopedia.com/updates/top-developing-countries/ visited on 04 march 2019, 10:14 AM

27
STAT India Norway

64th. 64%
more than
Norway

Debt > Interest rates > Central bank discount 7.5% 1.5%
rate Ranked 48th. 5 Ranked 85th.
times more than
Norway

Government >Revenue > Tax >Corporate tax 30% 28%

Ranked 10th. 7% Ranked 4th.
more than
Norway

Government >Revenue > Tax >Overall tax 20% 56.7%

burden Ranked 26th. Ranked 1st. 3 times more than India

Size of economy >Share of world GDP 1.45% 0.5%

Ranked 11th. 3 Ranked 26th.
times more than
Norway

Table: Source - https://www.nationmaster.com/country-

info/compare/India/Norway/Economy#stat

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 6. CONCLUSION

Subjective data in this project work contains a number of lessons regarding the well-being
benefits that growth may confer on developing countries. Scandinavian countries are the
combination of high living standards and low-income disparity that has captured the world’s
attention. The Nordic model is a term coined to capture the unique combination of free
market capitalism and social benefits that have given rise to a society that enjoys a host of
top-quality services. Two of the largest concerns are an aging population and influx of
immigrants.

GDP is defined as the total value of goods and services produced within a country’s borders
in a specific time period — monthly, quarterly or annually. GDP enables policymakers and
central banks to judge whether the economy is contracting or expanding, whether it needs a
boost or restraint, and if a threat such as a recession or inflation looms on the horizon.

Economic growth is the most powerful instrument for reducing poverty and improve the
standard of living of people in developing countries. Rising global income can help in global
poverty reduction, improved life expectancy, increased investment in technology
development and a high material standard of living in general.

It has positive as well as negative impacts. Positive impacts namely improvised education,
technological advancement etc. it depends on government action, especially policies that
target primary-level education and health care.

Case study of Norway and India shows despite being India is among the fastest growing
countries in the world it’s rank in human development index indicates not an adequate
amount of development of its citizens which in some way affects country’s economic
growth. Despite several problems facing the Indian economy, many economists point to
potential strengths of the Indian economy which could enable it to continue to benefit from
high levels of economic growth in the future.

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BIBLIOGRAPHY

1. Dr. Kalpana Satija “Textbook on ECONOMICS For Law Students” Published by

Universal Law Publishing Co Pvt Ltd. Ed 2009
2. M.L. Jhingan “The Economics of Development & Planning” Published by Advent
Books Division Inc Ed. 2016

WEBSITES

1. www.investopedia.com
2. www.tutor2ueconomics.com
3. www.economicsdiscussions.com

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