Q1 comment on the history of India’s fiscal deficit and

what does it indicate about govt policies and state of

economy?
in three reference points
 1991
 pre-1991
 post-1991
Q2. Long term growth depends on total factors of
production and labour market, using the experience of Us
and France, explain the state of China?
Long term growth depends on total factors of production and labour
market and which will help to analyze the state of China this can be
explained with the help of:
- Difference between USA’s and France’s history which showed
that (1) total factor productivity of France compared to USA
reduced, (2) France never caught up in terms of GDP per capital
and (3) total labour hours per capita was high for France initially
but reduced with increasing unemployment. This happened due
to (1) insurance program which discouraged individuals from
seeking work, (2) high marginal tax rates making additional
working hours less interesting and (3) less incentive to hire new
workers because of high minimum wage rate and legal
restrictions. These were the few reasons why construction
industry was successful in USA and not in France between 1950 to
2000.
The Solow growth model explains long-run economic growth by
looking at capital accumulation, labor or population growth, and
increases in productivity, commonly referred to as technological
progress.
For example, USA had a strategy of capital accumulation in which with
time being more investment made it into capital formation.

Different policies and measures will have a major role in deciding the
state of China such as:

1. If GDP of China was in an increasing state then it would have

been good for the construction company as it will increase the
high standard of living and hence the consumption.
2. Already having a high population growth which boost the
demand of construction industry.
3. High economic growth and High rate of investment hence helpful
in capital formulation
4. If China makes it economy according to free market principles
and opening up trade and investment with the West then it will
lead to significant increase in economic growth and raise living
standards
5. Adopting the one-child policy might affect the economic growth
because this will decrease the working age population hence less
labour to work and produce.
6. From 1958 to 1962 the Chinese living standards fell by 20.3%, and
from 1966 to 1968, they dropped by 9.6%. which could lead to
less interest in construction industry and being less successful like
France.
7. It was given that doing business was difficult in China as
compared to USA and France due to regulatory environment
hence making it difficult to put up new technology.