Reasons for economic growth include a raft of supply side policies that have helped to increase competitiveness and productivity. For example financial markets have become more deregulated, allowing more flexible loans. These have helped to increase investment which has led to increased capacity and competitiveness.

There has also been increased focus put on training and education of at least part of the population. Despite the rapid economic growth so far the Indian economy has managed to maintain relatively stable prices, with inflationary pressures remaining subdued.

The success of the Indian economy shares several parallels with the Chinese economy. Like China the Indian economy has a plentiful supply of cheap labour. This has enabled low labour costs for firms which have made them particularly competitive in labour intensive industries.

This has often been at the expense of Western manufacturing sectors. For example, recently Dyson’s announced it would switch production of vacuum cleaners from the UK to Indian where labour costs are cheaper.

ADVERTISEMENTS:

The Indian economy has also benefited from the process of globalization and improved technology. A good example of this is in call centers, which benefit from the low labour costs. Due to the internet and cheap telephone calls many Western companies have found it profitable to switch their call centers to places in India where labour costs are significantly lower.

India is at a particular advantage for this growing market because compared to other developing countries English is spoken to a reasonable standard by a high share of the population.

The Indian economy has also been able to diversify from its primarily agricultural roots. Mumbai has emerged as one of the leading financial centers in Asia. India is also increasingly benefiting from foreign investment into a variety of industries.