Established Economy United Kingdom And An Emerging Economy India

Introduction

The past decade has seen a major growth in world economies; the extent of success can only be compared and measured in terms of socio-economic factors, institutional variables and their interactions, in order to understand why certain countries have grown at a faster rate as compared to others. The aim of this essay is to explore a comparative analysis of a sample established economy and a sample emerging economy with relevance to social, political, and economic factors. An established economy is characterized by a significantly high level of economic growth usually measured by income per capita, the general living standards of its citizens, industrialization and infrastructure, the sample established economy in this context is the United Kingdom. The United Kingdom’s economy is fueled by the service industry, which contributes over 80% of the GDP. Growth and dominance of the service industry is attributed to financial growth of the middle-income families’, wealth retention amongst the upper class and high mechanization of other sectors. In comparison, emerging economies also known as transitional economies are countries that have made significant changes in their social, economic, and political structures in order to gain significant and consistent economic growth above world average. The sample emerging economy in this context will be India. India’s economy is mainly fueled by the agricultural industry, which accounts for 23% of the total GDP. This growth is attributed to high domestic private consumption of its local produce and exportation of its diverse agricultural produce mainly cashew, sugarcane, rice, wheat, and cotton.

Social indicators influencing economic development

Social factors influence economic development in varying degrees either directly or indirectly, thereby, affecting market performance or contributing to the overall gross domestic product between established and emerging economies. The main social factors influencing economic development of a country are comprised of education, employment and unemployment rate, gender equality. The comparison of these social indicators between a sample established economy (United Kingdom) and a sample emerging economy (India) varies as follows;

Education

Literacy levels in the UK stands at 99% while in India it is at 79.5%. It is significant to note that more males are educated in India than females and the distribution of literacy index shows that more people in the urban areas educated as compared to people in the rural areas of India. The significant difference in literacy between the established economy and emerging economy indicate a difference in the contribution of education as a factor of development through reduction of poverty and crime rate, lowering birth rate and prevention of diseases as well as enhancing cultural diversity.

The employment and unemployment rate

Employment increases purchase power by earning salaries and wages for goods sold and services rendered. Notably, this contributes towards the economic growth of a country. Unemployment rate on the other hand, contributes significantly to the loss of gross domestic product and may lead to insecurity; hence, creating a non-conducive environment that hinders the growth of a business. By investing in labor force and production, established economies brag a higher employment rate with the UK, at 76% as compared to emerging economies (India) at 48%.

Gender equality

Gender equality involves recognition of a feminist approach in achieving an inclusive economic development through women empowerment and gender diversity in leadership. Countries that promote equal access to job opportunities and education for both men and women enjoy significantly higher economic growth and development compared to countries with a lesser representation of women, by creating more jobs and fighting for wage equality for the same services rendered by men as women. The UK for example has a representation of 34% compared to India at 12% in the parliament.

Religion

Religion influences certain decisions around people’s lives therefore creating a culture. Entrepreneurs associating themselves to a religion create a unifying effect amongst people of the same belief. This can also be a divisive factor when people of different believe compete for the same opportunities or resources. Christianity is the most widespread religion in the UK followed Islam, Hinduism ad Sikhism, Judaism. Christianity in the UK dates back the 16th century and the royal family is the head of the Church of England. The constitution and legal systems are founded on Christian principles of justice and fairness. 20,000 state-funded schools in England are faith based mainly Anglican and Catholic. National holidays and working weeks are also structured Christian calendars. Christianity has also influenced the formation of Sunday trading laws In the UK, which restricts trading hours on a Sunday.

India is home to Hinduism, Buddhism, Jainism, and Sikhism. Sections of the Indian population practice Christianity and Islam, making Islam the second most popular religion. Since independence, Hindus majority and Islam minorities have been at conflict leading to arson and looting of property periodically creating a less conducive environment for businesses to thrive in amongst these communities. These religious differences have also influenced politics in India and how they elect their leaders.

Political indicators influencing economic development

Political influence deters or enables the economic development of a country through government policies and administrative culture. Trade laws, corruption, policies, political stability, and regime have a direct impact on the economic development. Reliable government structures create a healthy environment for business to start and thrive as well as promoting the existing ones through favorable rules and regulations.

The company’s act of UK 2006 is one of the oldest laws In the land, it makes provisions for incorporation, shareholders rights, director duties, company naming and address, company secretary’s and need for them, auditing, disqualification of company directors, capital rules and annual general meetings. The UK companies’ law gives more attention to stake holders ad makes them the focal point more than they do shareholders. India’s companies act 2013 makes provisions on significant official company owners, acceptance of deposits incorporation, protection of medium, small, and micro enterprises. India’s companies act focuses more on the shareholders and promotes self-regulation.

Trade laws

Trade laws are barriers to economic development. They regulate export and import of goods and services from one county to another, hence, determine surplus and deficit. They also create bilateral, regional, and multinational trade agreements between countries. The fewer the trade barriers a country has, the better the economic environment. The UK has significantly less trade barriers as compared to India. However India has been working significantly towards reducing the number of barriers; both tariff and non-tariff barriers to promote trade between it and other countries.

Corruption

Corruption amongst political leaders or political institutions deprives a country of its economic stability and stunts development. Corruption directly impacts the social wellbeing of citizens in a country through inadequate allocation of resources and provision of low quality services such as healthcare and education. It slows development since very little funds are invested back into the country. The established economy (UK) ranks at position 11 in the corruption index while India ranks 78 out of the 180 countries worldwide. Through corruption India loses a significant amount of its gross domestic product annually.

Policies

There are two government policies in particular that affect political growth of a country; monetary and fiscal policy. Monetary policy targets inflation by controlling interest rate imposed on money borrowed and controls money supply in general. Fiscal policy regulates government expenditure and monitors tax rate to stabilize the economy. In order to understand the significance of these policies in a countries economy consistency of indicators such as inflation and taxation rate must be observed over a period of time since they influence consumer’s purchasing power. Inflation rate in the UK stands 1.5% as at 2019 while the inflation rate in India was 3.4%.

Political stability

Politically stable nations have a highly predictable political environmental and significant prosperity of government as compared to politically unstable countries.. A politically unstable government reduces political growth by lowering investment for fear of unpredictability; it also creates a volatile environment where businesses cannot thrive by limiting economic investments.

Regime

Regime refers to political framework with which a country’s leadership style is drawn. The democratic regime is characterized by freedom of the people to choose their leaders and how they want to be ruled. The final decision lies with the majority of the population therefore political goodwill may influence economic development of people within the minority population negatively. This contributes to inequality in distribution of resources. This regime has been adopted by India. Tyranny regime is characterized by severe governance where the ruler has absolute authority over its subjects and exercises power in a cruel or harsh manner. This type of regime is open to economic oppression due to abuse of authority. An established economy like the UK is a democratic state under monarchial constitution where the head of state is the queen.

Economic factors influencing development

There are four main economic factors influencing economic growth and development of a country are availability of capital, availability of natural resources, use of technology, availability of skilled and non-skilled human resources.

Availability of capital

Capital is the physical investment a government makes to improve the livelihoods of its citizen. These physical resources include good road networks used in transportation of goods from one place to another or creation of employment through establishment of factories. Capital directly affects the ability of a country to create employment and pay for labor. The more a country invests in physical capital the more employment opportunities it creates for its citizens.

Availability of natural resources

Availability of natural resources such as oil and minerals, coal, or water in a country automatically gives it an economic advantage. However, exploration and utilization of these natural resources is the ultimate boost of a country’s economy, through creation of employment and investing in other resources..

Use of technology

Adaptation of technology in production of goods and services influences the quality of production as well as speed of production; technology can be adapted in farming, manufacturing, and processing industries as well as the health sector. Technologically advanced countries offer more competitive goods and services unlike countries that have not adapted to the use of technology. The UK experienced industrial revolution at the end of the 18th century, it has since moved from agricultural industrialization to manufacturing, construction and service industry. India however still relies of agriculture and the textile industry as its main source of income thus limiting its exportation range of produce.

Availability of human resources

Diversity of the population of a country in terms of age, gender, and education provides a wide variety of expertise in human resources. However, education and training of the labor force significantly influences the overall economic output of a nation..

Conclusion

Emerging economies still need to make significant changes and develop policies that would protect social, economic, and political aspects of their development. Human resources in emerging countries are still underpaid ad they still record a higher rate of slavery. Most emerging economies that are significantly reliant on agriculture may experience high volatility due to lack of capacity for disaster management. In order to protect themselves against currency swings, emerging markets need to diversify their market. Finally, emerging markets need to protect themselves from inflation and promote local savings amongst its citizens to explore full growth potential.

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