...Group - 5 Somnath Bhaduri Neeraj Jain Naveen A. Kumar Kirti Katiyar Harsh Agarwal Dipankar Duttagupta Group - 5 Somnath Bhaduri Neeraj Jain Naveen A. Kumar Kirti Katiyar Harsh Agarwal Dipankar Duttagupta MIDDLE-INCOME TRAP IN INDIA MIDDLE-INCOME TRAP IN INDIA TABLE OF CONTENTS 1. Introduction……………………………………………………………………………………………… 2. The Middle Income Trap…………………………………………………………………………… 3. Reason why countries are struck in Middle-Income Trap…………………………. 4. India enters the Middle Income Group…………………………………………………….. 5. Factors causing Middle Income Trap and Economic Slowdown………………… 6. Income inequality and its relevance…………………………………………………………. 7. How to avoid India falling into Middle Income Trap…………………………………. 8. Conclusion………………………………………………………………………………………………… INTRODUCTION According to International Monetary Fund World Economic Outlook (April-2015), GDP (nominal) per capita of India in 2014 at current prices is $1,627. India is in the lower-middle income category. India’s entry to the middle income group has raised the question whether it will be able to avoid the ‘middle income trap’ which refers to prolonged stay in the middle income category and failure to move ahead to the high income category. India’s economy has developed quickly in the last decade, improving living standards and experiencing strong growth in such critical sectors as ICT (information, communication and technology). In recent years, however, circumstances...
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...capita in the period since 1980 has averaged over 3.6 percent, a rate that results in a doubling of income levels in just a 20-year period. By way of comparison, the industrial countries of Britain and the United States realized an average growth in GDP per capita of between 1.3 and 1.8 percent during their own respective periods of industrialization. Yet, relative to the more advanced Newly-Industrializing Economies (NIE) of Singapore; Taiwan, China; and the Republic of Korea, the record of Malaysian growth appears more sobering.1 These countries recorded real per-capita growth rates of 4.4, 5.7 and 7.5 percent, respectively, during the same period. As shown in Figure 1, Malaysia was at a similar level of development as Korea and Taiwan, China in 1980, and yet while these countries have made the transition from middle-income to high-income status during the subsequent decades, Malaysia has found such an evolution more difficult. In addition, Malaysia’s absolute productivity gap with high-income (OECD) countries has also widened; in the case of the industry sector, the productivity differential nearly doubled from $21,786 in 1980-1985 to $38,946 in 2000-2004 (Felipe et al, 2007). After markedly reduced rates of productivity and growth after the Asian financial crisis of 1997-98, there is a growing concern that emerging markets like Malaysia might fall into a “middle income trap”, unable to subsequently achieve high levels of economic growth and further economic transformation...
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...Walmart vs Target Calculate profit margin, net marketing contribution, marketing return on sales (or marketing ROS), and marketing return on investment (or marketing ROI) for both companies. Which company is performing better? Profit margin: Profit / sales Net marketing contribution: Gross Profit - marketing costs Marketing ROS: net marketing contribution / sales Marketing ROI: net marketing contribution / marketing costs According to the data shown in the table above Target is preforming better than Walmart. At the first observation, one would assume that Walmart is performing better because of its higher sales and profits. However, the data above shows that Target is preforming better and is more efficient than Walmart. First, Target’s profit margin is 4.9%, this means that its profits make up 4.19% of its sales, while Walmart’s profits only make 3.51% of its sales. This tells us that Target manages its expenses relative to its net sales. Meaning it has managed to keep its expenses relatively low to its sales. Second, the net marketing contribution. This tells us the net contribution to profits after all marketing expenses are accounted for. Walmart here has a higher value because it generate more sales than target. By looking at the value one would assume that Walmart is better off because it has a higher net contribution to profits, but this does not mean that it is preforming better. Third, the marketing ROS. Target has an ROS of 15.9%, this means that its...
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...Industrial Revolution, some societies traded this ancient poverty for amazing affluence. Historians and economists have long struggled to understand how this transition occurred and why it took place only in some countries. A scholar who has spent the last 20 years scanning medieval English archives has now emerged with startling answers for both questions. Gregory Clark, an economic historian at the University of California, Davis, believes that the Industrial Revolution -- the surge in economic growth that occurred first in England around 1800 -- occurred because of a change in the nature of the human population. The change was one in which people gradually developed the strange new behaviors required to make a modern economy work. The middle-class values of nonviolence, literacy, long working hours and a willingness to save emerged only recently in human history, Dr. Clark argues. Because they grew more common in the centuries before 1800, whether by cultural transmission or evolutionary adaptation, the English population at last became productive enough to escape from poverty, followed quickly by other countries with the same long agrarian past. Dr. Clark’s ideas have been circulating in articles and manuscripts for several years and are to be published as a book next month, "A Farewell to Alms" (Princeton University Press). Economic historians have high praise for his thesis, though many disagree with parts of it. "This is a great book and deserves attention," said Philip...
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...Case Analysis Case: Trap-Ease America: The Big Cheese of Mousetraps Product: Variety, quality, design, features, brand, packing, services, warranties, returns. Price: List price, discounts, allowances, payment period, credit terms. Promotion: Sales promotion, advertising, sales force, public relations, and direct marketing. Place: Channels, coverage, assortments, locations, inventory, transport. Strategic Marketing Choose de value: STP: Segmentation, Targeting, and Positioning. The marketing staff must segment the market, select the appropriate market target, and develop the offering’s value positioning. Tactical Marketing Provide the value: Product development, service development, pricing, sourcing making, distributing. Communicate the value: Sales force, sales promotion, and advertising. Strategy Formulation: Overall cost leadership, differentiation, and focus. 1) Diagnose Advantages: Consumers can use safely and easily with no risk, and it poised no injury or poising. Target Market: Women Distribution: Direct through national grocery, hardware, and drug chains (Safeway, Kmart…). Pricing: $0.99 – Suggested Retail Price $2.49 (2 unit) – Cost $0.392 – Retail net revenue $0.75. Price Positioning: 5 to 10 times more expensive Sales expenses: $60,000 ($50K for travel, and sales calls - $10K advertising). Advertising: Good Housekeeping Magazine. Sales Forecast: 5 millions of units - Current Sales: Several hundred thousand. Budget: $250,000 for fixed...
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...Government Spending: An Expansionary Fiscal Policy Article Summary “On fiscal policy, USC professor's viewpoint is moral and farsighted” by Edward D. In this article, Kleinbard Challenges reliance on the tax code in order to stimulate the economy. According to Kleinbard (2014), increased government spending is a solution of achieving an expansionary fiscal policy in the American economic system. Moreover, he argues with the progressive tax systems as the only popular way of achieving equitable distribution of resources and growing the economy. Additionally, he mentioned the use of government spending in achieving equity and growth. Government Expenditure Increase The fiscal policy postulated is expansionary in nature. The application of the policy would lead a growth in the economy. Government spending should be viewed as an investment. The government should increase its spending on housing, medical care, and education. Also, it should invest in infrastructure. Infrastructural investments include investments on roads, bridges, seaports, airports and dams. Economic Analysis The most important point in government spending is in order to minimum the existing recessionary gap in the economy. Increasing in the government expenditure results in an upward shift of the aggregate demand. Government spending generates demand for goods and services. As a result, the overall aggregate demand increases. Moreover, government spending infuses more capital into the economy. Consumers...
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...ASSESSMENT 2B: Identifying Decision Traps Decision Making Exercise 2 Introduction We all remember the hot summer(winter in Australia) when we heard the news that Lehman Brothers filed for bankruptcy during the terrible ‘sub-prime meltdown’(Investopedia 2009). As a giant among investment banks with a history over 150 years,Lehman Brothers suddenly collapsed in few months. How did Lehman Brothers go bankrupt? Why did it happen? Are there any methods that could have been used to avoid the doomsday? These questions will be discussed below. Case study overview In early 2007, with the stock reached $86.18(Investopedia 2009), Lehman Brothers seemed to have done a great job. Therefore ,the company underestimated the risks posed by rising ‘home delinquencies’(Terry 2008) and overestimated the risk-enduring capacity of the US housing market. One real estate investment broker described Lehman as ‘the real estate A.T.M(Terry 2008).Then Lehman’s share price went into a tailspin when the dark days came in August 2007. Dramatically, at the end of 2007, Lehman’s share price rebounded, as ‘global equity markets reached new highs and prices for fixed-income assets staged a temporary rebound’(Terry 2008).However, Lehman failed to seize the chance to ‘trim its massive mortgage portfolio’(Investopedia 2009). According to the Investpedia (2009), the news was a deathblow to Lehman, leading to a 45% plunge in the stock and a 66% spike incredit-default swaps on the company's debt. With...
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...Case Analysis of Trap-Ease America A group of investors had formed Trap-Ease America after obtaining the worldwide rights to sell a patented and innovative mousetrap from an inventor. The group hired Martha as president to develop and manage the company. Trap-Ease America regarded housewives as the best target market. Because the company believed that women will be attracted to the safety and cleanliness that the traps offer. Unlike traditional spring-loaded traps or poisons, the tarp lures the mouse into a square tube in which it will be trapped alive. There is no danger in baiting and setting trap. It can also avoid the “mess” resulted by the traditional trap’s operation. Martha sold the trap directly to large retailers such as Safeway, Kmart, and CB Drug. The traps sold in packages of two, with a suggested price of $ 2.49, about five to ten times more expensive than the traditional trap. Martha promoted the mousetrap mainly through trade show and personal selling. Despite the innovativeness of the trap and its success at gaining public attention, sales are disappointingly slow. Following are analysis of the problem Trap-Ease faced and some suggestions. Martha and the investors believe they face an once-in-a-lifetime opportunity that the patented mousetrap will bring huge profits. But things were not going on well in the start-off. We know that in order to evaluate any investment opportunity investors need to conduct a detailed analysis concerning a variety of different issues...
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...Global poverty and inequality are problems that affect a large portion of the world’s population. In fact, over half of the world’s population has an income below America’s official poverty standard. To understand this massive gap, one must realize that global poverty is very different from U.S. domestic poverty. The United Nations set a goal to cut global poverty rates in half in 2015. In order for this to occur, nations must reduce extreme poverty through low-income nations having faster GDP growth. This gives greater priority to eliminating the structural, cultural, and legal “inequality traps” that both impede upward mobility for the poor and inhibit economic development. Due to the increasing views on global poverty, there has been a big push regarding ways to alleviate this problem. The main sources to alleviating global poverty are medical assistance, direct aid, education, family planning, and government reform. In society, there are many different effects when it comes to poverty and discrimination. To begin to understand how to alleviate the problem of global poverty, one must understand the effects of poverty and the impact of where one is brought up. Where you grow up and who you grow up around are two of the major elements of poverty and are known as neighborhood effects. The definition of neighborhood effect is the effect of the neighborhood you grew up in on your adult outcomes. One program that the U. S. Department of Housing and Urban Development came up with...
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...collective. To study the social variables that mold identity and construct worldview is to study how our species has created our reality. Learning about the way identities and worldviews are shaped is the first step necessary in altering the formation of those identities and worldviews in order to change our thinking; to create a better and more equal reality. In some cases, such as my own, the formation of an individual’s identity is influenced by a collection of social variables typical of those within their society, as well as variables considered atypical. An absence of organized religion, Caucasian racial categorization, a culture comprised of scattered American ideals and values, an ascribed female gender role, and an upbringing within the middle class are the primary sociable variables that have laid the foundation of my identity and ultimately created my societal view. Depending on an individual’s level of devotedness, religion is often the primary social variable shaping identity and forming ones worldview....
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...economic. It may seem like a random fact but confidence in the economy has an effect that: (www.tharawat-magazine.com) Stimulates spending Lowers interest rates making it easier for people to access loans and credit. Boost performance and returns in the financial market Encourages investment Improving the economic would also help us avoid the dreaded deflationary trap that has brought the japanese economy to there knees. The second reason the minimum wage should be raised is it will help the economy recover. A big part of having the economy recover or stay strong is raising people's purchasing power. If the minimum wage increased it would increase the disposal income of 28 million people which would make businesses do better....
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...from social exclusion and whether or not these people’s behaviours causes them to be outcasts in society. Social Exclusion consist on many factors that combine together which affects a certain group of individuals, these people are usually discriminated on by society due to having a disadvantage on either unemployment, low-income, household, poor skills, lack of education , poor health and family breakdowns. Social exclusion usually tend to happen when we have discrimination and very low income pushing people to poverty, Discrimination and poverty doesn’t randomly happen to people because they are not trying hard enough in life to get improve their situation however it affects groups who are deprived which indicates that our social system exclude and discriminate in a continuous pattern basis. The British society is conformed of a traditional class system which are the upper class, middle class and the lower class these factors determined how your lifestyle is to be. What distinguishes these factors are education, housing, Income and occupation it forms the level in which one is in society and how they are treated in relation to whether or not they would be socially included or excluded within society therefore the nature of social class identity is important in this context. The lower class families and...
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...Economic Growth * Aggregate production function relates the aggregate output (Y) to: (a) Physical capital (b) Labor (c) Index of aggregate productive efficiency Y = F(AL, K) * Y is a flow variable because it measures GDP in a given period * K and L are stock variables, can measure at a given point in time * Y measures the services produced by K and L in period or instant t (e.g. hours of computation and hour of labors affects output, not just number of computers) * Y = 100K + 40L * One computer works 100 hours per week; each labor works 40 hours a week. If there are 2 worker then L=2; computer = 4 then K=4 * Assume economy is working at full potential * Capital is depreciated at constant proportionate rate, * L is assumed to be homogenous (everyone has same skill, education, productivity) and it grows at rate n. * If n>0 growing exponentially, n<0 declining exponentially, n=0 stagnant * Growth of labour is due to growth of population * A is defined as costless labour-augmenting technological progress * A multiplies the labour input, while leaving capital unchanged (e.g.: new organization routines, rearrangement of the flow of material in a factory, better management of inventory, other changes that do not require knowledge to be embodied in new equipment) * A is also known as index of productive efficiency or index of productivity or level of technology * A grows at an exponential rate of g;...
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...Final Exam Notes Lecture 1 => Asia has 32% share of the global economy (in PPP terms that suggest that their currencies are undervalued), is the fastest growing region, and makes significant contribution to global GDP growth => Once a key contributor to GDP, China lost footing to the west due to technological efficiency in the US, UK, and Europe => The four tigers (HK, SG, KR, TW) had 8% growth rates from 1970-1997 due to high saving/investment rates, strong education, stable macro environment, and few downturns => Success of East Asia as a whole due to the aforementioned factors as well as limited price distortions, agricultural development, foreign tech, directed credit, selective industrial promotion, and export push policies => Key weaknesses prior to the 1997 crisis were a lack of increase in output efficiency, poor banking regulations and poor legal frameworks Asian Crisis of 1997 => 1) western investors loaned money to east Asian banks (believing growth would continue and that the IMF would bailout if needed) 2) money was funneled into projects with cheap credit and no collateral 3) projects didn’t have good returns and currency speculators started to sell east Asian currencies 4) triggered drop in baht value leading to overall concern => TH, ID, KR, MY, and lesser extent PH were hammered by the crisis => SG and HK survived due to high reserves and strong economic fundamentals => other countries escaped either because...
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...outline of world economic history is surprisingly simple. Indeed it can be summarized in one diagram: figure 1.1. Before 1800 income per person—the food, clothing, heat, light, and housing available per head—varied across societies and epochs. But there was no upward trend. A simple but powerful mechanism explained in this book, the Malthusian Trap, ensured that short term gains in income through technological advances were inevitably lost through population growth. Thus the average person in the world of 1800 was no better off than the average person of 100,000 BC. Indeed in 1800 the bulk of the world population was poorer than their remote ancestors. The lucky denizens of wealthy societies such as eighteenth-century England or the Netherlands managed a material lifestyle equivalent to that of the Stone Age. But the vast swath of humanity in East and South Asia, particularly in China and Japan, eked out a living under conditions probably significantly poorer than those of cavemen. The quality of life also failed to improve on any other observable dimension. Life expectancy was no higher in 1800 than for hunter-gatherers: thirty to thirty-five years. Stature, a measure both of the quality of diet and of children’s exposure to disease, was higher in the Stone Age than in 1800. And while foragers Figure 1.1 World Economic History in One Picture. After 1800 income in some societies rose sharply, while in others it declined. satisfy their material wants with small amounts of work, the...
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