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Comparing Economic Indicators – India and UK Seminar Task 2

Student Name] 11/25/2018

Table of contents: Introduction:.................................................................................................................................................. 2 The Data on three indicators: A comparison ................................................................................................ 2 GDP per capita, PPP (constant 2011 international $) ................................................................................... 3 Internet Usage and a country’s development: ............................................................................................... 6 Population aged 65 and above (% of total) ................................................................................................... 8 Summary: What do these trends in data tell you for international business? ............................................... 9 Conclusion: ................................................................................................................................................. 10 References: ................................................................................................................................................. 11

Introduction: In this task, we are going to compare the three indicators of GDP per capita PPP, internet usage and population aged 65 and above as a percentage of total population for the two countries – India and United Kingdom (UK) for the years 2002 till 2017. We can see that UK is a most advanced country when compared to India which is still a developing or an emerging country. These comparisons between the two countries help in laying out the differences for the international business organizations on where they can expand to given the situation in both countries.

The Data on three indicators: A comparison The data on GDP per capita PPP (constant international $), internet users as a percentage of total population and population above 65 years of age (as a percentage) is collected from the world bank website and is presented in tabular column below. GDP

per

capita

PPP Country

Population % above Internet Users (%)

65

United

United

United

Kingdom India

Kingdom India

Kingdom

Name

India

2002

2623.33 34669.52 1.54

56.48

4.56

15.96

2003

2783.00 35656.18 1.69

64.82

4.64

15.99

2004

2955.20 36292.18 1.98

65.61

4.71

16.02

2005

3178.83 37159.80 2.39

70.00

4.77

16.05

2006

3419.93 37793.62 2.81

68.82

4.85

16.12

2007

3698.78 38384.25 3.95

75.09

4.92

16.19

2008

3786.63 37903.38 4.38

78.39

4.98

16.27

2009

4049.81 36042.42 5.12

83.56

5.05

16.40

2010

4404.70 36366.98 7.50

85.00

5.11

16.60

2011

4635.88 36607.98 10.07

85.38

5.21

16.86

2012

4827.56 36892.85 12.58

87.48

5.30

17.18

2013

5073.61 37398.80 15.10

89.84

5.39

17.53

2014

5385.14 38251.79 21.00

91.61

5.50

17.86

2015

5756.66 38839.17 26.00

92.00

5.64

18.12

2016

6095.72 39309.33 29.55

94.78

5.81

18.35

2017

6426.67 39753.24

5.99

18.52

Source: (WorldBank, 2018)

GDP per capita, PPP (constant 2011 international $) GDP per capita is average income a person earns in a country. For example if every individual in a country earns thousand Dollars per year then the GDP per capita of the country will be approximately 1000 dollars. GDP per capita as an indicator is very significant because it is a primary indicator of whether the country is poor or not(Kopf, 2018). This is important because if the average income of the country’s population is higher, it would lead to population being healthy, educating the children better, and the basic requirements of the people would be met. Hence GDP per capita become the fundamental indicator of the prosperity of the country. When compared with United Kingdom, India's GDP per capita is very low and this can be attributed to various reasons as summarized below:



India is not a developed country and still developing from being a factor driven country to an industrialized country. During the 18th and 19th centuries, India was mostly agrarian in nature and even though it has seen industrial revolution after its independence, it has been using outdated technology productive activities till recently. the production Technology is a mostly labor intensive in nature.



Similarly the Indian education system was demolished during the earlier centuries and the literacy rates plummeted

before independence and it is not recover fast enough when

compared to UK. 

Infrastructure facilities required for growth and development in India are not fully developed like in the case of United Kingdom and hence the GDP per capita is lower than that of United Kingdom as shown in the graph below.

GDP of a country includes the total value of final goods and services produced within the borders of the country during the specific period mostly annually and it is a widely used measure of the economic activity of a country(Investopedia, 2018). GDP per capita on the other hand is a Better Indicator of the trend in the country’s living standards as it adjusts for the population differences over time and between countries. GDP per capita can be taken as an informal measure for denoting the Nation's prosperity however the ranks of the advanced nations are generally dominated by the countries with relatively small populations and disproportionately large economies. PPP generally refers to the purchasing power parity exchange rates and this theory essentially states that in the long term, currency exchange rates would generally converge

towards the rate that equalizes the price of identical basket of goods and services between any two countries. however a nation having a consistent economic growth can still be far behind in the measure of per capita GDP if its population is growing faster than the rate of growth in GDP. In the comparison between India and United Kingdom, India’s growth rate in population is very much higher than it is for UK and hence per capita GDP is a major issue for countries like India where rapidly increasing population has resulted in declining living standards as represented by the per capita GDP Trend. This can be seen from the bar chart of per capita GDP which makes a comparison between per capita GDP of India and that of UK and we can see that the per capita GDP for UK is far more than that of India.

GDP per capita, PPP (constant 2011 international $) 45000 40000 35000 30000 25000

India

20000

United Kingdom

15000 10000 5000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0

We can see from the above chart, that the percapita GDP for India is just reaching $6000 in the year 2017 while that of UK has been above 35000 in almost all the years and is reaching nearly

$40000 in the year 2017. This shows how advanced United Kingdom is than India which is still an emerging economy.

Internet Usage and a country’s development: The internet usage and the use of technological services like mobile phones have become a important measure for the economic development of the country. This is mainly because internet has been changing the way in which companies work, individuals socialize and create information and share this information with others and it also helps in organizing the flow of people things and ideas across countries(Salahuddin & Gow, 2016). In the developed and most advanced countries internet accounted for 21% of the GDP growth over the last 5 years. During the same period those who are accessing Facebook meant by million users that includes leading firms who regularly share content and update their pages. Social media marketing has been the trend of various Global companies across the countries. Large Enterprises and multinational corporations have reaped major benefits from the internet revolution and this as an empowering influence on many small businesses also. Technological innovations and efficiency enhancers like the payment platforms emerging and the ability to connect people across the world and engage them intensely through the internet is expanding exponentially. The governments of various Nations, the businesses and the policy makers are beginning to recognize the enormous opportunities that the internet Revolution can create even though it has some major risks of privacy and security over the internet. E-Commerce has been the trend over the last two decades and it is the strong contributor to the GDP growth of nations. When comparing India and UK percentage of population who are using internet, we can see that only 30% of the population in India is using internet while more than 90% of the population in UK are using internet. This major difference exhibits the fact that India still has to go a long way in internet usage which can

contribute significantly to the GDP growth rate of a country and also revolutionize the globalisation process in the country.

100 90 80 70 60 50 40 30 20 10 0

India United Kingdom

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(% Of Population)

Individuals Using The Internet

With the internet revolution, traditional activities are rejuvenated and it has enabled fundamental transformations in the ways in which businesses are conductor in virtually all types of Companies and not only those who have become online. With the internet Revolution there are shifts which include wholesale changes in the ways in which the products are bought and sold and also in the ways in which they are designed, and produced and even marketed. The various ERP systems that businesses use involve internet Technologies and ecosystem and this impacts the supply chain and help organizations operate with a global workforce. physical assets have become part of the information system as the ability to capture, communicate,

compute and collaborate with information around has enabled the

internet of things become a powerful and transformative tool for development of businesses and economies around the world. Internet ecosystem has enabled various advantages like fostering competition, encouraging innovation,

developing human capital and also building out comprehensive internet

infrastructure that enables the economy to capture the maximum utility from this technological transformation. It has been empirically proven that countries with higher internet contribution to GDP have an high correlation to those economies with stronger internet supply ecosystem (Manyika & Roxburgh, 2011). This is shown by the graph below

Population aged 65 and above (% of total) Population aged 65 and above represent dependent population who do not contribute significantly to the GDP growth of a country. many developed countries are having a high population rate in this age group 65 and above and this is due to the longevity, decrease in mortality rate, decrease in fertility rate and a decline in population growth which has been visible from 1970s when the adult population which was working outpaced the child population growth (Nagarajan, Teixeira, & Silva, 2013). This was mainly due to the fact that in many of the advanced nations women began actively participating in the workforce as a result of which the

fertility rate declined in these countries. (Maestas, Mullen, & Powell, 2016) Comparing India and UK main can see that the aged population above 65 years represents a smaller percentage in India at 5.99 during the year 2017; while in UK the percentage of population in this dependent age group of above 65 is at 18.52%. Bar chart below represents the percentage of population in the age group above 65 as a percentage of total population.

Population aged 65 and above (% of total)

20 15 10 India 5

United Kingdom

0

Years

Summary: What do these trends in data tell you for international business? For international business organization GDP per capita of a country represents a significant indicator for the purchasing power of the country as the people of the nation would purchase more with their per capita GDP is at a higher rate. in this regard UK has a higher GDP per capita than that of India and hence UK may represent prospective market for international business. how were when compared in the population base which is the potential market size for any business India ranks significantly more as it is the second largest populated country in the world. When comparing the internet usage for both the countries, UK ranks significantly well as nearly 94% of its population of using internet when compared with 30% of the population using internet in India. For global businesses without transforming they are channels of distribution

through online digitalization, UK fares significantly well in comparison with India. however in the case of ageing population, where the dependent population of age category 65 and above is larger in UK than in India which represents that more of the population in India is of the working age group category which can significantly contributed to the GDP growth rate. Hence considering international business, a country with the higher working age population is India when compared to UK. Hence considering the market size and the working age population India ranks significantly well and are an emerging economy that can also improve upon its internet usage facilities.

Conclusion: The 3 indicators of economic activity which was compared in the above analysis includes the GDP per capita PPP, internet usage as a percentage of population and the population aged 65 and above as a percentage of total population. We can say that the relationship between internet usage and GDP growth rate is positive from the above analysis and the relationship between the population aged 65 and above and the GDP growth rate is negatively related. This is mainly because internet facilities that are growing in the emerging Nations like India having helping out Global businesses to both outsource productive activities in India and also help in distribution and marketing through the internet in India which has a largest market size. India has the most important asset of human capital (though they are unskilled and Semiskilled) and the largest percentage of population is in the working age population which is a significantly contributing factor for international businesses. However with the largest population in the world, GDP per capita is significantly lower than that of Advanced Nations like UK.

References: Investopedia. (2018). Per Capita GDP Definition | Investopedia. Retrieved November 25, 2018, from https://www.investopedia.com/terms/p/per-capita-gdp.asp Kopf, D. (2018). GDP per capita is far more important that GDP for measuring economic development — Quartz. Retrieved November 25, 2018, from https://qz.com/1194634/theworld-bank-wont-stop-reporting-gdp-instead-of-gdp-per-capita-and-it-is-driving-me-crazy/ Maestas, N., Mullen, K. J., & Powell, D. (2016). The Effect of Population Aging on Economic Growth, the Labor Force and Productivity. Retrieved from www.rand.org/giving/contribute Manyika, J., & Roxburgh, C. (2011). The great transformer: The impact of the Internet on economic growth and prosperity. Retrieved from https://www.mckinsey.com/~/media/McKinsey/Industries/High Tech/Our Insights/The great transformer/MGI_Impact_of_Internet_on_economic_growth.ashx Nagarajan, R., Teixeira, A. A. C., & Silva, S. (2013). The Impact of an Ageing Population on Economic Growth: An Exploratory Review of the Main Mechanisms. Retrieved from https://www.fep.up.pt/investigacao/workingpapers/wp504.pdf Salahuddin, M., & Gow, J. (2016). The effects of Internet usage, financial development and trade openness on economic growth in South Africa: A time series analysis. Telematics and Informatics, 33(4), 1141–1154. https://doi.org/10.1016/J.TELE.2015.11.006 WorldBank. (2018). World Development Indicators (WDI) | Data Catalog. Retrieved November 25, 2018, from https://datacatalog.worldbank.org/dataset/world-development-indicators