Keynesianism as a theory maintains that the economic performance of a country depends on the expense incurred in running its operations in the short run. These expenses depend on production and employment levels of the country; they also affect the inflation rate in the concerned country.
According to this theory, government involvement in the monitoring of monetary policies is the best strategy in ensuring growth and stability in the economy of the country.
Mercantilism refers to a system of the economy that aims at increasing a country’s economic wealth. It applies government regulations on all of the country’s commercial business. It is applied by imposing high tariffs on imports thus reducing them while maximizing exports.
Mercantilism’s main argument is that the wealth of a country, which determines its economic strength, relies on available minerals such as gold, diamond, and oil.
Mercantilism cannot be sustained for a long duration since there would be no economic growth if countries only want to export their products without importing products from other countries.
The two economic approaches recommend a full involvement by the government in managing the country’s commercial activities through regulative policies that aimed at fostering the economy.
India has a third of the world’s poor population, as per the World Bank figures, but it is still the twelfth largest economy in the world.
India was unable to feed its people at some point when it struggled with poverty. The country’s capacity to produce agriculturally was far much surpassed by its rapidly growing population, and as a result, it largely depended on imported agricultural produce.
However, this was overturned when the government realized that the large population could be harnessed to produce in the agricultural sector. Most of the people in India are not formally employed and have remained unemployed for a long time.
The government directed much of its focus on improving agricultural production after independence in the 1960s.
India enacted regulations that prohibited the exportation of agricultural products especially foodstuffs but rather encouraged imports to boost the country’s production. In this way, Keynesianism was applied in India.
Before liberalization, Indian production companies belonged to families. These firms relied on political favors within the country to be successful.
As agitated by mercantilism, the country only allowed the purchase of local products produced by these firms; hence this ensured a ready market for locally produced products as imports were not allowed in the country.
After implementing the economic reforms, the Indian government allowed foreign competition and such firms faced competition from cheap Chinese products.
As a result, the government privatized public manufacturing and production companies. To cope up with competition from imports, the old firms had to restructure their management and concentrate on producing new products at low labor and technology costs.
This led to the creation of employment for the residents thus helping improve their living standards.
India’s oil reservoir is the second largest in capacity in the Asia Pacific region behind China. However, India is a leading importer of oil. The Indian government has also laid down strategies to increase domestic oil production and support exploration.
This is an indicator of mercantilism in India. The oil industry in India extends to a large run by state-owned firms. Though the government has moved on to encourage foreign investment, only a small percentage of oil firms belong to foreign companies.
The scenario is no different in the natural gas sector. India has an estimated 38 trillion cubic meters of natural gas.
Nevertheless, India still imports small amounts of natural gas, and although the government has allowed ownership by some foreign companies, the majority of the gas firms belong to private Indian companies.
The central government controls the overall circulation and distribution of natural gas. The service industry in India also incorporates local market and foreign participation. For instance, India has a well-developed information technology sector.
The IT sector in India is the leading employer of young graduates. The period that India progressed technologically also saw Asia as the first continent to be connected through optic fiber.
This period was followed by an era of economic recession, and most of the undersea optic fiber cables ended up being disposed at low prices. These led to high demand for experts from India to take up these jobs. IT sector generated 3 million jobs directly and indirectly to the Indian citizens.
It can be noted that, through appropriate adoption of the two economic policies, India has managed to reduce the poverty levels amongst its citizens as well as improve its economy.
Hence, with proper intervention, regulative policy implementation, and management by the government through involvement in foreign trade a country’s gross domestic income can be improved.
This has subsequently generated both domestic and foreign employment avenues for the people of India.
The world’s developing countries can easily take notice of the following key economic growth and poverty eradication strategies as depicted by India. Proper policy implementation will help maintain a balance of trade between the country’s imports and exports.
India applied this, in that even though it is among the chief producers of oil and natural gas, it still imports to supplement its production at the same time; it is economical to import than to produce.
Most of the production firms in India belong to local investors thus opening up channels for employment opportunities. Keynesianism and Mercantilism, if well incorporated in a country’s economic system can help improve the economy of the country.
For instance, by increasing tariffs on exports, the economy did not only earn extra income but helped discourage exportation thus retaining much to sustain the country’s population.
The government achieves this through the enactment of regulations which could not see as openly discouraging exportation but encouraging production for the local market.
For instance, the products from the local investors can easily be marketed among the densely populated country. Agriculture is the backbone of any economic system if the latter has to grow. No economy will realize any significant progress if it cannot produce enough to feed its people.
The Indian government realized this and heavily invested in the agricultural sector. This helped cut the import duty spend on importing food and also provided self-employment since the farmers got free agricultural inputs.
In conclusion, it is quite evident that India managed to combine Keynesianism and Mercantilism within its system. India enacted effective policies to accomplish the same and managed to increase its economy.
Though faced by economic drawbacks such as lack of land, poor infrastructure, ineffectual judicial systems and corruption, India is still a highly rated economy in the world. Its concept of economic growth can be emulated and implemented by other developing countries.
This will help to curb poverty and achieve rapid economic growth, bearing in mind that not so many countries support such a large population like India.