Advanced economic systems: post-industrial states characterized by high per-capita income, extremely competitory industries, and well-developed commercial substructure. E.g. Australia, Canada, Japan, United States, and Western European states.
Developing economic systems: low-income states characterized by limited industrialisation and dead economic systems. E.g. , most low income states in Africa, Latin America, and Asia, such as Bangladesh, Nicaragua and Zaire.
Emerging market economic systems: a subset of former developing economic systems that have achieved significant industrialisation, modernisation, improved life criterions, and singular economic growing. They are some 27 states in East and South Asia, Latin America, Middle East and Eastern Europe. Examples: Brazil, Russia, India, China.
Advanced economic systems ( illustration ; USA )
the United States ‘ economic freedom mark of 76.3 beads it to tenth topographic point in the 2012 Index. Its mark is 1.5 points lower than last twelvemonth, reflecting deteriorating tonss for authorities disbursement, freedom from corruptness, and investing freedom. The U.S. is ranked 2nd out of three states in the North America part, and its overall mark remains good above the universe and regional norms.
The U.S. economic system faces tremendous challenges. Although the foundations of economic freedom remain strong, recent authorities intercessions have eroded bounds on authorities, and public disbursement by all degrees of authorities now exceeds tierce of entire domestic end product. The regulative load on concern continues to increase quickly, and heightened uncertainness further additions ordinances ‘ negative impact. Fading assurance in the authorities ‘s finding to advance or even prolong unfastened markets has discouraged entrepreneurship and dynamic investing within the private sector.
Restoring the U.S. economic system to the position of a “ free ” economic system will necessitate important policy alterations to cut down the size of authorities, pass the revenue enhancement system, and transform dearly-won entitlement plans. By hiking growing in the private sector, such freedom-enhancing policies are the best hope for conveying down high unemployment rates and cut downing public debt to manageable degrees.
The U.S. economic system, the universe ‘s largest, has non recovered to the full from the 2008 fiscal crisis and resulting recession. Under Democratic President Barack Obama, the federal system of authorities, designed to reserve important powers to the province and local degrees, has been strained by the national authorities ‘s rapid enlargement. Spending at the national degree rose to over 25 per centum of GDP in 2010, and gross public debt surpassed 100 per centum of GDP in 2011. A 2010 wellness attention measure that greatly expanded the cardinal authorities ‘s range has been under challenge in the tribunals, and the Dodd-Frank fiscal inspection and repair measure has roiled recognition markets. Although the election of a Republican Party bulk in the House of Representatives in late 2010 slowed disbursement growing, divided authorities has left U.S. economic policy in flux.
RULE OF Law
Property rights are guaranteed, and the judiciary maps independently and predictably. Serious constitutional inquiries related to government-mandated wellness insurance have been under consideration in the tribunals. Corruptness is a turning concern as the cronyism and economic rent-seeking associated with the growing of authorities have undermined institutional unity.
In the absence of comprehensive revenue enhancement reforms, the top person and corporate revenue enhancement rates remain at 35 per centum. Other revenue enhancements include a capital additions revenue enhancement and excise revenue enhancements, with the overall revenue enhancement load amounting to 24 per centum of entire domestic income. Government outgos have grown to 42.2 per centum of GDP, and the budget shortage is near to 10 per centum of GDP. Entire public debt is now larger than the size of the economic system.
Business start-up processs are efficient, and the labour market remains flexible. However, over 70 new major ordinances have been imposed since early 2009, with one-year costs of more than $ 38 billion. There were merely six major deregulatory actions during that clip, with reported nest eggs of merely $ 1.5 billion. Although rising prices is under control, monetary value deformations caused by authorities intercessions persist.
The trade weighted mean tariff rate is 1.8 per centum, with non-tariff barriers such as “ purchase American ” procurance regulations adding to the cost of trade. Investing freedom is hampered by ongoing protectionist limitations. The impact of the late passed fiscal reform measures has yet to be measured, as elaborate ordinances are bit by bit emerging. However, they are likely to increase conformity costs, perplexing the banking sector ‘s recovery.
Developing economic system ( Example ; Bangladesh )
The GDP growing rate of Bangladesh started picking up since the 1990s and over the last 5 ( five ) old ages has maintained a growing rate of around 6 % . It is recognized that the economic system has the potentialto grow at an even higher growing rate if the growing restraints such as hapless administration, rampantcorruption, substructure constrictions, developing fiscal markets and failure to pull FDI areremoved.Over clip, there has been structural transmutation in the economic system with a displacement from predominantlyagriculture-led economic system towards industry-led economic system ; the part of agricultural sector to GDPwas 38 % in early 70s but declined to 21 % in 2007-08, while the part of industrial sectorincreased from 15 % to 30 % during the same period of time.Investment remained stagnated until the 1980s but started picking up since early 1990s, mainlyattributable to the openness of economic system and the debut of a broad policy environment ; creatingincreased chances for private investing. The investment-to-GDP ratio during 2006-2008 periodstood at around 24 % of GDP, but it should in the vicinity of 30 % in order for the economic system toreach two-digit growing flight.
Approximately 75 % of the population lives in rural countries, out of which 44 % unrecorded below the poorness line.Therefore, investing in agribusiness and rural economic system needs to be high on the development agenda.The policy prejudices in the distribution of public resources have created disparity between the easternand the western parts of the state. Appropriate policy intercession is needed to rectify theimbalance. During the last three old ages, the national nest eggs grew to 28.6 % on an norm. The mobilization ofdomestic resources and the transforming of national nest eggs into investible excess are critical for thecontinued growing of the economy.The rising prices for the first clip touched double-digit in 2007-08 chiefly due to provide dazes arisingfrom significant additions in the international monetary values of fuel, fertiliser and nutrient points every bit good as naturalcalamities caused by cyclone SIDR and inundations. However, in the recent months the rising prices rate hascome down and in December ’08 it stood at 6.03 % on point to indicate footing.
Over clip, the mean Revenue-to-GDP ratio improved bit by bit and increasing to 10.8 % duringthe 2006-2008 period from 7.5 % in 1973-1980 period. However, the Revenue-to-GDP ratio ofBangladesh still remains one of the lowest in the universe and even lower compared to that of Nepal. There have been structural alterations in the gross construction replacing pre-dominance on customsduties by income revenue enhancements and VAT.
As a per cent of GDP, public outgos increased from approximately 10 % in 1972-73 to a extremum of about18 % in 1999-00. The ratio declined to 13 % in 2003-04 and remained under 14 % to 2006-07. In2007-08, it increased to 16 % . The expenditure-to-GDP ratio in Bangladesh slowdown behind compared toother developing states, as in the instance for the revenue-to-GDP ratio.
Over the old ages, outgo on subsidies and current transportations, wage and allowances, involvement
Payments and goods and services has increased bit by bit. However, the rate of addition in
Outgo on subsidies and current transportations, involvement payments and goods and services is muchhigher than others peculiarly from 2005-06 onwards. Over the old ages, the portion of subsidy among different sectors/areas has changed significantly, withincreased focal point in the country of fertiliser.
The financial shortage has remained within a tolerable bound. In 2007-08, the budget shortage stood at 4.9 % ofGDP including BPC liabilities and 3.5 % of GDP excepting BPC liabilities. The budget allotment for the societal safety net programmes increased from 8.4 % to 16.9 % of entire
Budget during 2004-05 to 2008-09.
Monetary and Financial Sector
Fiscal deepening measured by the ratio of wide money to GDP increased steadily from 11.5 % in 1973-74 to 46 % in 2007-08 implying that the economic system is being progressively monetized.Private sector recognition as per centum of GDP grew to 35 % in 2007-08 compared to merely approximately 3 % in 1973-74.The portion of private sector recognition to entire domestic recognition increased from 24 % in 1973-74 to 74 % in2007-08.Time sedimentation increased from 40 % to 76 % from 1973-74 to 2007-08.Market capitalization of all portions and unsecured bonds listed in the Dhaka Stock Exchange stood at14.6 % of GDP by June 2008 compared to 8.7 % of GDP at June 2007.
Development of Government Bond Market
Government has initiated reforms in the country of debt direction since 2005. It has enacted the Bangladesh Government Treasury Bonds ( BGTB ) Rules, 2003 under which exchequer bonds are being marketed on a regular footing. Development of a primary market for purchasing and merchandising of authorities bonds of changing adulthood ( 5 twelvemonth, 10-year, 15-year and 20-year ) to raise financess from the domestic market is one of the important accomplishments of these reform enterprises.
Average export growing increased to around 18 % in the 2006-2008 period from 7 % in 1981-1985 period. In the entire export basket, RMG accounts for 76 % , Frozen Food 4 % , Jute and Jute Goods 3 % , Leather and Leather Goods 2 % and others 15 % .The import points include capital machinery ( 36 % ) and major primary goods ( 17 % ) .Remittances from expatriate Bangladeshi workers stood at US $ 7.9 billion in 2007-08 reflecting32.4 % addition over the old twelvemonth stand foring about 10 % of GDP. FDI as per centum of GDP shows a diminishing tendency and stood at 7 % during 2007-08.Foreign Exchange Reserve stood at US $ 5.6 billion as on February 3, 2009.
Recent Global Financial Crisis: Bangladesh Context
The planetary fiscal crisis triggered by US subprime mortgage fiasco in 2007 badly affected the
universe economic system seting it into a recession. The possible countries that could impact the economic system ofBangladesh include exports, remittals and foreign investing. The existent impact is nevertheless, non
seeable at this phase. The grade of such impact will depend on how deep and prolonged the recession is.
Challenges and Policy Responses
In order to confront the challenges identified, the new authorities demands to come up with a set of appropriatepolicy intercessions. The challenges identified and the suggested policy responses are categorized inthree groups:
1. Immediate challenges and policy responses
2. Short and mid-term challenges and policy responses
3. Long-run challenges and policy responses
Immediate Challenges and Policy Responses
Ensure effectual market monitoring, remotion of market barriers for cardinal indispensable trade goods
Rationalize and prioritise undertakings and maximise ADP execution
Operationalise Agricultural Endowment Fund and Climate Change Fund
Increase domestic gross mobilisation through the enlargement of tax-net
Expedite recent enterprises for power coevals
Boost up energy sector through Public-Private Partnership ( PPP )
Diversify exports in footings of both parts and points
Ensure smooth supply of fertiliser at a sensible monetary value
Short and Medium-term Challenges and Policy Responses
Understate the losingss of and subsidies to SOEs
Keep a tolerable bound of budget shortage
Maintain stableness in the fiscal markets
Ensure proper policy intercession in footings of resource allotment to extenuate regional disparity,
particularly modernisation of Mongla Port to use its full potency
Long-run Challenges and Policy Responses
Ensure good administration to speed up economic growing
Restructure civil service to guarantee a well-balanced ratio of officers and staff within thegovernment
Restructure authorities establishments to back up ongoing reform docket
Establish venture capital through Public-Private Partnership ( PPP ) to advance IT sector to realizethe vision of Digital Bangladesh
Emerging market economic systems ( Example ; India )
Recent Tendencies in the Indian Economy
The modern history of Indian economic development begins with India ‘s Independence in 1947. The six decennaries since so can be dividedinto three distinguishable stages. The first stage from 1947 to 1980 was markedby comparatively modest growing, compared to several other freshly industrializing economic systems of Asia, with the mean rate of growing being around 3.5 % per twelvemonth. The 2nd stage of development, from 1980 to 2000, saw an acceleration of economic growing with the mean rate ofgrowth being about 6.0 % . The of import turning point of the secondphase was 1991 when a series of economic reform steps helped brace the economic system, better India ‘s external economic and financial profile. The 3rd stage begins around 2000, after the dotcom roar and flop, with a new stage of private sector led growing climaxing in India entering about 9.0 % growing for a uninterrupted period of five old ages, from 2003-08.For the first three decennaries following independency, India consciously sought to construct a assorted economic system. One of the chief
aims of economic policy was to right the failings inherent in a developing economic system with a hapless capital and infrastructural base. State intercession and investing were justified on the evidences of `private investing failure ‘ . The Second Five-Year Plan ( 195560 ) witnessed heavy public investing in the nucleus industrial sector every bit good as in conveyance and communications. While this was politically advertised as being the footing for the edifice of a `socialistic form of society ‘ , in world, public investing, both in industry and agribusiness, was THINK INDIA QUARTERLYsupplemented by private investing, which laid the foundations for the growing of autochthonal concern endeavor. India ‘s protected industrial sector thrived during the first half of the sixtiess. However, a series of hapless monsoons, two wars with Pakistan ( in 1965 and 1971 ) and lifting societal and political discontent curbed productive investing, taking to a slowing in the rate of growing of industrial production throughout the seventiess. In order to set to this low-growth stage and in response to force per unit areas from new concern groups ( both domestic and non-resident Indians ) , a series of policy alterations were carried out, liberalising the extremely regulated economic system and doing production for exports, instead than for the internal market, comparatively
profitable. The first stage of this new broad economic policy was introduced in 1978-80. The rise in the cost of crude oil on the universe market in 1979, nevertheless, forced the Government to return to a more regulated economic system. The 2nd stage of economic liberalisation was implemented during the early months of Rajiv Gandhi ‘s premiership ( 1985-1989 ) .
Compared with the low economic growing rate of the seventiess ( with an mean one-year GDP growing rate of 3.5 % ) , the 1980s witnessed centrist to high growing, with an mean one-year GDP growing rate of 5.5 % . This addition was mostly due to a steep rise in public outgo and investing. The modest liberalisation of the import government facilitated entree to new engineerings, which, in bend, encouraged enlargement in the consumer durable goodss, electronics and petrochemicals industries. The Government had non, nevertheless, protected itself against an inordinate degree of adoption, both domestically and internationally. India ‘s first-class crowned head recognition evaluation allowed it easy entree to planetary fiscal markets in the late eightiess, and both long- and short-run debts were quickly accumulated. Given the high accretion of debt and the attendant load of debt service, and in the absence of an equal growing in exports, India found itself unable to defy the inauspicious effects of the Gulf crisis in mid-1990. Partially on history of this and partially on history of the hapless political appraisals of credit-rating bureaus, which believedthat a minority Government would be unable to prosecute policies that would stabilise the Indian economic system, India ‘s recognition evaluation began to steal in the latter half of 1990.
Faced with the hazard of default, the Government imposed Draconian import control steps, borrowed extensively from the IMF and, in July 1991, devalued the rupee by 20 % . The balance-of-payments crisis of mid-1991 coincided with the reaching in office of a new Congress Party Government led by Prime Minister P. V. NarasimhaRao, with the former Governor of the Reserve Bank of India, Dr Manmohan Singh, as Minister of Finance. The Rao- Singh squad utilized the chance opened by the payments crisis to do the Indian economic system more accessible to foreign trade and investing flows. Implementing a traditional structural accommodation programme designed with the aid of the World Bank and the IMF, India liberalized its trade and investing policies, announced a programme of financial stabilisation aimed at cut downing the financial shortage from more than 8.5 % of GDP to 5.0 % , initiated a policy for phasing out short-run external debt exposure and reduced the current-account shortage from more than 3.0 % of GDP to less than 2.0 % within a twelvemonth.
Harmonizing to the UN Development Programme ‘s Human Development Report 2007, India ‘s human development indexs showed an betterment in the 1990s. India, one time considered a state with `low ‘ homo development, has advanced to the class of medium ‘ human development. Harmonizing to the study ‘s estimations of the Human Development Index ( HDI ) , India ranked 128 in a list of 177 states. These estimations of HDI, nevertheless, were based on the profile in 2005. While India ‘s HDI did lift during the 1990s, the progressively widening spread between the state ‘s HDI and per caput GDP ranking in the `negative way ‘ has been a badgering phenomenon. Harmonizing to the Human Development Report 2007, India ‘s place in footings of per caput GDP was 11 topographic points higher than its ranking in footings of HDI, bespeaking that the state could make much better in administering the benefits of its GDP growing. Until the late 1990s there was small difference between India ‘s HDI and per caput GDP rank.
The rapid acceleration in Indian economic growing in the early old ages of the twenty-first century has changed planetary feelings of India. Indian companies have made their grade in the universe market place in a figure of Fieldss, from consumer merchandises to sophisticated technology and IT services ; Indian professionals are much sought after in countable services, of which computing machine package is merely one ; Indian exports have been turning at a rate of more than 20 % per twelvemonth ; and the state has emerged as the preferable planetary location for the proviso of low-cost services. India is no longer seen as a hapless economic system that has systematically under-fulfilled its possible. Alternatively, it is now seen as a new driving force in the planetary economic system, one that rivals China in the altering international balance of economic power. The Indian economic system has grown by more than 5 % per twelvemonth since the early 1980s. However, the acceleration to an 8 % or more growing rate took topographic point merely during the first decennary of the twenty-first century, an norm of 8.8 % growing per twelvemonth between 2003/04 and 2007/08, compared with an norm of 5.4 % growing per twelvemonth over the old five old ages ( 1998/99 – 2002/03 ) . This acceleration prompted the Planning Commission of the Indian Government to put a mark of mean one-year growing of 9 % during the 11th Five-Year Plan ( 2007/08 – 2011/12 ) .