Economics

assignment

Name:Kaustav
Mitra Roll:2105802
Section:CSE-20

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 I NDIA AS AN ECONOMIC SUPERPOWER
Economic Power: Who Has It and How to Get It:
Economic power is the ability of countries, businesses, or
individuals to improve their standard of living. It increases their
freedom to make decisions that benefit themselves alone and reduces
the ability of any outside force to reduce their freedom.

Purchasing power is a significant component of economic

power. Countries, companies, and individuals can acquire economic
power by improving their income, thereby adding to their wealth. That
allows them to purchase more and better goods and services to meet
their needs.

The way to increase income is to produce a good or service that

provides a real benefit to the world. The laws of supply and demand
will see to it that customers will pay the highest price to receive
that benefit. For a country, it might mean manufacturing high-tech
equipment, providing cheap labour to make consumer products, or
having lots of oil.

Private-Sector Economic Power:

Examples of companies that provide a real benefit include Apple,
Google, and Amazon. The first sells high-tech products, the second
capitalized on a great search engine, and the third offers fast
delivery from a wide selection of goods.

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Monopolies have huge economic power by owning most of a desired good
or service. Google has 87.6% of the internet search market, while
its closest competitors—Microsoft's Bing and Yahoo—make up 10.4%
combined. However, Google is always updating its search algorithms
to help it control 73.1% of all search-related advertising.

Why the U.S.'s Economic Power Is Greater Than Its GDP:

The United States has an economic power that exceeds its gross
domestic product (GDP). One reason is that its currency, the dollar,
is also the world currency. The dollar is used for most international
transactions, including all oil contracts. Its position was
established after World War II at the Bretton Woods Conference.

Sixteen nations have a higher GDP per person than the U.S., but that
doesn't make them powerful. Most of these are either financial
centers, oil-exporting countries, or both. For example, Ireland and
Qatar have a higher GDP per capita as of 2020, but they aren't
drivers of the global economic engine like the United States is.
Although China is the world's largest economy, its GDP per capita was
only
$16,400 as of 2020. A country is not an economic power if it can't
create a high standard of living for its residents.5

Think of the incredible economic power it takes to be one of the

largest economies in the world while producing one of the highest
standards of living per person. In fact, the GDP of most countries
are nearly the same as in many U.S. states. For example, California
produces as much as India, Texas as much as Brazil, and even tiny
Rhode Island as much as Tanzania as of 2019.

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Sources of US Economic Power:
The U.S.'s economic power comes from its abundance of natural
resources. It has thousands of acres of fertile land and lots of
fresh water. It also has an abundance of oil, coal, and natural gas.
Its large landmass is bordered by two large coastlines that provide
ports for commerce.

Also, the United States is governed by one political system, monetary

system, and language. This gives it a comparative advantage over the
world's second-largest economy, the European Union. The EU is made up
of 27 separate member countries with different political systems and
languages, making it more difficult to manage its single monetary
system unified by the euro.

A third advantage is that the U.S. has two peaceful

neighbors, Canada and Mexico. It doesn't have to defend its borders.
It also allowed the creation of the world's largest trade area,
the North American Free Trade Agreement.

A fourth advantage is its large and diverse population, which allows

companies to test market products before incurring the expense of
bringing them to market, lowering product development costs.

How is economic power measured?

For national economies, economic power is usually measured by looking
at GDP per capita. This shows you how productive a county is in
relation to its population. However, it doesn't provide a complete
picture. Some economists recommend expanding how economic power is
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measured by including things like economic security, leisure time,
life expectancy, and overall quality of life.

What are the factors that influence economic power?

If economic power is primarily measured in the growth of GDP per
capita, then the main factors that influence a country's economic
power are the four factors of production: natural resources, labour,
capital equipment, and entrepreneurship. The more a country has
access to these, the greater potential for economic power it has.

The world has witnesses the rise and fall of many great economic
empires. It is safe to say that we have enough empirical data that we
can analyze what spurs economic growth.

1. Natural Resources:
Natural resources are the number one factor that spurs economic
growth. It makes economic growth considerably easier. Consider
the case of countries like Dubai or other Middle East nations.
The fact that they are rich in oil resources has literally been
the defining factor of their economies. There are other
countries like Singapore which have a good natural harbor and
therefore have become a major transit point. Other countries also
have resources like coal deposits, iron ore deposits or even
arable land.
In an era when shipping was strategic, locations with harbors
experienced exponential growth. Nowadays, since energy literally

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 controls the world, any deposits of fossil fuel or other energy
sources drastically increases the economic prowess of any nation.

2. Deregulation:
People were meant to trade with each other. That is simply the
natural order i.e. how things are supposed to be. Some repressive
governments try to take this freedom away. Rules and limitations
are imposed and trading becomes limited. This could benefit a
small group of people at the expense of others. However, it could
almost never benefit the entire nation.
Economic superpowers have traditionally been known to be trade
allies of the entire world. They gain their power because they
are indispensible in trade and not because they are isolated.
The record of history is absolutely clear. Superpowers have
always been following free trade policies and will always be.
Notice that countries like United States and United Kingdom only
developed when they implemented a policy of free trade. As and
when protectionism became rampant, the economic prowess steadily
deteriorated.

3. Technology:
Technology has always played a pivotal role in economic growth.
The industrial revolution was started because of technological
advances. Mankind has never looked behind since. Only the
applications of technology changed over the years.
From manufacturing to services and then to social media,
technology still drives employment and business growth. It is for
this reason that countries that build technological prowess
develop much faster than others.
Consider the case of Germany. The country has been destroyed
twice in both the World Wars and also has been under communist
occupation for decades. Yet its economy is much more developed
compared to its European counterparts who have not nearly faced
as much turmoil. Analysts have concluded that this success is
because of the German emphasis on the development of technology.

4. Human Resources:
Human resources of a nation can be either a boon or a bane
depending on how they are utilized. For instance, consider the
case of a country like India. The population is simply
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 astounding. A large proportion of the population is in the
working age. Also, most of them have good education and job
skills.

This is what has led an otherwise poor country like India to

quickly become one of the fastest growing economies in the
world. These human resources which have made India an IT
superpower could also have resulted in large scale crime if the
people weren’t educated!
Any nation that wants to progress economically must ensure that
its citizens have access to high quality education at affordable
prices.

5. Infrastructure:
Last but not the least is the Chinese model of development. The
state of China has heavily invested in huge infrastructure
projects. These projects created employment and spurred the
economy once they were underway. Also, since they were
infrastructure projects, they literally paid for themselves
later.
China now has one of the lowest manufacturing costs in the world.
This has been enabled by the large scale infrastructure.
Electricity is cheaper in China than anywhere else in the world.
Also, Chinese carriers can transport goods across continents
cheaply. This has made China the largest exporter and the second
largest economy in the world.

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Why are Countries Unable to Grow ?
The factors that lead to growth are relatively straightforward.
Therefore countries can chart a well defined path to growth if they
want to. However, most are unable to do so!

This is because economic growth is an inside job. In most countries

people want to grow at the expense of one another. Therefore,
economic policies are not based on what’s good for the economy but
rather on what is good for a certain group of people that have the
capability to influence this policy.
In most countries it is the infighting between the haves and the
have nots that prevents a synergistic solution that would make life
better for everybody involved.

Is India an economic superpower?

India is considered one of the potential superpowers of the world.This
potential is attributed to several indicators, the primary ones being
its demographic trends and a rapidly expanding economy and military.
In 2015, India became the world's fastest growing economy with a 5%
estimated GDP rate (mid year terms). Before it can be considered a
superpower, the country must overcome many economic, social, and
political problems and it also needs to be on the international stage
when compared to the United States, European Union, China, the former
British Empire and the former Soviet Union

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Booming economy:
The economy of India is currently the world's third largest in terms
of real GDP (PPP) after the United States of America and the People's
Republic of China. According to the World Bank, India overtook China
to become the fastest-growing major economy in the world as of 2015.
[48] Its record growth was in the third quarter of 2003 when it grew

higher than any other emerging economy at 10.4%.India's Rising

Economy Archived 10 April 2018 at the Wayback Machine by John
Williamson</ref> Estimates by the IMF show that in 2011 (see List of
countries by future GDP estimates (PPP)), India became the third
largest economy in the world, overtaking the Japanese economy and the
fifth largest economy by GDP (Nominal). India has grown at 7.5% in
2015.

Primary sector:
India, growing at 9% per year, is the world's second largest producer
of food next to China. Food processing accounts for US$69.4 billion
as gross income.
Secondary sector:
India is still relatively a small player in manufacturing when
compared to many world leaders. Some new trends suggest an
improvement in the future, since the manufacturing sector is growing
at 11-12%

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Tertiary and quaternary sector:
India currently has an expanding IT industry which is considered one
of the best in the world. Some have begun to describe India as
a technology superpower. It is considered the World's Office and is
leading in the Services Industry. This is mainly due to the
availability of a large pool of highly skilled, low cost, English
speaking workforce.

Science and technology:

India is attempting to develop a highly skilled workforce with an
expert command of the English language to fit into the
future knowledge economy. India is becoming one of the world's
leading producers of computer software; with mushrooming research and
development centres, it is experiencing a steady revolution in its
science and technology sector. A typical example of India's
accomplished scientific endeavours includes: becoming the third
nation to found a National Space Agency called ISRO, after the USSR
and the U.S.; the third Asian nation to launch a satellite from
an indigenously developed rocket into orbit after China and Japan,
starting with Rohini RS-1 in 1979. In January 2007, India became the
fourth nation to complete atmospheric re entry.In October 2008, India
launched its first unmanned lunar probe, Chandrayaan 1, which operated
until August 2009. On 14 November 2008, the Moon Impact
Probe separated from the Chandrayaan orbiter at 20:06 and was
deliberately made to strike the Moon near the south pole, making India
the fourth country to reach the Moon's surface. Among its many
achievements was the discovery of the widespread presence of water
molecules in lunar soil. On 24 September 2014, India became the fourth

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nation to have a satellite orbiting Mars. India is the first Asian
nation to achieve this and the first to do so in a first attempt in
the whole world. India and the United States have increased mutual
co- operation in space-travel related technologies, such as increasing
the interoperability between Indian and US systems, and prospects for
a commercial space launch agreement with India that would allow US
satellites to be launched on Indian vehicles. India is among the
world leaders in remote sensing, a technology coming to great use,
among others, to Indian fishermen & farmers. India is also trying to
join international R&D projects - e.g. it has recently joined the
European Galileo GPS Project and the ITER for fusion
energy club. India also holds a world record for placing 104
satellites in orbit by single launch. India recently
launched Chandrayaan 2 mission to moon which had included a lander
and rover. It also has a planned space mission(Indian Human
spaceflight) to send a human to space by 2022. Some Indian educational
and research institutions like IIT, IISER, NIT, IIIT, BITS Pilani,
IIM,IISc,
TIFR and AIIMS are among the world's best.

Energy:
In the future, the world is expected to exit the "fossil fuel age" and
perhaps the "nuclear energy age", and enter the "renewable-energy
age" or even further into the "fusion power age", if and whenever
these technologies become economically sustainable. Being a region in
the sunny tropical belt, the Indian subcontinent could greatly
benefit from a renewable energy trend, as it has the ideal
combination of both
- high solar insolation[81] and a big consumer base density. For
example, considering the costs of energy consumed for temperature
control (a major factor influencing a region's energy intensity) and

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the fact that - cooling load requirements, unlike heating, are
roughly in phase with the sun's intensity, cooling from the excessive
solar

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radiation could make great energetic (and hence economic) sense in the
subcontinent, whenever the required technology becomes competitively
cheaper. India also has 25% of the world's thorium resources.
To reduce the energy crisis, India is presently constructing ~ 9
civilian nuclear power reactors and several hydro-power stations. On
25 January 2007, Russian president Vladimir Putin offered to build 4
more reactors on a visit to India, and India is expected to clinch
this deal of strategical importance. Recently, it also made a
civilian nuclear energy deal with the US and EU. In recent years,
India joined China to launch a vigorous campaign to acquire oil fields
around the world and now has stake in several oil fields (in the
Middle East and Russia).

Mass transit system:

India is in the process of developing modern mass rapid
transit systems to replace its existing system which is seen
as
inadequate to cater to present and future urban requirements. A modern
metro rail system is already in place in the cities
of Delhi, Mumbai, Chennai, Bangalore, Kolkata, Hyderabad, Kochi, Gurga
on, Jaipur and Lucknow . Work is in progress or would be commencing
shortly for developing similar mass transit system in cities
of Noida, Pune Bhopal, Nagpur, Indore, Kanpur and Ahmedabad. Indore is
leading the track by implementing world class GPS enabled low floor
buses in a Rapid Transport System. With the growth in economy and
technology, India is welcoming modernisation. The Indian rail
network traverses the length and breadth of the country, covering a
total length of 63,140 km (39,200 miles). It is one of the largest and
busiest rail networks in the world, transporting over 9 billion
passengers and over 350 million tonnes of freight annually. Its
operations covers twenty-seven states and three Union territories and
also links the neighbouring countries
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of Nepal, Bangladesh and Pakistan. However, other public transport

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systems, such as buses are often not up to the standards followed in
developed countries. India is heading towards the implementation
of high-speed rail in the country.

Tourism:
India, with its diverse and fascinating history, arts, music,
culture, spiritual & social models has witnessed the growth of a
booming tourism industry.[95] India is a historic place with a diverse
history of over five millennia. About 3.9 million tourists travelled
to India in 2005, each spending approximately $1,470 per person,
higher than that of France (the leading tourist destination in the
world). Foreign visitors in 2005 spent more than US$15.4 billion
annually in
India. Many travellers find the cultural diversity an enriching
experience, despite the hassles inefficiency, pollution and
overcrowding. Monuments like the Taj Mahal are among the many
attractions of this land. As of 2006, Conde Nast Traveller ranked
India the 4th most preferred travel destination. The Planning
Commission expects 5.8 million tourists travelling to India by 2010.
The World Travel and Tourism Council believes India's tourism
industry will grow at 10% per annum in the next decade, making it lead
the world in terms of growth. Tourism contributes 6% of India's GDP
and employs 40 million people, making it an important factor in
India's economic growth. More than 8 million foreign tourists arrived
in the year 2015 against 7.68 million in 2014 recording a growth of
4.4
percent over 2014.

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Medical tourism in India:
Indian Metros have emerged as the leading destination of medical
tourism. Last year, an estimated 150,000 foreigners visited India for
medical procedures, and the number is increasing at the rate of about
15 percent a year.

Battle between Indian and Chinese economic powers:

The rise of China has been the biggest story in the global economy in
recent decades. But amid concern about its stumbling property market
and global fears about inflation, the emergence of its neighbour,
India, as a potential new economic superpower may be going under the
radar.

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You won’t find mention of it in Liz Truss’s blueprint for a “modern
brilliant Britain”, but the UK has just been overtaken by India as the
world’s fifth biggest economy. The nation of 1.4 billion people is on
track to move into third place behind the US and China by 2030,
according to economists.

And while the world became familiar with Chinese business titans such
as Alibaba founder Jack Ma, the staggering wealth accumulated in
recent years by Indian billionaires Gautam Adani and Mukesh Ambani
has been less well publicised.

Adani, in particular, has come to represent India’s growing economic

strength thanks to the rapid expansion of his Adani Group
conglomerate, which covers everything from ports to airports, and
solar power to television. Having entered the global Top 10 when he
became Asia’s richest person in February, he is now ranked third with
a fortune of $143bn (£123bn) and is closing fast on second-placed
Amazon boss Jeff Bezos.

India was for many years seen as the poor relation to China, held back
by a sclerotic, sprawling state sector and labyrinthine bureaucracy.
It still has enormous problems of poverty and poor infrastructure, but
it is beginning to emerge as a rival to its large neighbour with the
kind of economic growth figures that were once the pride of Beijing.

Gross domestic product (GDP) grew by 13.8% in the second quarter of

this year as pandemic controls were lifted and manufacturing and

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services boomed. Although double-digit growth is unlikely to be
repeated in subsequent quarters, India is still on track to expand by
7% this year as it benefits from economic liberalisation in the
private sector, a rapidly growing working population, and the
realignment of global supply chains away from China.

“India has overtaken the UK to become the world’s fifth-largest

economy,” says Shilan Shah, senior India economist at the consultancy
Capital Economics, citing recent updated figures from the
International Monetary Fund. “Looking ahead, India looks set to
continue its march up the global rankings. In all, we think India
will overtake Germany and Japan to become the third-largest economy
in the world within the next decade.”

A key part of India’s continued rise will be its ability to grow its
manufacturing sector and challenge China as the world’s No 1
exporter. India has already benefited from a large, well-educated,
often English-speaking middle-class, helping the country to develop
world- class IT and pharmaceutical sectors. It also has strong
consumer demand, which accounts for about 55% of the economy compared
with less than 40% in China.

Building an economic superpower – ITR's India Special

Focus launched:
India is home to one-sixth of humanity. With a young population and a
grand consumer base – complete with ethnic and linguistic diversity –
it is a country with unparalleled economic potential. In March, the
OECD forecasted India’s GDP to grow by 12.6% in 2021 – a figure that
if realised, would return the country to being the world’s fastest
growing major economy.

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The country’s steady economic growth in the mid-2010s had slowed
following ambitious fiscal policy – including the 2016 demonetisation
and 2017’s goods and services tax (GST) implementation – though
appears to have quickly rebounded through reforms supporting
increased economic liberation and extended support for overseas
investors.
Moreover, there has been political stability, welcome incentives
targeting the manufacturing sector, and a liquidity boost handed to
the country’s busy micro, small and medium-sized enterprise sector.

With India’s penchant for creativity and entrepreneurship, new

capabilities will emerge to overcome obstacles. As businesses,
investors and taxpayers strive for prosperity, the demand for tax
advice remains high.

Associating with leading firms who are closest to the action, ITR
brings you an exclusive insight into some of the most important
developments from the Indian tax world.

In the backdrop of an unprecedented contraction in the Indian economy

caused by COVID-19, Finance Minister, Nirmala Sitharaman, presented
the Union Budget for 2021-22 in February. The article from Dhruva
Advisors considers how the proposals would assist in leading towards
Atmanirbhar Bharat (a self-reliant India), in the light of incentives
for the development of GIFT City and foreign funds.

The key provisions that investors should take into account when
planning an inbound investment structure in India, is the subject of
Aurtus Consulting’s article. The enactment of general anti-avoidance
rules and the modification of tax treaties on account of the

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multilateral instrument have had a significant impact.

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The article by Lakshmikumaran & Sridharan discusses how the pandemic
has drastically changed the cross-border tax and transfer pricing
sphere in the country. The authors stress the importance of tax
administrations responding swiftly to challenges, to ensure that tax
disputes and litigation do not add to the suffering.

Meanwhile, the article from KNAV explores how companies may look to
target post-pandemic growth via mergers and acquisitions. The authors
reflect on the evolving tax, regulatory and legal framework that
businesses will need to consider.

The switch to seamlessly working in a virtual environment means that

India has had to swiftly embrace technological innovation. The
article from TMSL assesses how the rapid rise of technology has
transformed the global tax function and generated new challenges for
professionals and governments.

In addition to the chapters, ITR has spoken to practitioners and

policymakers from the subcontinent about the most important career
tools for the tax lawyers and chartered accountants of tomorrow.
Alongside tax voices from Bangladesh, Bhutan and Nepal, Tata
Consultancy Services’ global head of taxation, Renu Narvekar,
discusses the importance of keeping in-sync with the changing tax
landscape.

As the investment climate bounces back, India’s tax world will go

from strength to strength in the coming year. We hope that you enjoy
hearing from the tax experts leading the progression in our first
India Special Focus.

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The Union Budget is the right choice at the right time. Given Covid’s
effects and a recovery this year, finance minister Nirmala Sitharaman
has appropriately prioritised growth, while keeping the fiscal deficit
in check.

This growth-oriented Budget will create numerous jobs, spark

enterprise and position India as the fastest-growing of the major
economies. The Budget is consistent with our honourable Prime
Minister Narendra Modi’s vision of making India Atmanirbhar – a
digital superpower, a sustainability leader and a healthy nation.
This statement of intent is clearly supported by a plan for the
future, and backed by allocations – specifically in the areas of
infrastructure, digital transition, planet resilience, education and
health – to support Indian ambitions.
What stops India from becoming an economic
superpower:
1. High population growth rates:
The impact of population growth can be positive or negative depending
on the circumstances.

The random increase in population is one of the most important

obstacles that the economy may face in any country.Population growth
is considered one of the biggest obstacles and barriers that may slow
down the process of economic growth and development.

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The large population is considered a great pressure on economic
resources, as economic resources are often insufficient and do not
cover the existing population, which in turn leads to the formation
of pressure on the resources and services provided.
For example, investment projects that in turn increase economic
development may not lead to sufficient numbers of employees.

2. Low level of the human factor:

The increase in the population numbers compared to the obstacles to
economic development leads to the exit of labor outside the country,
as well as increases the processes of immigration abroad.
Building human factors is one of the most important factors for the
success of any economic plan, and this requires improving the
educational outcomes of all kinds
The human factor is considered one of the most important economic
factors and constituents, which in turn increase the production of
projects, improve economic growth and move the economic cycle.
Therefore, the state must work to provide special attention to all
human resources, as well as provide special attention to university
students, institutes, colleges, etc., as well as all necessary
provisions for their training.

3. Lack of an attractive investment destination:

The lack of an attractive environment for investment and the lack of
economic resources and infrastructure are among the biggest challenges
facing economic development.
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Economic development depends mainly on increasing the number of
investments, which in turn lead to an increase in the number of
employees and their employment and work to move the economic wheel in
general. The weakness of economic projects leads to an increase in the
unemployed, and also reduces the processes of economic development.
Encouraging investment and taking care of its infrastructure is one
of the most important means of achieving economic development and
providing various job opportunities to employ the unemployed, in
addition to the ability of the investment to exploit the resources
available for production and achieve profits that contribute to
supporting the economy.

4. Poor transportation network:

Transportation is considered one of the most important factors
of economic development, which in turn contributes to activating
and developing all aspects of life and making life easier and
better.

Poor transportation systems adversely affect economic and industrial

competitiveness by raising the unit cost of freight. It also raises
the damages total inventories, incurred in transit, and ordering and
overhead costs.
Good transport infrastructure lowers the costs of moving people and
goods. This increases economic productivity.

5. Lack of innovative solutions:

The inability to find innovative solutions is one of the most
important obstacles to economic development.

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This problem appears in a large and clear way in some societies that
rely on traditional means to do their business. Perhaps the most
prominent example of this is the complete dependence of many societies
and countries on oil. It is possible to reduce the oil bill by making
additional efforts in finding and applying alternative means.
Some countries insist on the use of oil, and the developed nations
have become alienated from, and reduced its use due to the great harm
it inflicts on humans at all levels.
Innovative solutions greatly contribute to the improvement and
development of countries ’economies.

Conclusion:
It is heartening to listen to the commentary of economic pundits on
how India is going to be an economic superpower by 2050. India is
expected to become the world’s third-largest economy just behind the
United State of America and China, cornering almost 7% of the world
economy.

As per the first advance estimates by NSO (National Statistical

Office release, India’s economy is expected to grow 9.2% in the
current financial year, aided by the base effect of 7.3% contraction
last year.

Economists see a downward bias to the growth estimates, as the data

may not fully capture the impact of the ongoing third wave, a
possibility acknowledged by the statistics office.
The estimates are likely to undergo revisions as more data become
available, the statistics office said, adding that these are early
estimates.

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As per estimates of even renowned economists, India needs to grow at
over 9% for many years to come, to cross the immediate milestone of
becoming a USD 5 trillion economy by 2025 and USD 10 trillion
economies by 2030.

There are optimists and there are pessimists.

With India’s huge population, the increasing buying power of its
massive middle class, there is no stopping India from becoming a USD
5 trillion economy in the next 3-5 years.

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