Economics in the Global Environment: India's Living Standards

This report compares the living standards of the United Kingdom and India, focusing on the potential for India to match the UK's standards by 2030. It examines key economic factors such as growth rates, government transparency, education, and economic structure, highlighting challenges like inequality and corruption. The report analyzes two specific Indian policies: the Smart Cities Mission, aimed at improving living conditions in medium-sized cities through infrastructure development and economic zones, and a proposed policy of "Home for All and Education for All" targeted at rural areas to address housing shortages and improve education and employment. A case study of an individual business is then used to describe and analyze a strategic initiative to expand into a new product market in India. The report concludes with a discussion of the factors influencing the living standard of the country.

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ECONOMICS IN THE GLOBAL ENVIRONMENT

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Contents
Introduction................................................................................................................................3
Comparison of the living standard of UK with India in 2030....................................................3
Analyses of two policies of India that are aimed at improving living standard.........................5
Case study analysis of an individual business for new product entry in Indian market............7
Conclusion..................................................................................................................................9
Reference..................................................................................................................................10

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Introduction
Economy of a country is not only a system of production and consumption of goods and
services; it also works as a tool for the further development. The activities within an economy
also pave the way for the future scope for the nation. One such scope for any nation is the
living standard, which is a gift of the economy to the country. Living standard is referred to
as the quality of living of the general population of that country. This depends mainly on the
economic capability of the country. This is why; living standard differs between a developed
nation and a developing nation. The objective of this paper is to shed light on the economy of
a non OECD country, India vis-à-vis the economy of the United Kingdom.
Comparison of the living standard of UK with India in 2030
The UK and India have a lot of difference in terms of the structure of economy and the cost
of living. That has also shaped the living standard in the respective nations. Currently in
terms of the economic measurements, the condition of the UK is way better than that of India.
While, the savings rate and the per capita income in the economy of UK is very among the
world leaders, the widespread unemployment and economic backwardness in India has
resulted in an unbalanced economic performance (Kumar and Dahiya, 2017). India, as per the
figure of 2019, is one of the fastest growing economies of the world. It is also expected to
surpass the economy of the UK in the recent years. However, existing inequalities have
hampered the distribution of the wealth it has acquired over the years. The Economist (2019)
stated that, persistent inequality, corruption and unemployment has restricted the growth path
of the economy of India. Hence, the living standard has, from the very beginning been very
low compared to the UK.
The UK on the other hand, as per the data of the year 2019, shows a very stable economy
with a high domestic private savings rate . Although the economic growth rate has slowed
down after the financial crisis of the year 2007, it still has maintained a healthy growth rate
compared to the other developed economies of the world. In addition to that, the government
of the UK has also managed to increase the rate of employment in the country that led to the
improvement in the living standard of the people as well. UK Parliament (2019) stated that,
the economic performances of the UK post the financial crisis has been the most exceptional
among the European nations and that lead to the decision to exit the European economic
cooperation.

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Now in the coming years, both the economies will grow towards forward direction and
whether there will be convergence between the economies of the two countries depend on a
lot of factor (Zwart, 2015). On paper, mathematically, as per the theory of development it is
possible for the economy of India to catch up with the living standard of the UK as the
economic remains to grow. However, there are few factors which in practical works and that
is why catch up effects have not been seen in the real life. The Economic Times (2019)stated
that, the aim of the government should be to minimise the effects of these factors so that the
economic growth can fully manifests and living standard improves in the economy of India.
Therefore, while on paper it is possible to catch up, the likeliness in the real life is not much.
The reasons are the factors which are discussed below.
First and the most important factor is the growth rate of economy of India and the UK. India
has been growing very rapidly compared to any other OECD nations including the UK.
According to the data of the year 2017, the growth rate of economy of India is around 7.1% .
While on the other hand the growth rate of the economy of the UK is 1.7%. That means if the
economy of India grows at the same rate, it will come a lot closer to the economy of the UK
by the year 2030. However, the living standard of that country is not a direct reflection of the
national GDP of that country. Ft.com. (2019) stated that, presence of high inequality in the
economy can result in a low living standard even in the presence of high national GDP.
Another factor is the transparency in the government. Mumtaz and Theophilopoulou (2017)
noted that, developing countries like India also faces widespread corruption which in turn
impacts on the distribution of the wealth. India can only go close to or reach the living
standard of living only if corruption can be eliminated fully. However, this is a tough job to
implement by the government. It will take a lot of monitoring from the side of the
government. Apart from that reformations need to be there both in terms of work process and
in terms of the pay structure of the officials to correct this . This requires a lot of time and
hence practically, matching its living standard with that of the UK by the year 2030 is
impossible.
Apart from that, another important factor is the education and the structure of the economy.
The economy of India is still dependant mainly on the agricultural activities. Most citizen of
the country is based in the rural areas and makes ends meet from the agricultural field
(Chatterjee and Kar 2018). This not only reduces the pace of the growth of the economy, but
it also lowers the requirement of education. The economy of India also has a problem of
unemployment and underemployment that can reduce efficiency of the growth in the coming

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years if not fixed by the government. According to En.wikipedia.org (2019),
underemployment is really important issue for the Indian economy that can gain the hidden
momentum in the coming years. Underemployment reduces the potential productivity of the
resources and hence even with a huge economic growth rate it is less likely for Indian
economy to have a similar living standard with that of the UK’s by the year 2030. However,
the government of India can still improve the living standard of India so that it comes closer
to that of India (BBC News, 2019). The government has already taken some steps to improve
the living standard, inclusion of the underemployment, unemployment, education and
inequality can further increase the efficiency of the policies.
Analyses of two policies of India that are aimed at improving living standard
As discussed above, improving the living standard of India is a very tough task for the
government for different reasons. The presence of widespread corruption and inequality can
make it even tougher for the government. In addition to that, around 29% of the citizens of
the country is still below poverty line and have income lower than 1.5 USD per day. These
factors can become the hurdle in the pursuit of a better living standard compared to that of the
UK. The government has already started implementing policies and some are also there in the
pipeline.
Existing policy
One of the most recent policies to improve the living standard in the country of India has
been the implementation of smart cities. The government of India has named this policy the
smart city mission under which the government is aiming to improve the quality of living in
the medium sized cities of India (Ft.com, 2019). However, this has also attracted criticism
from the opposition as the living standard in the rural areas of India is even more problematic
than this medium sized town. However, for the implementation of this policy the government
has chosen a pool of 40 cities among different parts of the country. In this cities, the
government not only will invest extra amounts for the development of infrastructure, but
special economic zones will also created in these cities so that employment can be increased
in this parts of the country. The Independent (2019) stated, one of the advantages of this
policy is that it has also worked on the out migration from the small cities of the country as
well.

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The mission smart cities will also emphasise on the modern connectivity of this city with
other parts of the world as well. The government has already provided free wifi in the public
places of these selected cities (Ft.com, 2019). The advocates of the mission state that in the
modern world, in order to improve the living condition, it is necessary for the government to
provide abundance of information to its citizens and free wifi will enable it. Apart from that,
the government has also announced special packages for the investment in these selected
cities. There are basic six features that are there in these smart cities that will further
contribute to the overall living standard of the country. The features are-
 Reasonable and secure access to important resources is water, electricity.
 Inclusive and well expanded government services for the citizens.
 Increased and improvement in the quality of public transpiration.
 Redevelopment of the poorly planned areas of the city.
 Creation of more living space along with the maintenance of recreational spaces like
parks.
 More sustainable and eco-friendly infrastructure development.
These six features are common in all the cities selected to be made smarter so that living
conditions can be improved. Hoelscher (2016) stated that, success in this policy will allow the
government to move towards the rural areas which requires more attention and capital
infusion from the side of the government.
Proposed Policy
Apart from that existing policy, the government of India also have another important policy
in the pipeline that can improve the living standard in the coming years. One such policy
proposed by the government of India is mainly targeted towards the rural parts of the country.
The government of India has promised a home for all Indians by the end of the year 2025.
Han and Hawken (2018) stated that, one of the basic needs for better living standard in case
of India is home. Around 71% of the rural household of India does not have their own house.
Open defecation is very common in India that has reduced the quality of living in the rural
areas of the country since the independence in the year 1947 (Watson, 2015). The proposed
policy, “Home for all and education for all” ensures a basic and secure stays with attached
bathroom for all the citizens living in the rural areas of the country. Apart from that, the
government has also planned to attract investment in the manufacturing units in the rural
areas so that employment conditions can be improved (Anand et al. 2017).

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In addition to that, the government has also included the minimum support scheme for the
farmers of the rural areas as well. Datta (2018) noted that, the profitability of the farmers are
real concerns and hurdle in the path of development. Therefore, in order to have a better
living standard it is important to provide security to the farmers as well. The proposed policy
of the government of India also includes inclusive education as well. As stated above, the
education and literacy rate in the rural areas of India is very low and that has impacted the
living standard (Praharaj, Han and Hawken, 2017). The level of education is so low that,
people actually substitutes the services of the public hospitals with local wizards. These kinds
of widespread superstition and misinformation can be eliminated with education. The living
standard of rural India is slow poor that kids are forced to work in the fields (Malik, 2019).
This is also the reason the government of India has included free meals in the educational
programme as well. Thus, the living overall condition of India way behind compared to UK.
These policies will help India to close the gap of living standard between the countries by the
year 2030, but it is important for India to catch up the living standard of UK in the near
future.
Case study analysis of an individual business for new product entry in Indian market
The globalisation has allowed the company to enter any of the regional markets of the world.
Companies from the OECD countries can also enter the markets of India. However, the
strategies and the operations of the company will differ as different countries have different
economical, demographical and geographical features (Murphy, 2018). Now in this case,
Aviva life insurance, an insurance company of the UK is considered. Its strategy for new
product entry into the market of India is described below.
Market entry:
Now first and foremost thing for the new market entry is the mode of entry. There are a
number of ways a foreign company can enter a destination market. In this case of Aviva life
insurance it has used partnership or joint venture as a mode to enter the markets of India. In
india it has partnered with Dabur Group in order to sell its product in the market. Tulung
(2017) stated that, one of the reasons for choosing joint venture is that the market of India is
different than that of UK. It is important for the company to understand the behaviours of the
customers before it ventures out to sell its product in the market. Joint venture allows the
company to use the experience of the partner company. In this case the Dabur group has

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assisted in bringing customer information in the table so that appropriate products can be
designed for the customers of the Indian market.
Segregation of the customer and product designing:
The second step for the new product introduction is the secretion of the customers of the
market. Life insurance is a product that costs differently for different individuals depending
upon various factors such as income, quality of life and many more. In the Indian market,
customer secretion has been a crucial strategy for Aviva life insurance. It needs to be noted
that, the quality of lives in the rural areas and the urban areas differs significantly (Desai,
2016). In addition to that, the cost of living in the urban areas is way more than that of the
rural areas as well. Thus, Aviva life insurance has introduced different products for rural and
urban people of the country. Apart from that, the living conditions of the rural areas and the
urban areas have also been considered before setting up the premiums for the products. In
general the company sets a low premium and low sum assured for the individual residing in
the rural areas, whereas, the premium for an individual residing in the urban area is more
(Munshi and Rosenzweig, 2016). The company, in the market also plays around with the
premium to extract more surpluses from the market as well. As discussed above, inequality in
the economy of India is widespread. Thus, it also uses the customer specific premium to
increase their revenue (Ramesh and Kasthuri, 2016). For example, if the income of the person
A is more than income of the person B, given the same probability of claims, the company
charges a higher premium from the person A.
This not only allow the company to increase their revenue from the Indian market, but it also
help in the corporate social responsibility as well. In many of the products of Aviva life
insurance, the premium for the rural areas is kept at a very low level for the betterment and
the development of the rural population. For example, Aviva life insurance provides security
insurances to the agricultural workers against any kinds of asset loss (Raza et al. 2016). Most
of the Indian Farmers take loans from the banks to carry out the processes. Therefore, this
product from the insurance companies like Aviva life insurance allows them to insure their
asset against very nominal premiums.
Distribution and expansion of the operation:
Distribution and expansion of the operation of Aviva life insurance is done through the agents
of the company. The agent’s gets commission from the company for each policy sold to the

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customer. The corporate clients of the company are managed from the head offices of the
company (Panda et al. 2016). The overall living quality of lives in India is low and hence the
risk is high. The agents allow the company to understand the scenario in the grassroots level.
Apart from that the agents also help the company and the customers in the claim settlement as
well. The company also carries out survey with the customers of the market in order to
redesign their products as per the changing needs of the customers of the market as well
(Nigam, 2018). However, the company has been facing challenges in the recent times due to
the presence of public insurance companies in different parts of the company. The company,
thus, is trying to use the consumer data analytics for the further risk assessment of the
customer of the market so that premiums can be further lowered and market share can be
increased in the coming years.
Conclusion
Therefore, the living standard of India and UK differs by a huge margin. While, the economic
performance in the UK and hence the living condition is superior in the UK, its condition in
India is very poor and alarming. Given the gap and the persistent problems related to the
economy of India, it is less likely for India to catch up with the level of UK in terms of living
standard by the year 2030. However, the government of India has implemented policies to
improve the living standard which can reduce the gap with the living standard in the UK.
There are also proposed policies in place which promise to improve the living conditions of
the rural populations of India as well. The study also furnishes the strategy analysis of
company based in UK for its market entry in India.

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