The India’s economic liberalization policies have created a competitive economic environment for growth and trade over the years. Basically, the India’s economic growth has been possible as a result of the expansionary policies geared towards sustainable trade in a friendly market. This analytical treatise attempts to explicitly review the importance of international economics, the principle of comparative advantage, and modern trade theory from the article, “India, known for outsourcing, expands in industry”.
International economics, comparative advantage, and modern trade theory
The article shows that a good economic policy model should have five key attributes to spur growth and attract economic boom. Same as the situation in India, it should have a good management system for its public and debts finances. The second aspect considers arrangements that ensure stability in monetary policies. Thirdly, a government has to create incentives that help in modeling domestic and international economic development goals.
Fourthly, the economic system shouldensure that there is creation of an independent system of operation. This helps in setting and dealing with the economic policies that create desirable trade conditions in the economy. The last aspect under consideration is the development of a well established security market by the government to ensure sustainability of its economic development policies, targeting the global market (Giridharadas, 2006).
The increase in demand from the domestic consumers as well as the international consumers may catalyze any growth in trade. International demand is stimulated by improved terms of trade between the home country and other countries. Moreover, a rise in factor productivity may ensure that the trade is sustainable, as is the case in India (Giridharadas, 2006).
As stated in the modern trade theory, the current modernization strategies by the developing India and the rapid growth of capital have contributed to the mobilization of capital from the domestic and foreign sources. On the other hand, the comparative advantage holds in the current economic climate of India.
In fact, under comparative advantage, trade has become advantageous between India and other parts of the world due to incentives such as tax holidays, cheap labor, and support given to investors (Giridharadas, 2006). Besides, the comparative advantage has inspired differences in price and skills mix that can be attributed to the current affordable cost of doing business in India.
Comparative advantage and increased domestic employment
Reflectively, production factors remain different in countries. These factors of production are the basis of trade between countries. For instance, India has plenty of labor while the United States has plenty of capital.
Through trading on these grounds, India and America may narrow their differences in wage. India may provide cheap labor in exchange for capital investment in different sectors. As a result of capital investment from foreign countries in India, the domestic employment rate will increase as companies will employ more local workers (Giridharadas, 2006).
Basis of comparative advantage in the US
The US has a massive capital accumulation which is a vital factor of production. For instance, the composition of the United States’ resources explains its imports and exports composition, especially to other parts of the world.
Specifically, under individual sector scrutiny, it is apparent that trade has become more of a partnership function than mere exchange of goods and services (Giridharadas, 2006). These partnerships also deal with social aspects of trade. Apparently, the famous AGOA trade pact between America and its partners has been very helpful to the parties due to the benefits of comparative advantage on trade.
From the above reflection, it is apparent that international economics come into play in the global trade arena. The aspects of comparative advantage and modern trade have placed India in a strategic global trade position.
Giridharadas, A. (2006). India, known for outsourcing, expands in industry. Retrieved from http://www.nytimes.com/2006/05/19/business/worldbusiness/19factory.html