Question

Choose two countries. Compare and analyse a macroeconomic factor that has been impacted due to significant global or domestic changes, within the last 40 years. Describe and contrast a measure each country took to impact this factor in the last 40 years.

Answer 1

Solution

The macroeconomic factor that I am opting for is GDP (Gross Doemstic Product)

GDP = C+I+G+ Net Exports

India

From 1960 s till1990 India was growing but growth was highly volatile as the economy was mostly driven by the domestic consumption.When there were externalities like natural calamities,geo policitcal tensions,the economy posted negative growth rates.We can say there were 2-3 years  in every decade during which India had posted negative growth rate in GDP.

In the year 1991, India undertook massive economic reforms as it underwent a balance of payments crisis in the year 1990.After these reforms,the economic growth rate has increased notably.These reforms which were called Globalization,Liberalization and Privatization reforms were aimed at rapid industrialization of the country by opening up it's market for international investments,reducing the very high import tariffs,removing many licencing procedures and privatizing many industries and sectors.

After this the foreign investments increased many fold,which lead to rapid industrialization due to which the exports have increased due to which the consumption levels of the economy also increased as a result of increase in the per capita income and standard of living of the people.

Bangladesh

Till early 1980 s , the GDP growth rate of Bangladesh has been very volatile but never has been negative.

After 1980,the growth rate has increased due to different reasons like the increase in foreign remittances from the bangladeshi nationals from abroad.It is reported that the size of the foreign remittances was around USD 15 to 16 billions per year which resulted in the country having enough foreign currency reserves of 6-8 months whiuch means even if the price of some imports which are important in production ,services,they can continue to import which does not deter the production.

Another factors contributing to the growth are the reduction in population growth rate (to around 1%),increase in exports especially by the garment manufacturing sector (as the labor cost is increasing comparatively slower than that of India,most of the textile exports moved from India to Bangladesh.Another important factor is increase in microfinance sector in Bangladesh.

Other factor include the ease of labor laws,the avoidance of debt by the country (since the country has good relations with it's neighboring countries,it does not spend huge amounts by taking debts for military and also it has set itself a policy to clear any debts whenever taken to be cleared within 10 -15 year of the time period.

Presently it is one of the fastest growing countries in the country with a GDP growth rate of around 7.5%

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