economics of the country

8/6/2019 Economics of the Country

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1

Economy of Germany

Germany has a developed social market economy that is ranked the world's

fourth largest economy in USD exchange-rate terms, and the largest

economy in Europe.

The German economy is heavily export-oriented; as of 2008, Germany is the

world's leading exporter of merchandise, and exports account for more than

one-third of national output. As a result, exports traditionally have been a

key element in German macroeconomic expansion. Germany is a strong

advocate of closer European economic and political integration, and its

economic and commercial policies are increasingly determined by

agreements among European Union (EU) members and EU single market

legislation. Germany uses the common European currency, the euro, and its

monetary policy is set by the European Central Bank in Frankfurt, Germany.

Most foreign and German experts agree that there are/were domestic

structural problems to be addressed. Beginning in 2003, the government

gradually deregulated the labour market to tackle formerly high

unemployment, and employment levels have been increasing. As of October

2008, the overall unemployment rate, as measured by the German

authorities, was 7.2 percent (6.0 percent in West Germany, and 11.8 percent

in East Germany). As of September 2008, as measured by ILO standards the

German unemployment rate was 6.2 percent (compared with 7.4 percent as

measured by German standards). Further issues, which are being addressed

by governmental policies, are high non-wage labour costs and bureaucratic

regulations that burden businesses and the process of starting new

businesses.


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Nevertheless, the export oriented economy is doing extremely well. Export

growth in 2007 is estimated to be 9%, underscoring Germany's role as the

world's biggest exporter. GDP growth in 2006 was 2.9% and in 2007 was

2.5%. However in 2008 GDP slowed down to a growth of 1.3%, because of

the Economic crisis of 2008.

A problem can be seen in the weak domestic market, most likely stemming

from stagnating wages over more than a decade. Germany finances its

reunification to a large extent by social insurance contributions, forcing up 2

non-wage labour costs. To conserve the competitiveness of German workers,

unions have abandoned high wage demands since the mid-1990s. According

to the Federal Statistical Office of Germany, the average net income after

deduction of consumer price rises declined by 2% between 1991 and 2005.

However, in 2007 collective bargaining sessions, unions' wage demands were

strongly up compared with averages of the last decade.

Primary sectors

In 2004 agriculture, forestry, and mining accounted for only 1.1% of

Germanys gross domestic product (GDP) and employed only 2.2% of the

population, down from 4% in 1991. Much of the reduction in employment

occurred in the eastern states, where the number of agricultural workers

declined by as much as 75% following reunification. However, agriculture is

extremely productive, and Germany is able to cover 90% of its nutritional

needs with domestic production. In fact, Germany is the third largest

agricultural producer in the European Union (EU) after France and Italy.

Germanys principal agricultural products are potatoes, wheat, barley, sugar

beets, fruit, and cabbages. Despite Germanys high level of industrialization,

roughly one-third of its territory is covered by forest. The forestry industry


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provides for about two-thirds of domestic consumption of wood and wood

products, so Germany is a net importer of these items.

Mining and minerals

Coal is Germanys most important energy resource, although government

policy is to reduce subsidies for coal extraction. Coal production has declined

since 1989 as a result of environmental policy and the closing of inefficient

mines in the former East Germany. The two main grades of coal in Germany

are hard coal and lignite, which is also called brown coal. Despite its

considerable reserves, the strong demand and high cost of domestic coal

production turned Germany into a net importer of coal. Also as of January

2004, proven natural gas reserves were 10.8 trillion cubic feet (310 km3

,(

the third largest in the EU. Nearly 90% of Germanys natural gas production

takes place in the state of Lower Saxony. In 2002 Germany imported 2.4

trillion cubic feet (68 km3

) of natural gas, or 75% of its requirements. The

most important source of natural gas imports is Russia, with a 40.8% share,

followed by Norway at 31.5%, and the Netherlands at 22.3%.

Energy

In 2002 Germany was the worlds fifth largest consumer of energy, behind

the United States, China, India and Japan with two-thirds of its primary

energy being imported. In the same year, Germany was Europes largest 3

consumer of electricity; electricity consumption that year totalled 512.9

billion kilowatt-hours.

Government policy emphasizes conservation and the development of

renewable energy sources, such as solar, wind, biomass, hydro, and


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geothermal. As a result of energy-saving measures, energy efficiency (the

amount of energy required to produce a unit of gross domestic product) has

been improving since the beginning of the 1970s. The government has set

the goal of meeting half the countrys energy demands from renewable

sources by 2050. In 2000 the government and the German nuclear power

industry agreed to phase out all nuclear power plants by 2021. However,

renewables currently play a more modest role in energy consumption. In

2002 energy consumption was met by the following sources: oil (40%), coal

(23%), natural gas (22%), nuclear (11%), hydro (2%), and other

renewables (2%).

Industry

Industry and construction accounted for 29% of gross domestic product

(GDP) in 2003, a comparatively large share even without taking into account

related services. The sector employed 26.4% of the workforce. Germany

excels in the production of automobiles, machine tools, and chemicals. With

the manufacture of 5.5 million vehicles in 2003, Germany was the worlds

third largest producer of automobiles after the United States and Japan,

although the People's Republic of China was threatening to displace Germany

in the world rankings as early as 2005. In 2004 Germany enjoyed the largest

world market share in machine tools (19.3%). German-based multinationals

such as Adidas, Continental AG, Daimler, BMW, Bosch, BASF, Bayer,

Siemens, Miele, and Volkswagen are brand names throughout the world. Of

vital importance is the role of small- to medium-sized manufacturing firms,

which specialize in niche products and often are owned by management.

These firms employ two-thirds of the German workforce.


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Service sector

In 2002 services constituted 70% of gross domestic product (GDP), and the

sector employed 71.3% of the workforce. The subcomponents of services are

financial, renting, and business activities (30.5%); trade, hotels and

restaurants, and transport (18%); and other service activities (21.7%).

Tourism

Domestic and international tourism generates about 8% of gross domestic

product (GDP) and 2.8 million jobs. Following commerce, tourism is the 4

second largest component of the services sector. In 2004 Germany

registered 45 million overnight stays by international tourists, 4% higher

than in the previous year and an all-time record. Two-thirds of all major

trade fairs are held in Germany, and each year they attract 9 to 10 million

business travellers, about 20% of whom are foreigners. The four most

important trade fairs take place in Hanover, Frankfurt, Cologne, and

Dsseldorf. Germanys hosting of the FIFA World Cup in 2006 presented an

opportunity for the tourism sector.

Financial Services

By tradition, Germanys financial system is bank-oriented rather than stock

market-oriented. The process of disintermediation, whereby businesses and

individuals arrange financing by directly accessing the financial markets

versus seeking loans from banks acting as intermediaries, has not fully taken

hold in Germany. One of the reasons that banks are so important in German

finance is that they have never been subject to a legal separation of

commercial and investment banking. Instead, under a system known as

universal banking, banks have offered a wide range of services from lending

to securities trading to insurance. Another reason for the strong influence of


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Trade

In 2003 Germany conducted slightly more than half of its trade within the

then 15-member EU, followed by, in order of volume, developing countries,

Eastern Europe (including countries like Poland that subsequently joined the

EU), the United States and Canada, non-EU Europe (Switzerland, Norway,

Liechtenstein, and Iceland), and Japan. Increasing emphasis is being placed

on trade with Russia and the People's Republic of China. The 2005 Hanover

trade fair devoted much of its attention to Germanys growing economic and

trade ties to Russia, particularly in the area of energy. Germany is Russias

top trade partner. In 2002, the People's Republic of China overtook Japan as

Germanys top trade partner in Asia, and Germany is investing heavily in

that rapidly rising economic power.

German trade is consistent with the policy of the European Union (EU) to

expand trade among the 25 member states and also with the goal of global

trade liberalization through the latest Doha Round of the World Trade

Organization (WTO). Germany uses its position as the worlds leading

merchandise exporter a fact that partially reflects the strength of the euro

to compensate for subdued domestic demand. German companies derive

one-third of their revenues from foreign trade. Therefore, Germany is

committed to reducing trade restrictions, whether involving tariffs or nontariff barriers, and

improving the transparency of foreign markets, including

access to public works projects.

The United States is Germany's second-largest trading partner after France.

Two-way trade in goods totalled $88 billion in 2000. German exports to the

USA totalled $58.7 billion while US imports to Germany were $29.2 billion.

Germany's main exports to the USA include motor vehicles, machinery,


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chemicals, and heavy electrical equipment, while imports from the USA

included aircraft, electrical, telecommunications and data processing

equipment, and motor vehicles and parts.

Exports and imports

In 2003 Germany imported US $ 601.4 billion of merchandise, while imports

of goods and services totalled US$773.4 billion. Principal merchandise

imports were motor vehicles (US$64.4 billion), chemical products (US$63.2

billion), machinery (US$41.8 billion), oil and gas (US$39.9 billion), and 6

computers (US$30.5 billion). Germanys main import partners were France

(9.0%), the Netherlands (7.8%), the United States (7.3%), Italy (6.1%), the

United Kingdom (6.1%), Belgium (4.9%), China (3.8%), and Austria (3.8%).

In 2003 Germany exported US$748.4 billion of merchandise, while exports of

goods and services totalled US$873.3 billion. Principal merchandise exports

were motor vehicles (US$145.5 billion), machinery (US$103.0 billion),

electrical goods (US$210 billion), chemical products (US$181.5 billion), and

telecommunications technology (US$35.1 billion). Germanys main export

partners were France (10.6%), the United States (9.3%), the United

Kingdom (8.4%), Italy (7.4%), the Netherlands (6.2%), Austria (5.3%),

Belgium (5.0%), and Spain (4.9%).

Investments

Germany follows a liberal policy toward foreign investment. During the

period 1998-99, France was the largest source of direct investment, followed

by the United Kingdom and the United States (18%). From 1995 to 1999,

annual average flows of U.S. direct investment in Germany were $3.4 billion,

while those of German investors in the United States reached $21 billion. In

terms of cumulative position (historical cost basis), German investment in


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the United States was valued at $111 billion in 1999, having more than

doubled since 1995, while U.S. investment in Germany was worth just under

$50 billion, having grown 12% since 1995.

Despite persistence of structural rigidities in the labour market and extensive

government regulation, the economy remains strong and internationally

competitive, not least because of its highly skilled work force. Although

production costs are high, Germany is still an export powerhouse.

Additionally, Germany is strategically placed to take advantage of the rapidly

growing central European countries. The current government has addressed

some of the country's structural problems, with important tax, social

security, and financial-sector reforms. In the future, Germany faces further

fundamental (and perhaps even more sweeping) economic adjustments to

boost growth and job creation.

Labour force

The distribution of Germanys workforce by sector is very similar to the

relative output of each sector. In 2004 the workforce was distributed as

follows: agriculture, 2.2%; industry, 26.4%; and services, 71.3%.

Participants in the workforce totalled 38.87 million. In summer 2007,

Germanys seasonally adjusted national unemployment rate decreased to 7

9%, or nearly 38 million people. While as recently as December 2007 there

was an even further decline to 8.4 percent. These statistics represented

post-war records. Unemployment approached 20% in some states in the

East, where high wages are not matched by productivity. However, by

September 2005 overall unemployment had declined to 11.2%, or 4.65

million people. Germany's national unemployment rate is only partially

comparable to unemployment rates in the United Kingdom or United States,


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because it includes a significant share of part-timers, who work less than 15

hours a week. Everyone working less than 15 hours a week, who is seeking

and available for a job with full social security insurance (normally full-time

job or part-time above 15 hours a week), can be registered as unemployed.

Around one quarter of Germany's national unemployment is underemployed

part-timers.

As a labour market performance index and for the current situation on the

German labour market, the German job index BA-X has been established in

early 2007.

At the start of 2005, the seasonally adjusted number of registered

unemployed persons initially showed another sharp increase, reaching a rate

of 12.6%, with more than 5.2 million Germans out of work. The considerable

rise in the unemployment figures is largely due to the fact that former

recipients of income support who now receive the new class-II

unemployment benefit are registered as unemployed. This means that

people who used to be numbered among the latent manpower reserve are

now shown as registered unemployed persons. In particular, the labourmarket statistics now

include more unemployed young, older and low-skilled

people.

A quarterly report prepared by the Economist Intelligence Unit on behalf of

Barclays Wealth in 2007 estimated that there were 2400000 dollar

millionaires in Germany.


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20.9 TWh (3.8%) by natural gas power.

9.9 TWh (1.8%) by other fossil fuel generation (fuel oil and gases byproducts of

industry such as blast furnace gases). 2

6.9 TWh (1.3%) was produced by other types of power generation

(essentially waste-to-energy and wind turbines).

The electricity produced by wind turbines increased from 0.596 TWh in

2004, to 0.963 TWh in 2005, and 2.15 TWh in 2006, but this still accounts

only for 0.4% of the total production of electricity (as of 2006).

Privatisation of EDF

In November 2004, EDF (which stands for Electricit de France), the largest

electricity provider in France, was floated on the French stock market, with

the French State keeping more than 70% of the capital. EDF is not the only

electricity provider in France. Other electricity providers include CNR

(Compagnie nationale du Rhne) and Endesa (through SNET).

Agriculture

France is the European Union's leading agricultural producer, accounting for

about one-third of all agricultural land within the EU. Northern France is

characterized by large wheat farms. Dairy products, pork, poultry, and apple

production are concentrated in the western region. Beef production is located

in central France, while the production of fruits, vegetables, and wine ranges

from central to southern France. France is a large producer of many

agricultural products and is currently expanding its forestry and fishery

industries. The implementation of the Common Agricultural Policy (CAP) and

the Uruguay Round of the General Agreement on Tariffs and Trade (GATT)

have resulted in reforms in the agricultural sector of the economy.


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France is the world's sixth-largest agricultural producer and the secondlargest agricultural

exporter, after the United States. However, the

destinations of 70% of its exports are other EU member states and many

poor African countries (including its former colonies) which face serious food

shortage. Wheat, beef, pork, poultry, and dairy products are the principal

exports. The United States, although the second-largest exporter to France,

faces stiff competition from domestic production, other EU member states,

and third world countries. U.S. agricultural exports to France, totalling some

$600 million annually, consist primarily of soybeans and products, feeds and

fodders, seafood, and consumer oriented products, especially snack foods

and nuts. French exports to the United States are mainly cheese, processed

products and wine.

The French agricultural sector is heavily dependent upon subsidies from the

European Union, which account for 11 billion. France is the main country in

the EU that is against the reduction of subsidies. Subsidies have given

France a competitive advantage which also demotes the concept of free 3

trade. Specific government policies, such as the infamous reclassification of

French wine as a 'health food' to avoid VAT, also goes a long way to create a

thriving domestic sector.

Tourism

France is the most visited country in the world with over 75 million visitors a

year. As of 2004, the most recent statistics compiled by the World Tourism

Organization; see World Tourism rankings. Tourism is a significant

contributor to the French Economy. In the 1960s the government heavily

promoted the development of skiing in the French Alps through the

development of new high level resorts including some of the world's most


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extensive ski trails.

Weapons industry

France is the third largest weapons supplier in the world. The French arms

industry's main customer, for whom they mainly build warships, guns,

nuclear weapons and equipment, is the French Government. Furthermore,

record high defense expenditure (currently at 35 billion), which was

considerably increased under the government of Prime Minister Jean-Pierre

Raffarin, have contributed to the success of the French arms industries. In

addition, external demand plays a big part in the growth of this sector: for

example, France exports great quantities of weaponry to the United Arab

Emirates, Greece, India, Pakistan, Taiwan, Singapore and many others.

External trade

France is the second-largest trading nation in Europe (after Germany). Its

foreign trade balance for goods had been in surplus from 1992 until 2001,

reaching $25.4 billion in 1998; however, the French balance of trade was hit

by the economic downturn, and went into the red in 2000, reaching US$15bn

in deficit in 2003. Total trade for 1998 amounted to $730 billion, or 50% of

GDPimports plus exports of goods and services. Trade with European Union

countries accounts for 60% of French trade.

In 1998, U.S.-France trade totalled about $47 billiongoods only. According

to French trade data, U.S. exports accounted for 8.7%--about $25 billionof

France's total imports. U.S. industrial chemicals, aircraft and engines,

electronic components, telecommunications, computer software, computers

and peripherals, analytical and scientific instrumentation, medical

instruments and supplies, broadcasting equipment, and programming and

franchising are particularly attractive to French importers. 4


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The principal French exports to the United States are aircraft and engines,

beverages, electrical equipment, chemicals, cosmetics, luxury products and

perfume. France is the ninth-largest trading partner of the US.

Departements economy and cities

Some Departements in France are very rich compared to others. Paris,

Hauts-de-Seine (GDP per capita: 67 000 in 2000) and Rhne, for example,

concentrate a lot of company headquarters. The Yvelines is the second

richest dpartement in France according to the income of inhabitants. In

Hauts-de-Seine the wages are on average 28 000 per capita, in Yvelines

27 900, and in Paris 25 000 against 15 000 in France (data 2004 INSEE).

Finally, in France like in other countries, a lot of cities are extremely rich in

much of Regions, so the richest is Marnes-la-Coquette in Hauts-de-Seine

with 81 750 per household (according to INSEE, data 2004)

A quarterly report prepared by the Economist Intelligence Unit on behalf of

Barclays Wealth in 2007 estimated that there were 3,000,000 dollar

millionaires in France.

1

Economy of India

The economy of India is the twelfth largest economy in the world by market

exchange rates and the fourth largest by purchasing power parity (PPP)

basis.

India was under socialist-based policies for an entire generation from the

1950s until the 1980s. The economy was characterised by extensive

regulation, protectionism, and public ownership, leading to pervasive


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corruption and slow growth. Since 1991, continuing economic liberalisation

has moved the economy towards a market-based system.

India's large service industry accounts for 54% of the country's GDP while

the industrial and agricultural sector contribute 29% and 17% respectively.

Agriculture is the predominant occupation in India, accounting for about 60%

of employment. The service sector makes up a further 28% and industrial

sector around 12%. The labor force totals half a billion workers. Major

agricultural products include rice, wheat, oilseed, cotton, jute, tea,

sugarcane, potatoes, cattle, water buffalo, sheep, goats, poultry and fish.

Major industries include textiles, chemicals, food processing, steel,

transportation equipment, cement, mining, petroleum, machinery,

information technology enabled services and software.

India's per capita income (nominal) is $1016, ranked 142

nd

in the world,

while it's per capita (PPP) of US$2762 is ranked 129

th

Previously a closed .

economy, India's trade has grown fast. India currently accounts for 1.5% of

World trade as of 2007 according to the WTO. According to the World Trade

Statistics of the WTO in 2006, India's total merchandise trade (counting

exports and imports) was valued at $294 billion in 2006 and India's services

trade inclusive of export and import was $143 billion. Thus, India's global

economic engagement in 2006 covering both merchandise and services trade

was of the order of $437 billion, up by a record 72% from a level of $253

billion in 2004. India's trade has reached a still relatively moderate share


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24% of GDP in 2006, up from 6% in 1985.

Despite robust economic growth, India continues to face several major

problems. The recent economic development has widened the economic

inequality across the country. Despite sustained high economic growth rate,

approximately 80% of its population lives on less than $2 a day (PPP), more 2

than double the same poverty rate in China. Even though the arrival of

Green Revolution brought end to famines in India, 40% of children under the

age of three are underweight and a third of all men and women suffer from

chronic energy deficiency

While the credit rating of India was hit by its nuclear tests in 1998, it has

been raised to investment level in 2007 by S&P and Moody's. In 2003,

Goldman Sachs predicted that India's GDP in current prices will overtake

France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by

2035. By 2035, it was projected to be the third largest economy of the

world, behind US and China.

Sectors

India ranks second worldwide in farm output. Agriculture and allied sectors

like forestry, logging and fishing accounted for 16.6% of the GDP in 2007,

employed 60% of the total workforce and despite a steady decline of its

share in the GDP, is still the largest economic sector and plays a significant

role in the overall socio-economic development of India. Yields per unit area

of all crops have grown since 1950, due to the special emphasis placed on

agriculture in the five-year plans and steady improvements in irrigation,

technology, application of modern agricultural practices and provision of

agricultural credit and subsidies since Green revolution in India. However,

international comparisons reveal that the average yield in India is generally


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30% to 50% of the highest average yield in the world.

India is the largest producer in the world of milk, cashew nuts, coconuts, tea,

ginger, turmeric and black pepper. It also has the world's largest cattle

population (193 million). It is the second largest producer of wheat, rice,

sugar, groundnut and inland fish. It is the third largest producer of tobacco.

India accounts for 10% of the world fruit production with first rank in the

production of bananas, sapotas and mangoes.

Industry and services

Industry accounts for 27.6% of the GDP and employ 17% of the total

workforce. However, about one-third of the industrial labour force is engaged

in simple household manufacturing only. In absolute terms, India is 16

th

in

the world in terms of nominal factory output. India's small industry makes up

5% of carbon dioxide emissions in the world.

Economic reforms brought foreign competition, led to privatisation of certain

public sector industries, opened up sectors hitherto reserved for the public

sector and led to an expansion in the production of fast-moving consumer 3

goods. Post-liberalisation, the Indian private sector, which was usually run

by oligopolies of old family firms and required political connections to prosper

was faced with foreign competition, including the threat of cheaper Chinese

imports. It has since handled the change by squeezing costs, revamping

management, focusing on designing new products and relying on low labour

costs and technology.

Textile manufacturing is the second largest source for employment after

agriculture and accounts for 26% of manufacturing output. Tirupur has


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gained universal recognition as the leading source of hosiery, knitted

garments, casual wear and sportswear. Dharavi slum in Mumbai has gained

fame for leather products. Tata Motors' Nano attempts to be the world's

cheapest car.

India is fifteenth in services output. It provides employment to 23% of work

force, and it is growing fast, growth rate 7.5% in 19912000 up from 4.5%

in 195180. It has the largest share in the GDP, accounting for 55% in 2007

up from 15% in 1950.

Business services (information technology, information technology enabled

services, business process outsourcing) are among the fastest growing

sectors contributing to one third of the total output of services in 2000. The

growth in the IT sector is attributed to increased specialization, and an

availability of a large pool of low cost, but highly skilled, educated and fluent

English-speaking workers, on the supply side, matched on the demand side

by an increased demand from foreign consumers interested in India's service

exports, or those looking to outsource their operations. The share of India's

IT industry to the country's GDP increased from 4.8% in 2005-06 to 7% in

2008. In 2009, seven Indian firms were listed among the top 15 technology

outsourcing companies in the world. In March 2009, annual revenues from

outsourcing operations in India amounted to US$60 billion and this is

expected to increase to US $225 billion by 2020.

Most Indian shopping takes place in open markets and millions of

independent grocery shops called kirana. Organized retail such supermarkets

accounts for just 4% of the market as of 2008. Regulations prevent most

foreign investment in retailing. Moreover, over thirty regulations such as

"signboard licences" and "anti-hoarding measures" may have to be complied


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before a store can open doors. There are taxes for moving goods to states,

from states, and even within states.

Tourism in India is relatively undeveloped, but growing at double digits.

Some hospitals woo medical tourism. 4

Banking and finance

The Indian money market is classified into: the organised sector (comprising

private, public and foreign owned commercial banks and cooperative banks,

together known as scheduled banks); and the unorganised sector

(comprising individual or family owned indigenous bankers or money lenders

and non-banking financial companies (NBFCs)). The unorganised sector and

microcredit are still preferred over traditional banks in rural and sub-urban

areas, especially for non-productive purposes, like ceremonies and short

duration loans.

Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by six

others in 1980, and made it mandatory for banks to provide 40% of their net

credit to priority sectors like agriculture, small-scale industry, retail trade,

small businesses, etc. to ensure that the banks fulfill their social and

developmental goals. Since then, the number of bank branches has

increased from 10120 in 1969 to 98910 in 2003 and the population covered

by a branch decreased from 63800 to 15000 during the same period. The

total deposits increased 32.6 times between 1971 to 1991 compared to 7

times between 1951 to 1971. Despite an increase of rural branches, from

1860 or 22% of the total number of branches in 1969 to 32,270 or 48%,

only 32270 out of 5 lakh (500,000) villages are covered by a scheduled

bank.

The public sector banks hold over 75% of total assets of the banking


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industry, with the private and foreign banks holding 18.2% and 6.5%

respectively. Since liberalisation, the government has approved significant

banking reforms. While some of these relate to nationalised banks (like

encouraging mergers, reducing government interference and increasing

profitability and competitiveness), other reforms have opened up the

banking and insurance sectors to private and foreign players. Since

liberalisation, the government has approved significant banking reforms.

While some of these relate to nationalised banks (like encouraging mergers,

reducing government interference and increasing profitability and

competitiveness), other reforms have opened up the banking and insurance

sectors to private and foreign players.

More than half of personal savings are invested in physical assets such as

land, houses, cattle, and gold.

Natural resources

India's total cultivable area is 1,269,219 km (56.78% of total land area),

which is decreasing due to constant pressure from an ever growing 5

population and increased urbanisation.

India has a total water surface area of 314,400 km and receives an average

annual rainfall of 1,100 mm. Irrigation accounts for 92% of the water

utilisation, and comprised 380 km in 1974, and is expected to rise to 1,050

km by 2025, with the balance accounted for by industrial and domestic

consumers. India's inland water resources comprising rivers, canals, ponds

and lakes and marine resources comprising the east and west coasts of the

Indian ocean and other gulfs and bays provide employment to nearly 6

million people in the fisheries sector. In 2008, India had the world's third

largest fishing industry.


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India's major mineral resources include coal, iron, manganese, mica,

bauxite, titanium, chromite, limestone and thorium.

India meets most of its domestic energy demand through its 92 billion

tonnes of coal reserves (about 10% of world's coal reserves). India's oil

reserves, found in Bombay High off the coast of Maharashtra, Gujarat,

Rajasthan and in eastern Assam meet 25% of the country's domestic oil

demand. India's total proven oil reserves stand at 11 billion barrels, of which

Bombay High is believed to hold 6.1 billion barrels and Mangala Area in

Rajasthan, an additional 3.6 billion barrels. India's huge thorium reserves

about 25% of world's reserves is expected to fuel the country's ambitious

nuclear energy program in the long-run. India's dwindling uranium reserves

stagnated the growth of nuclear energy in the country for many years.

However, the Indo-US nuclear deal has paved the way for India to import

uranium from other countries. India is also believed to be rich in certain

renewable sources of energy with significant future potential such as solar,

wind and biofuels (jatropha, sugarcane).

External trade and investment

Until the liberalisation of 1991, India was largely and intentionally isolated

from the world markets, to protect its fledging economy and to achieve selfreliance. Foreign

trade was subject to import tariffs, export taxes and

quantitative restrictions, while foreign direct investment was restricted by

upper-limit equity participation, restrictions on technology transfer, export

obligations and government approvals; these approvals were needed for

nearly 60% of new FDI in the industrial sector.

In 2006-07, major export commodities included engineering goods,

petroleum products, chemicals and pharmaceuticals, gems and jewellery,


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textiles and garments, agricultural products, iron ore and other minerals.

Major import commodities included crude oil and related products, 6

machinery, electronic goods, gold and silver.

Global trade relations

According to World Trade Organization (WTO), India accounted for 1.2% of

the global trade in 2006. Until the liberalization of 1991, India was largely

and intentionally isolated from the world markets, to protect its economy and

to achieve self-reliance. Foreign trade was subject to import tariffs, export

taxes and quantitative restrictions, while foreign direct investment (FDI) was

restricted by upper-limit equity participation, restrictions on technology

transfer, export obligations and government approvals; these approvals were

needed for nearly 60% of new FDI in the industrial sector. The restrictions

ensured that FDI averaged only around US$200 million annually between

1985 and 1991; a large percentage of the capital flows consisted of foreign

aid, commercial borrowing and deposits of non-resident Indians.

India's exports were stagnant for the first 15 years after independence, due

to the predominance of tea, jute and cotton manufactures, demand for which

was generally inelastic. Imports in the same period consisted predominantly

of machinery, equipment and raw materials, due to nascent industrialization.

Since liberalization, the value of India's international trade has become more

broad-based and has risen to Rs. 63080109 crores in 200304 from Rs.1250

crores in 195051. India's major trading partners are China, the US, the

UAE, the UK, Japan and the EU. The exports during April 2007 were $12.31

billion up by 16% and import were $17.68 billion with an increase of 18.06%

over the previous year.

India is a founding-member of General Agreement on Tariffs and Trade


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(GATT) since 1947 and its successor, the WTO. While participating actively in

its general council meetings, India has been crucial in voicing the concerns of

the developing world. For instance, India has continued its opposition to the

inclusion of such matters as labour and environment issues and other nontariff barriers into theWTO policies.

Balance of payments

Cumulative Current Account Balance 1980-2008 based on the IMF data since

independence, India's balance of payments on its current account has been

negative. Since liberalisation in the 1990s (precipitated by a balance of

payment crisis), India's exports have been consistently rising, covering

80.3% of its imports in 200203, up from 66.2% in 199091. India's

growing oil import bill is seen as the main driver behind the large current

account deficit. In 2007-08, India imported 120.1 million tonnes of crude oil,

more than 3/4th of the domestic demand, at a cost of $61.72 billion. 7

Although India is still a net importer, since 199697, its overall balance of

payments (i.e., including the capital account balance), has been positive,

largely on account of increased foreign direct investment and deposits from

non-resident Indians; until this time, the overall balance was only

occasionally positive on account of external assistance and commercial

borrowings. As a result, India's foreign currency reserves stood at $285

billion in 2008, which could be used in infrastructural development of the

country if used effectively.

Due to the global late-2000s recession, both Indian exports and imports

declined by 29.2% and 39.2% respectively in June 2009. Since the decline in

imports was much sharper compared to the decline in exports, India's trade


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deficit reduced to $252.5 billion.

India's reliance on external assistance and commercial borrowings has

decreased since 199192, and since 200203, it has gradually been repaying

these debts. Declining interest rates and reduced borrowings decreased

India's debt service ratio to 4.5% in 2007. In India, External Commercial

Borrowings (ECBs) are being permitted by the Government for providing an

additional source of funds to Indian corporates. The Ministry of Finance

monitors and regulates these borrowings (ECBs) through ECB policy

guidelines.

Foreign direct investment in India

As the fourth-largest economy in the world in PPP terms, India is a preferred

destination for foreign direct investments (FDI); India has strengths in

information technology and other significant areas such as auto components,

chemicals, apparels, pharmaceuticals, and jewellery. Despite a surge in

foreign investments, rigid FDI policies resulted in a significant hindrance.

However, due to some positive economic reforms aimed at deregulating the

economy and stimulating foreign investment, India has positioned itself as

one of the front-runners of the rapidly growing Asia Pacific Region. India has

a large pool of skilled managerial and technical expertise. The size of the

middle-class population stands at 50 million and represents a growing

consumer market. 8

Share of top five investing countries in FDI inflows. (20002007)

Rank Country

Inflows

(Million USD)

Inflows (%)


26/44


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nation. 9

A number of changes were approved on the FDI policy to remove the caps in

most sectors. Fields which require relaxation in FDI restrictions include civil

aviation, construction development, industrial parks, petroleum and natural

gas, commodity exchanges, credit-information services and mining. But this

still leaves an unfinished agenda of permitting greater foreign investment in

politically sensitive areas such as insurance and retailing. FDI inflows into

India reached a record US$19.5 bn in fiscal year 2006/07 (April-March),

according to the government's Secretariat for Industrial Assistance. This was

more than double the total of US$7.8 bn in the previous fiscal year. The FDI

inflow for 2007-08 has been reported as $24 bn and for 2008-09; it is

expected to be above $35 billion. A critical factor in determining India's

continued economic growth and realizing the potential to be an economic

superpower is going to depend on how the government can create incentives

for FDI flow across a large number of sectors in India.

Infrastructure

Development of infrastructure was completely in the hands of the public

sector and was plagued by corruption, bureaucratic inefficiencies, urban-bias

and an inability to scale investment. India's low spending on power,

construction, transportation, telecommunications and real estate, at $31

billion or 6% of GDP in 2002 had prevented India from sustaining higher

growth rates. This has prompted the government to partially open up

infrastructure to the private sector allowing foreign investment which has

helped in a sustained growth rate of close to 9% for the past six quarters.

Some 600 million Indians have no mains electricity at all. While 80% of

Indian villages have at least an electricity line, just 44% of rural households


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have access to electricity. According to a sample of 97,882 households in

2002, electricity was the main source of lighting for 53% of rural households

compared to 36% in 1993. Some half of the electricity is stolen, compared

with 3% in China. The stolen electricity amounts to 1.5% of GDP. Almost all

of the electricity in India is produced by the public sector. Power outages are

common. Many buy their own power generators to ensure electricity supply.

As of 2005 the electricity production was at 661.6 billion kWh with oil

production standing at 785,000 bbl/day. In 2007, electricity demand

exceeded supply by 15%.Multi Commodity Exchange has tried to get a

permit to offer electricity future markets.

Indian Road Network is developing. Trucking goods from Gurgaon to the port

in Mumbai can take up to 10 days. India has the world's second largest road

network. Container traffic is growing at 15% a year. Some 60% of Indias

container traffic is handled by the Jawaharlal Nehru Port Trust in Mumbai. 10

Internet use is rare; there were only 2.1 million broadband lines in India in

January 2007.

Most urban cities have good water supply water 24 hours a day, while some

smaller cities face water shortages in summer season. A World Bank report

says it is an institutional problem in water agencies, or "how the agency is

embedded in the relationships between politics and the citizens who are the

consumers."

Economic disparities

One of the critical problems facing India's economy is the sharp and growing

regional variations among India's different states and territories in terms of

per capita income, poverty, availability of infrastructure and socio-economic

development. Seven low-income states - Bihar, Chhattisgarh, Jharkhand,


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Madhya Pradesh, Orissa, Rajasthan, and Uttar Pradesh - are home to more

than half of India's population.

Between 1999 and 2008, the annualized growth rates for Gujarat (8.8%),

Haryana (8.7%), or Delhi (7.4%) were much higher than for Bihar (5.1%),

Uttar Pradesh (4.4%), or Madhya Pradesh (3.5%).

Poverty rates in rural Orissa (43%) and rural Bihar (40%) are some of the

worst in the world. On the other hand, rural Haryana (5.7%) and rural

Punjab (2.4%) compare well with middle-income countries.

The five-year plans have attempted to reduce regional disparities by

encouraging industrial development in the interior regions, but industries still

tend to concentrate around urban areas and port cities. After liberalization,

the more advanced states are better placed to benefit from them, with

infrastructure like well developed ports, urbanisation and an educated and

skilled workforce which attract manufacturing and service sectors. The union

and state governments of backward regions are trying to reduce the

disparities by offering tax holidays, cheap land, etc., and focusing more on

sectors like tourism, which although being geographically and historically

determined, can become a source of growth and is faster to develop than

other sectors.

1

Economy of the United Kingdom


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The United Kingdom is a major developed capitalist economy. It is the

world's sixth largest by nominal GDP and the seventh largest by purchasing

power parity. It is the third largest economy in Europe after Germany's and

France's in nominal terms, and the third largest after Germany's and Russia's

in terms of purchasing power parity. Its GDP PPP per capita is the 18th

highest in the world. The United Kingdom is also a member of the G8, the

Commonwealth of Nations, the Organisation for Economic Cooperation and

Development, the World Trade Organisation, and the European Union.

The UK was the first country in the world to industrialise in the 18th and

19th centuries, and for much of the 19

th

century possessed a predominant

role in the global economy. However, by the late 19

th

century, the Second

Industrial Revolution in the United States meant the US had begun to

challenge Britain's role as the leader of the global economy. The extensive

war efforts of both World Wars in the 20th century and the dismantlement of

the British Empire also weakened the UK economy in global terms, and by

that time Britain had been superseded by the United States as the chief

player in the global economy. At the start of the 21st century however, the

UK still possesses a significant role in the global economy, due to its large

Gross Domestic Product and the financial importance that its capital, London,

possesses in the world.

The United Kingdom is one of the world's most globalised countries. The

capital, London, is a major financial centre for international business and


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commerce and is one of three "command centres" for the global economy

(along with New York City and Tokyo). The British economy is made up (in

descending order of size) of the economies of England, Scotland, Wales and

Northern Ireland. In 1973, the UK acceded to the European Economic

Community which is now known as the European Union after the ratification

of the Treaty of Maastricht in 1993.

The UK entered a recession in Q3 of 2008. As of June 2009, the economy

had shrunk by 5.6% compared to the year before. In July 2009, the UK

appeared to have seen the worst of the global recession of 2009, with latest

Office of National Statistics figures for Q2 of 2009 showing that the economy

shrank by 0.8%, an improvement compared to the previous quarter. Some2

forecasts expect the UK to enter growth in Q3 as the first economy to do so

in the EU's big three (Germany, UK, France) and also the first out of the G8.

Recent economic performance

Gross Domestic Product (GDP) decreased by 0.8 per cent in the second

quarter of 2009, compared with a decrease of 2.4 per cent in the first

quarter, according to the first provisional estimate of the Office for National

Statistics (ONS). The first quarter figure (2009) has been revised down from

a decrease of 1.9%. There was a decrease of 1.8 per cent in the fourth

quarter of 2008. With a 0.6% decline in the third quarter, the latest figures

take the annual rate of decline to 5.6%, the biggest fall since records began

in 1955, the BBC reported.

In October 2007, the IMF had forecast British GDP to grow by 3.1% in 2007

and 2.3% in 2008. However, GDP growth slowed to 0.1% by the AprilJune

quarter of 2008 (revised from zero). However, in September 2008, the OECD

forecast contraction for at least two quarters for the UK economy, possibly


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severe, placing its predicted performance last in the G7 of leading

economies.

It has been argued that heavy government borrowing over the past cycle has

led to a severe structural deficit, reminiscent of previous crises, which will

inevitably exacerbate the situation and place the UK economy in an

unfavourable position compared to its OECD partners as attempts are made

to stimulate recovery, other OECD nations having allowed greater room for

manoeuvre thanks to contrasting policies of relatively tighter fiscal control

prior to the global downturn.

In May 2009 the European Commission (EC) stated: "The UK economy is

now clearly experiencing one of its worst recessions in recent history." The

EC expected GDP to decline 3.8% in 2009 and projected that growth will

remain negative for the first three quarters of 2009. It predicted two

quarters of "virtual stagnation" in late 2009early 2010, followed by a

gradual return to "slight positive growth by late 2010".

Agriculture, hunting, forestry, and fishing

Agriculture is intensive, highly mechanized, and efficient by European

standards, producing about 60% of food needs with less than 2% of the

labour force (477,000 out of a total workforce of 31,598,000, 3

rd

quarter of

2007). It contributes around 2% of GDP. Around twothirds of the production

is devoted to livestock, onethird to arable crops. The main crops that are

grown are wheat, barley, oats, oilseed rape, maize for animal feeds,3

potatoes and sugar beet. New crops are also emerging, such as linseed for

oil and hemp for fibre production. The main livestock which are raised are


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cattle, chickens (the UK is the second largest poultry producer in Europe

after France) and sheep. Agriculture is subsidised by the European Union's

Common Agricultural Policy.

The UK retains a significant, although vastly reduced, fishing industry. Its

fleets, based in towns such as Kingston upon Hull, Grimsby, Fleetwood,

Great Yarmouth, Peterhead, Fraserburgh, and Lowestoft, bring home fish

ranging from sole to herring.

The Blue Book 2006 reports that the "Agriculture hunting, forestry and

fishing" added gross value of 10,323 million (at 2006 prices) to the UK

economy in 2004.

Mining and quarrying

The Blue Book 2006 reports that this sector added gross value of 21,876

million to the UK economy in 2004.

Manufacturing

In 2003, manufacturing industry accounted for 16% of national output in the

UK and for 13% of employment, according to the Office for National

Statistics. This is a continuation of the steady decline in the importance of

this sector to the British economy since the 1960s, although the sector is still

important for overseas trade, accounting for 83% of exports in 2003. The

regions with the highest proportion of employees in manufacturing were the

East Midlands and West Midlands (at 19 and 18% respectively). London had

the lowest at 6%.

Although the manufacturing sector's share of both employment and the UK's

GDP has steadily fallen since the 1960s, data from the OECD shows that

manufacturing output in terms of both production and value has steadily

increased since 1945. This is a trend common in many mature Western


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economies. Heavy industry, employing many thousands of people and

producing large volumes of lowvalue goods (such as steelmaking) has either

become highly efficient (producing the same amount of output from fewer

manufacturing sites employing fewer people for example, productivity in the

UK's steel industry increased by a factor of 8 between 1978 and 2006) or

has been replaced by smaller industrial units producing highvalue goods

(such as the aerospace and electronics industries).4

Engineering and allied industries comprise the single largest sector,

contributing 30.8% of total Gross Value Added in manufacturing in 2003.

Within this sector, transport equipment was the largest contributor, with 8

global car manufacturers being present in the UK BMW (MINI, Rolls

Royce), Tata (JaguarLand Rover), General Motors (Vauxhall Motors), Honda,

Nissan, Toyota and Volkswagen (Bentley) with a number of smaller,

specialist manufacturers (including Lotus and Morgan) and commercial

vehicle manufacturers (including Leyland Trucks, LDV, Alexander Dennis,

JCB, the main global manufacturing plant for the Ford Transit, Manganese

Bronze and CaseNew Holland) also being present. The British motor

industry also comprises numerous components for the sector, such as Ford's

diesel engine plant in Dagenham, which produces half of Ford's diesel

engines globally.

A range of companies like Brush Traction and Hunslet manufacture railway

locomotives and other related components. Associated with this sector are

the aerospace and defence equipment industries. The UK manufactures a

broad range of equipment, with the sector being dominated by BAE Systems,

which manufactures civil and defence aerospace, land and marine

equipment VT Group, one of the world's largest builders of warships and


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GKN and Rolls Royce, who manufacture aerospace engines and power

generation systems. Commercial shipbuilders include Harland and Wolff,

Cammell Laird, Abels, Barclay Curle and Appledore. Companies such as

Fairline Boats and Sunseeker are major builders of private motor yachts.

Another important component of Engineering and allied industries is

electronics, audio and optical equipment, with the UK having a broad base of

domestic firms, alongside a number of foreign firms manufacturing a wide

range of TV, radio and communications products, scientific and optical

instruments, electrical machinery and office machinery and computers.

Chemicals and chemicalbased products are another important contributor to

the UK's manufacturing base. Within this sector, the pharmaceutical industry

is particularly successful, with the world's second and third largest

pharmaceutical firms (GlaxoSmithKline and AstraZeneca respectively) being

based in the UK and having major research and development and

manufacturing facilities there.

Other important sectors of the manufacturing industry include food, drink,

tobacco, paper, printing, publishing and textiles. The UK is also home to

three of the world's biggest brewing companies: Diageo, SABMiller and

Scottish and Newcastle, other major manufacturing companies such as

Unilever, Cadbury, Tate & Lyle, British American Tobacco, Imperial Tobacco,

EMAP, HarperCollins, Reed Elsevier, Ben Sherman, Burberry, French5

Connection, Reebok, Pentland Group and Umbro being amongst the largest

present.

The Blue Book 2006 reports that this sector added gross value of 147,469

million to the UK economy in 2004.

Manufacturing is an important sector of the modern British economy and


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there is a considerable amount of published research on the subject of the

factors affecting its growth and performance. Of late, such things as

increases in taxation and regulation have tended to diminish the

favorableness of the politicallegal environment for UK industry. Within

manufacturing, British firms and industries have often lagged behind their

overseas competitors in terms of productivity and various other key

performance measures. However, Britain the birthplace of the Industrial

Revolution continues to be one of the most attractive countries in the world

for direct foreign industrial investment

1

Economy of Japan

The economy of Japan is the second largest economy in the world, after the

United States at around US$4.5 trillion in terms of nominal GDP and third

after the United States and People's Republic of China when adjusted for

purchasing power parity. The workers of Japan rank 18th in the world in GDP

per hour worked as of 2006. The Big Mac Index shows that the wages in

Tokyo is the highest among principal cities in the world.

Japan's economy is highly efficient, highly diversified, and very competitive,

being ranked 19th among 111 countries on productivity. Japan has a well

educated work force and high levels of savings and investment rates.

For three decades, Japan's overall real economic growth had been

spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a

4% average in the 1980s.


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Sliding stock and real estate prices marked the end of the "Japanese asset

price bubble" of the late 1980s, and ushered in a decade of stagnant

economic growth. These problems may have been exacerbated by domestic

policies intended to wring speculative excesses from the stock and real

estate markets. Real GDP in Japan grew at an average of roughly 1.5%

yearly between 19911999, compared to growth in the 1980s of about 4%

per year. Growth in Japan throughout the 1990s was slower than growth in

other major industrial nations, and the same as in France and Germany.

Government efforts to revive economic growth have met with little success

and were further hampered in 2000 to 2001 by the slowing of the global

economy. However, GDP per worker has increased steadily even through the

nineties, growing at 2.0% per year in 2003 and 2004, and 2.8 percent in

2005. Unlike previous recovery trends, domestic consumption has been the

dominant factor in leading the growth. As predicted, the economic recovery

continued in 2006 and 2007.

Infrastructure

As of 2005, one half of energy in Japan is produced from petroleum, a fifth

from coal, and 14% from natural gas. Nuclear power in Japan makes a

quarter of electricity production and Japan would like to double it in the next

decades.2

Japan's road spending has been large. The 1.2 million kilometers of paved

road are the main means of transportation. Japan has lefthand traffic. A

single network of highspeed, divided, limitedaccess toll roads connects

major cities and are operated by tollcollecting enterprises. New and used

cars are inexpensive. Car ownership fees and fuel levies are used to promote

energyefficiency.


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Dozens of Japanese railway companies compete in regional and local

passenger transportation markets; for instance, 7 JR enterprises, Kintetsu

Corporation, Seibu Railway, and Keio Corporation. Often, strategies of these

enterprises contain real estate or department stores next to stations. Some

250 highspeed Shinkansen trains connect major cities. All trains are known

for punctuality.

There are 176 airports and flying is a popular way to travel between cities.

The largest domestic airport, Haneda Airport, is Asia's busiest airport. The

largest international gateways are Narita International Airport (Tokyo area),

Kansai International Airport (Osaka/Kobe/Kyoto area), and Chbu Centrair

International Airport (Nagoya area). The largest ports include Nagoya Port.

Given its heavy dependence on imported energy, Japan has aimed to

diversify its sources. Since the oil shocks of the 1970s, Japan has reduced

dependence on petroleum as a source of energy from more than 75% in

1973 to about 57% at present. Other important energy sources are coal,

liquefied natural gas, nuclear power, and hydropower. Demand for oil is also

dampened by higher government taxes on automobile engines over 2000 cc,

as well as on gasoline itself, currently 54 yen per liter sold retail. Kerosene is

also used extensively for home heating in portable heaters, especially farther

north. Many taxi companies run their fleets on liquefied gas with tanks in the

car trunks. A recent success towards greater fuel economy was the

introduction of massproduced Hybrid vehicles. Former Prime Minister Shinzo

Abe, who was working on Japan's economic revival, signed a treaty with

Saudi Arabia and UAE about the rising prices of oil.

Services

Japan Airlines is one of the largest airlines in the world. Japan's service


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sector accounts for about threequarters of its total economic output.

Banking, insurance, real estate, retailing, transportation, and

telecommunications are all major industries such as Mitsubishi UFJ, Mizuho,

NTT, TEPCO, Nomura, Mitsubishi Estate, Tokio Marine, JR East, Seven & I,

and Japan Airlines counting as one of the largest companies in the world.

The Koizumi government set Japan Post, one of the country's largest3

providers of savings and insurance services for privatization by 2014. The six

major keiretsus are the Mitsubishi, Sumitomo, Fuyo, Mitsui, DaiIchi Kangyo

and Sanwa Groups. Japan is home to 326 companies from the Forbes Global

2000 or 16.3% (as of 2006).

Industry

Japanese manufacturing is much diversified, with a variety of advanced

industries that are highly successful.

Industry is concentrated in several regions, in the following order of

importance: the Kant region surrounding Tokyo, especially the prefectures

of Chiba, Kanagawa, Saitama and Tokyo (the Keihin industrial region); the

Tkai region , including Aichi, Gifu, Mie, and Shizuoka prefectures (the

ChukyoTokai industrial region); Kinki (Kansai), including Osaka, Kyoto,

Kobe, ( the Hanshin industrial region); the southwestern part of Honsh and

northern Shikoku around the Inland Sea (the Setouchi industrial region); and

the northern part of Kysh (Kitakysh). In addition, a long narrow belt of

industrial centers is found between Tokyo and Fukuoka, established by

particular industries that have developed as mill towns.

The fields in which Japan enjoys relatively high technological development

include consumer electronics, automobile manufacturing, semiconductor

manufacturing, optical fibers, optoelectronics, optical media, facsimile and


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copy machines, and fermentation processes in food and biochemistry.

Agriculture

Only 12% of Japan's land is suitable for cultivation. Due to this lack of arable

land, a system of terraces is used to farm in small areas. This results in one

of the world's highest levels of crop yields per unit area, with an overall

agricultural selfsufficiency rate of about 50% on fewer than 56,000 km (14

million acres) cultivated.

Japan's small agricultural sector, however, is also highly subsidized and

protected, with government regulations that favor smallscale cultivation

instead of largescale agriculture as practiced in North America.

Imported rice, the most protected crop, is subject to tariffs of 490% and was

restricted to a quota of only 7.2% of average rice consumption from 1968 to

1988. Imports beyond the quota are unrestricted in legal terms, but subject

to a 341 yen per kilogram tariff. This tariff is now estimated at 490%, but

the rate will soar to a massive 778% under new calculation rules to be

introduced as part of the Doha Round.4

Although Japan is usually selfsufficient in rice (except for its use in making

rice crackers and processed foods) and wheat, the country must import

about 50% of its requirements of other grain and fodder crops and relies on

imports for most of its supply of meat. Japan imports large quantities of

wheat, sorghum, and soybeans, primarily from the United States. Japan is

the largest market for EU agricultural exports. Apples are also grown, mostly

in Tohoku and Hokkaid; Pears and Oranges are mainly grown in Shikoku

and in Kysh. Pears and oranges were first introduced by Dutch traders, in

Nagasaki in the late 18th century.

Fishery


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Japan ranked second in the world behind the People's Republic of China in

tonnage of fish caught11.9 million tons in 1989, up slightly from 11.1

million tons in 1980. After the 1973 energy crisis, deepsea fishing in Japan

declined, with the annual catch in the 1980s averaging 2 million tons.

Offshore fisheries accounted for an average of 50 % of the nation's total fish

catches in the late 1980s although they experienced repeated ups and downs

during that period

Coastal fishing by small boats, set nets, or breeding techniques accounts for

about one third of the industry's total production, while offshore fishing by

mediumsized boats makes up for more than half the total production. Deep

sea fishing from larger vessels makes up the rest. Among the many species

of seafood caught are sardines, skipjack tuna, crab, shrimp, salmon, pollock,

squid, clams, mackerel, sea bream, saury, tuna and Japanese amberjack.

Japan maintains one of the world's largest fishing fleets and accounts for

nearly 15% of the global catch, prompting some claims that Japan's fishing

is leading to depletion in fish stocks such as tuna. Japan has also sparked

controversy by supporting quasicommercial whaling.

Labor force

In 2008, Japan's labour force consisted of some 66 million workers40% of

whom were womenand was rapidly shrinking. Labour union membership is

about 12 million. The unemployment rate for June 2009 is 5.2% (5.4% male

(up 0.1% from May 2009), 4.9% female (up 0.3% from May 2009)). In

1989, the predominantly public sector union confederation, SOHYO (General

Council of Trade Unions of Japan), merged with RENGO (Japanese Private

Sector Trade Union Confederation) to form the Japanese Trade Union

Confederation.5


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One major longterm concern for the Japanese labour force is a low

birthrate. In the first half of 2005, the number of deaths in Japan exceeded

the number of births, indicating that the decline in population, initially

predicted to start in 2007, had already started. While one countermeasure

for a declining birthrate would be to remove barriers to immigration, the

Japanese government has been reluctant to do so.

In July 2006, the unemployment rate in Japan was 4.1%, according to the

OECD. At the end of February 2009, it stood at 4.4% this seemingly modest

rate however understates the situation. According to The Economist, the

ratio of job offers to number of applicants has declined to just 0.59, from

almost 1 at the start of 2008, while average work hours also declined.

Average wages also went down by 2.9% over the 12 months ending in

February.

Current economic issues

The Koizumi administration, which held office until 2006, enacted or

attempted to pass (sometimes with failure) major privatization and foreign

investment laws intended to help stimulate Japan's dormant economy.

Although the effectiveness of these laws is still ambiguous, the economy has

begun to respond, but Japan's aging population is expected to place further

strain on growth in the near future.

Keynesians tend to claim that Japan's economy is far stronger than generally

believed. Some mainstream economists acknowledge that Japan, which

unlike most Western countries has maintained its industrial base, and has

vast capital reserves, currently has a strong economic outlook.

The privatization of Japan Post, the Japanese postal system which also runs

insurance and deposittaking businesses, is a major issue. A political battle


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over privatization caused a political stalemate in August, 2005, and

ultimately led to the dissolution of the Japanese House of Representatives.

The Postal Savings deposits, which have until now been used to fund public

works projects, many of which have had questionable economic value,

stands in excess of 1.9 trillion U.S. dollars, and could be a major force in

energizing the private sector.

The Japanese monetary authorities' continued desire to depress the price of

yen relative to other key specific currencies to protect domestic business

from imports may no longer be feasible. The most recent record intervention

in 2003 amounted to over 17 trillion yen, more than one third of one trillion

US dollars at the time and nearly 3% of Japan's 2003 GDP, being sold in

favor of other nonyen denominated assets. However, since 2005, Japan has6

not directly intervened to buy currency, as yen carry trade has effectively

carried out the same task.

Interestingly, international trade has expanded by 60% from 91.4 trillion yen

to 142.6 trillion yen from 2001 to 2006. However, taking in account the

economic participation rate, Japan's GDP per worker has increased steadily.

The Organization for Economic Cooperation and Development downgraded its

economic forecasts on March 20, 2008 for the Japan for the first half of

2008. Japan does not have room to ease fiscal or monetary policy, the 30

nation group warned. For Japan, the OECD said the pace of underlying

growth appears to be softening despite support from buoyant neighboring

Asian economies. The organization expects firstquarter GDP to be up 0.3

percent and predicts a rise of 0.2 in the second quarter.

On November 17, 2008, Japanese government officials announced that the

economy was in a recession. It was reported that Japan's economy


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contracted at an annual pace of 1.8% in the third quarter of 2008. It is

forecasted to have shrunk 0.8% through the fiscal year that ends March

2009.

economics of the country

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