Comparison of Basic Economic and Social Indicators

India’s current situation conveys the importance of understanding the development of its sectors and their effects. Economic and social measures of development between 2008 and 2012 highlight India’s unique development position. These indicators also support the significance of India’s economic transitions and current policy for its large, young population and the global economy.

Justification for Comparison Nations

I compare India to two other developing nations—Brazil and Nigeria. All three nations face challenges with ethnic, class, and gender inequalities (“Brazil,” 2014; “India,” 2014; “Nigeria,” 2014; Todaro & Smith, 2012). India and Nigeria are former British colonies and low middle income (LMI) countries by the World Bank’s gross national income per capita (GNI per capita, a measure of the final goods and services produced by the nation’s residents and citizens) definition (Todaro & Smith, 2012). Nigeria’s software sector (which directly contributes to the industrial sector and contributes to the tertiary sector through corresponding information technology services) is emerging, while India’s is more established (Arora & Bagde, 2002; Soriyan & Heeks, 2004). India and Brazil are BRIC nations, members of the four-nation group with emerging markets of interest to financial analysts (Todaro & Smith, 2012). Both have expanding roles in multinational technology and service industries (Todaro & Smith, 2012). Brazil is an upper middle income (UMI) nation, so we expect many of its development indicators that are correlated with income to be higher than those of India (Todaro & Smith, 2012). All three nations will be compared to the developed economy in the United States (Todaro & Smith, 2012). These comparisons facilitate my investigation of the role of the agricultural, manufacturing, and service sectors in India’s development.

Development Measures 2007-2012

Table 1. Geographic and Population Indicators

Table 1. Geographic and Population Indicators

 

India’s development affects a large proportion of the global population and future working population.  As expected, India’s geographic and population indicators most closely resemble Nigeria’s. Table 1 provides geographic and population indicators for the four nations of interest. India’s total population and population density are significantly higher than those of the other nations, which suggest that it has the ability to provide large amounts of concentrated labor (Todaro & Smith, 2012; The World Bank, 2014). Nigeria and India and Brazil and the United States form two pairs of nations similar in size (both surface area and land area), proportion of arable land, and proportion of forest area (The World Bank, 2014). Nigeria and India are smaller and have significantly more arable land than forest area, which suggests that they have the natural resources to focus on their agricultural sector (The World Bank, 2014). However, it is important to recognize that geographic and population sizes are not absolutely correlated with development, because both large and small sizes have advantages and disadvantages (Todaro & Smith, 2012). Favorable geography and resource endowment are associated with development, although their relationships can be complex and lead to development challenges e.g., in the case of Nigeria, unequal distribution of oil income (“Nigeria,” 2014; Todaro & Smith, 2012). Developing nations are associated with higher annual population growth (especially in the young population), which is confirmed by India’s larger annual population growth rate than that of U.S. and Brazil but not Nigeria (Todaro & Smith 2012; The World Bank, 2014).  India, Brazil, and the United States all have crude birth rates per 1,000 population less than 25, with a notably higher crude birth rate in Nigeria. Both India and Nigeria have rapidly growing populations, with annual population growth exceeding one percent (Todaro & Smith 2012; The World Bank, 2014). Geographic and population indicators support the higher levels of development in Brazil and the United States.

Table 2. Economic Indicators

Table 2. Economic Indicators

 

India’s economic indicators emphasize its uniqueness as a developing economy that retains a large agricultural sector. Table 2 provides economic indicators for the four nations of interest. Gross national product (GNP) is a measure of an economy’s final output (Todaro & Smith, 2012; The World Bank, 2014). Both GNP per capita and growth in GNP per capita have been traditional measures of economic development, although they do not indicate actual income/wealth distribution or changes in how or which goods and services are produced (Todaro & Smith, 2012). All nations except the United States have growing per capita GNPs below 10,000 dollars, although India and Nigeria have similarly low per capita GDPs in the 2,000 to 3,000 dollar range and growth rates above three percent (The World Bank, 2014). India’s high growth rate highlights the importance of understanding its development from the standpoint of its population and the foreign investors that India’s high growth rate may attract. Agriculture, industry, and service shares of GDP indicate sectors in which output is produced (Todaro & Smith, 2012). A lower agricultural share and a higher industry share are associated with greater development in classical structural change models of development (Todaro & Smith, 2012). More recent models also account for service sector dominance in more developed nations (Todaro & Smith, 2012). Although India and Brazil have similar industry shares of their GDP, India still has an agricultural share greater than 15 percent (The World Bank, 2014). Nigeria exhibits a more expected development progression from the primary to secondary to tertiary sectors than India does (Todaro & Smith, 2012; The World Bank, 2014). Nigeria has much larger agricultural and industry shares than the other nations, which explains why it is the only nation to have a service share below 50 percent (The World Bank, 2014). Economic indicators suggest that India’s economy is unique, but most closely resembles that of Nigeria.

Table 3. New Human Development Index (NHDI) and Social Indicators

 

Social indicators are important measures of human capital and how well a nation permits development values of sustenance (ability to meet basic needs), self-esteem (sense of value in society), and freedom (ability to choose based on preference) (Todaro & Smith, 2012). Lower levels of human capital (investment in peoples’ productive capacities) and higher levels of inequality and poverty are associated with developing nations (Todaro & Smith, 2012). Table 3 provides human development and social indicators for the four nations of interest. The share of the population living on less than $1.25 per day is an indicator of absolute poverty, a condition of insufficient income to meet basic needs (Table 3) (Todaro & Smith, 2012). Brazil has a much lower share than India, and Nigeria has two times the share of India (The World Bank, 2014).

The Gini coefficient is a measure of income inequality and approaches zero as inequality is reduced (Todaro & Smith, 2012). India appears to have the least income inequality, and Nigeria and Brazil have the most income inequality (Table 3) (Todaro & Smith, 2012; The World Bank, 2014). The Gini coefficients in India and Nigeria are household consumption-based, and the Gini coefficients in the United States and Brazil are income-based (The World Bank, 2014). This may explain the higher apparent inequality in the United States and Brazil, because consumption-based inequality tends to be lower than income inequality (The World Bank, 2014).

The New Human Development Index (NHDI) geometrically weights three indicators of socioeconomic development—GNI per capita (U.S. dollar purchasing power parity), education in terms of expected years of schooling of current children and mean years of schooling of the entire population, and health in terms of life expectancy at birth (Todaro & Smith, 2012; United Nations Development Programme, 2014). As the NHDI approaches one, the United Nations considers development of a nation or group to increase (Todaro & Smith, 2012). India and Nigeria have similar NHDIs and NHDI ranks relative to other nations, which are below both those of Brazil and the United States (Table 2) (Todaro & Smith, 2012; United Nations Development Programme, 2014). Life expectancy at birth and a third and fourth measure of education (adult literacy and mean adult years of schooling, respectively), reinforce this trend (Todaro & Smith, 2012; United Nations Development Programme, 2014). Brazil, India, and Nigeria are members of the United Nations Millennium Development Goal (MDG) agreement, which includes targets for extreme poverty and primary education (Todaro & Smith, 2012). Based on these statistics, it appears unlikely that any of the nations will approach the original goals (Todaro & Smith, 2012). For India this is especially a concern, because poor health and inadequate distribution of education may lead to lower productivity across all sectors (Todaro & Smith, 2012).

The age dependency ratio is an indicator of the percentage of the total population supported by the working population (Todaro & Smith, 2012). For the three developing nations, the age dependency ratio is predominated by the young population, as expected (Table 3)  (Todaro & Smith, 2012; The World Bank, 2014). India and Brazil have the most comparable age dependency ratios, including in the young population subset (The World Bank, 2014). This population structure indicates that India’s growing young population will have to address the consequences of current and past economic structures as it enters the workforce.

Urbanization is associated with development due to labor force movement into the industrial and service sectors (Todaro & Smith, 2012). The United States and Brazil are predominantly urbanized, with India the least urbanized, but showing urban growth of above 1percent (Table 3) (The World Bank, 2014). Nigeria is more urbanized than India, with an even higher rate of urbanization, which highlights India’s unique rural sector development and the importance of understanding its progression (The World Bank, 2014). These social indicators reinforce Nigeria and India’s lower development in comparison to Brazil and the United States’.

India’s current population, social, and economic development measures indicate the importance of understanding its current economic structure. This structure arose due to transitions from agricultural sector GDP dominance, with a retained importance of the agricultural sector in both GDP and employment (Kaushik, 1997; Mukherjee, 2010a; The World Bank, 2014). By understanding these transitions through the Lewis model, we can better understand India’s current development.

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