Politics and the economy are intertwined. Politics affects economic policy, trade, GDP, inequality, and stability. In China, the Communist government focused on recovery after 1949, then intensive industrial growth under five-year plans. Reforms since 1978 transitioned to a more open market economy. In India, economic liberalization in 1991 led to rapid growth across sectors. Political instability can increase inflation and unemployment while decreasing investment. Stimulus plans like Obama's in 2009 aim to create jobs during recessions.

1. RELATIONSHIP BETWEEN
POLITICS AND ECONOMY

2. What is Politics and Economy?
•The activities associated with the governance of a country or other area,
especially the debate or conflict among individuals or parties having or
hoping to achieve power is Politics.
•The wealth and resources of a country or region, especially in terms of the
production and consumption of goods and services is Economy.
Relation BetweenPoliticsand Economy
There are various way in which politics affects the economy:-
• Formation of economic policy
• International trade
• GDP, Per capita income
• Income inequality
• War and disturbance
• Scams and corruption

3. Consequences of Political
Instability on Indian Economy
1. Inflation rate increases.
2. Unemployability increases
3. Low FDI’s
4. Low foreign reserves
5. Low growth environment
6. Increase in corruption

4. Relationship of Politics and
Economy Under China:-
• China’s economy under Communism:-
• China was under Communist rule since 1949,under leading of
Mao Zedong
• 1949–52 ,Recovery from war-
• In 1949 China's economy was under effects of decades
of warfare
• The chief goal of the government for the 1949–1952 period
was to restore the economy
• The administration moved quickly to repair transportation,
communication links and revive the flow of economic activity
• 1953–57, First Five-Year Plan –
• The leadership under Mao Zedong, was prepared to embark
on an intensive program of industrial growth and socialization.
• The Soviet approach to economic development was
manifested in the First Five-Year Plan (1953–57)

5. Contd..
• 1976-78, Post-Mao interlude-
• The new policies was made to strengthened the authority of managers
and economic decision makers
• Foreign trade was increased, and exchanges of students and "foreign
experts" with developed countries were encouraged.
• beginning in 1978,Reform of the economic system-
• The 11th Central Committee which opened on December 22, 1978
• The party leaders decided to undertake a program of gradual but
fundamental reform of the economic system
• They concluded that the Maoist version of the centrally planned
economy had failed to produce efficient economic growth
• 1982,Reform and opening-
• The period of readjustment produced promising results, increasing
incomes ; raising the availability of food, housing, and other consumer
goods
• In 1985-industry employed about 17 percent of the labour force but
produced more than 46 percent of gross national product (GNP).
• The agricultural sector employed about 63 percent of the labour force
and its proportion of GNP was about 33 percent.
• Foreign trade was growing rapidly in size and importance, as it
represented 20 percent of GNP in 1985

6. China’s Economy Under Xi Jinping
• Xi Jinping came to power in 2012-13
• Main themes of his leadership have been a fight against
corruption and economic reform
• China allows foreign companies majority ownership of some
telecom and internet services in the Shanghai free trade zone.
• China's trade surplus jumps to $31.9bn up 14 per cent from a
year earlier - easing concerns the world's second-largest
economy may be stuck in a slowdown.
• Chinese e-commerce giant Alibaba and China's largest Twitter-
like service Weibo unveils plans to sell shares on the US stock
market.

7. China’s GDP Growth(1950-2020)
• pre-1978 China had seen annual growth of 6 percent
• post-1978 China saw average real growth of more than 9 percent
• several peak years, the economy grew more than 13 percent
• During 1979-94 productivity gains accounted for more than 42 percent of
China's growth
• Between 1978-1992 the share of collective enterprises rose from 42 to
50 percent and that of private businesses and joint ventures rose from 2 to 10
percent
• In 2010 the annual growth rate stood at 10.4%

8. Effects of going into world war -2
• From 1930 - late 1930s,there was Great Depression in US.
• The reason for Depression is fall in stock prices which resulted
in increase in unemployment by 25%,international trade
dropped by 50%,personal income ,tax revenue and profits
decreased.
• Going into war generated 17 million civilian jobs, industry
productivity increased by 96% and corporate profits doubled.
• The war also resulted in creation of new technologies,
industries and human skills required.
• Government also adopted rationing of necessary items so
that every part of population can get essential items.
• The war brought fairer distribution of income and for the first
time African American and women entered into workforce.
• Due to Great Depression ,going into war actually pushed the
economy hence, increasing the wages and employment.

9. IncreaseinDefenceExpenditure
• During George Bush term, they focussed more on increasing
Defence Expenditure on the name of ‘War on terror’.
• The Defence Expenditure increased by some 70 % due to which
percentage of GDP spent on R & D outside defence and health has
fallen.
• Agricultural Subsides were doubled between 2002-2005.
• All of this resulted in a decrease of budget surplus of 2.4 % of GDP
which greeted bush when he took office into a deficit of 3.6 %

10. Obama’s Stimulus Plan
• The $787 billion economic stimulus package was approved by Congress in
February, 2009. The package was designed to quickly jump-start economic
growth, and save between 900,000 to 2.3 million jobs.
• Its three categories of spending were:
1) $288 billion in tax cuts.
2) $224 billion in extended unemployment benefits, education and health care.
3) $275 billion for job creation using federal contracts, grants and loans.
• Obama's biggest challenge was to create enough of a stimulus to soften the
recession, but not big enough to create further doubts about the ballooning U.S.
Debt.
• Unfortunately, the plan was blamed for doing both -- failing to reduce
unemployment below 9%, and adding to the debt.

11. India and Liberalization:-
Reasons for Liberalization:-
 The Balance of Payment crisis in 1991 which pushed the country to near
bankruptcy
 No FDI and FII investment
 The rupee devalued and economic reforms were forced upon india
Liberalisation refers to laws or rules being relaxed by a
government.
 Impacts of These Reforms
•Annual growth in GDP
•Rapid growth in all sectors
•A rate of growth that will double average income in decade
•Exports of information technology enabled services particularly strong

12. ReformsTaken DuringLiberalization:-
• Financial sector
• Fiscal sector
• Trade sector
• Industrial sector
0.00
5.00
10.00
15.00
20.00
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
0.08 0.06
1.8
0.06 0.06 0.04 0.06
1.8 2
11
15.5 15.8
10
7.5
6 6.2
5
3.6
Government(in %)
non-govt(in %)

13. India from 2004-2013
• Decrease in growth rate of India from 9.4 in 2010 to 4.5 in 2013.
• The trade deficit increased to $20 billion in 2013 from 2 billion in 2004.
• The UPA spoiled the current account with a huge deficit of $339 billion
during their 9-year regime, which has also resulted in the rupee’s downfall.
• The external debt, which the country owes to its creditors, has shot up
significantly from $112 billion in 2004 to $172 billion in 2013 approximately.

14. Modi-maniaboostsIndianstockmarkets
• India currently stands out as a rose among thorns in the Bric group of emerging
markets.
• The Indian stock market has rallied impressively around the election of Prime Minister
Narendra Modi in May, as other major emerging markets such as Brazil and Russia
have struggled.
• Six months after the general election Indian markets have turned fizzy as local
investors return to the market and the new government begins to deliver on a range
of promised policy changes, ending expensive diesel subsidies and laying the
foundations for commercial coal mining by private sector companies.

15. MajorAnnouncements
• As inflation slows, household savings are moving towards financial
assets from physical assets such as real estate and gold, where
demand has dropped particularly sharply.
• Mr. Modi gave a rousing speech on India’s independence day on
August 15, which included announcements about streamlining
Indian bureaucracy, and boosting manufacturing in the country.This
fired up investors, and sent the Sensex to a new record high. The
index rose 317.44 points.
• Bank Accounts for All-Mr. Modi launched an ambitious program to
provide bank accounts to millions of people without access to the
formal banking sector. Stocks rose 229.44 points .
• Make in India/U.S. Visit-The Sensex jumped the day after this
announcement, gaining nearly 158 points .
• Oct. 16: Labor reform-Earlier this month, Mr. Modi announced steps
toward reforming India’s labor laws.
• Oct. 19-23: Diesel Freed, BJP Lead in State Elections-The Sensex
gained 742.52 points, or 2.8% to 26,851.05.

16. References
• www.ibef.org
• http://www.rediff.com/business/slide-show/slide-show-1-
special-why-the-indian-economy-is-a-sinking-ship-under-
upa/20130925.htm
• www.useconomy.com
• www.nytimes.com
• blogs.wsj.com
• www.imf.org