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Is India a 'developing country'? America doesn't think so

Though both are the world's leading nation in terms of economic growth, the US claims they continue to enjoy special trade benefits that come with a 'developing country' tag.

twitter-logoBusinessToday.In | April 15, 2019 | Updated 17:01 IST
Is India a 'developing country'? America doesn't think so
Despite huge pressure from the US, India and China has also refused to shed the 'developing nation' tag.

The United States (US) wants the Switzerland-based international trade body World Trade Organisation (WTO) to review the 'developing country' status of India and China, the two fastest growing economies in the world. Though both are the world's leading nation in terms of economic growth, the US claims they continue to enjoy special trade benefits that come with a 'developing country' tag.

The developing nations in question, India and China, have in turn flagged several key factors, including per capita income and human development indicators, where they are still lagging and are far behind than the developed countries like the US, Singapore, South Korea, Saudi Arabia, etc.

The economists are also divided over the issue, but many of them feel neighbouring countries like China, Singapore, South Korea, and Hong Kong are way ahead in economic prosperity than India, and that putting India on the same scale can't be justified. Let us first compare India's social and economic indicators with these rising Asian countries.

Social and economic indicators

As per the 2017 World Bank figures, the per capita national income in India was $1,800, while other countries like Singapore, South Korea, and China reported per capita national income of $54,530, $28,380, and $8,690, respectively, reported Financial Express. In terms of Human Development Index, India ranked at 103, while China, South Korea, Singapore, and the US rank at 86, 22, 9 and 13, respectively. While India had 21.2 per cent poor population (living on $1.90 a day as per 2011 purchasing power parity), China had 7.9 per cent population in the category, while Singapore and South Korea had almost negligible poor population. While India employed around 41.6 per cent of the population in agriculture, while China, South Korea, Singapore and the US had 16.4 per cent, 4.8 per cent, 0.1 per cent and 1.6 per cent population that depended on agriculture.

Despite all odds, India is expected to remain the fastest growing emerging market economy and the economy is expected to grow at 7.5 per cent in the next three years.

What does 'developing' nation tag mean?

The World Bank classifies all countries of the world into one of the three broad categories: developed economies, economies in transition and developing economies. A developing nation tag means a country will get a certain advantage in terms of subsidies and tariff than a developed nation. The developing countries get a longer time to implement global initiatives and more flexibility in adopting measures to boost international trade. For example, a developing nation like India can provide larger input subsidies and MSP as compared to developed nations.

However, comparing India with these nations is extremely iniquitous, says Abhijit Das, head of the Centre for WTO Studies at the Indian Institute of Foreign Trade. He told the daily: "It would be extremely iniquitous if India is to be treated on a par with the US (developed countries) at the WTO, given that the per capita income of the US is over 30 times higher than India's."

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Despite huge pressure from the US, China has also refused to shed the 'developing nation' tag. The US argues China shouldn't be categorised as a developing nation because it has seen almost two decades of unprecedented economic prosperity. China, however, maintains that though its GDP per capita of the country has risen up to $16,660 in 2017, it is still lower than the US, which has the GDP per capita of $59,501, so China will take some time before it fully accepts the developed nation tag.

India, on the other hand, wants to achieve this feat as soon as possible. Prime Minister Narendra Modi, during the release of the BJP's 'Sankalp Patra' for the 2019 Lok Sabha elections recently, urged people to provide his party, the BJP, five more years to set India on the track of a "developed nation". "It is said that 21st century belongs to Asia and today I am asking why can't India lead... or should India lead or not? Our manifesto says when our country completes 100 years of independence in 2047, it should be transformed as a developed nation, moving on from the developing nation tag," he said.

Edited by Manoj Sharma

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