India and Germany are two developing nations that have been facing a good amount of growth since the last two decades. Indian is one of the developing nations, whereas Germany is another nation that has a well-developed social market. Though both of the nations have shown drastic development during the last two decades, both of them have a different growth path. According to the Purchasing Power Parity (PPP), Germany rank 4th and on the other hand India ranks third highlighting the similarity between the two economies (Storm and Naastepad 2015). Considering the Gross Domestic Product (GDP) value of two nations, it can be seen that both the state has a small amount of difference (Lindo-McGovern 2016). Well, though the macroeconomic figures of the states are almost identical, microeconomic figures differ on a large scale for both of them. Under this situation, this report is meant to analyze these two states and focused on providing a comparative review of the economy of them. Through analyzing the macroeconomic and microeconomic structure of the two states, this report will provide light on the various aspects of these economies.
Sectors of the economy
The economy of India is the 6th largest economy according to the nominal GDP, and when it comes to PPP, then the economy is third in the world. According to the per capita GDP value at a nominal rate, the state ranks 141st, and if the PPP model is considered, then it ranks 123rd in the world making it a big yet middle-income group economy (Perdikis 2018). India is one of the middle category economies due to the fact that it has world’s second largest population next to China and in addition to this, with 33.0 Gini coefficient Indian economy has showcased that most of its money is possessed by a small section of the population (Hooda 2018). Eventually, with the bases in the wealth distribution, the state has become a middle-income group economy, where it suffers largely from the unequal wealth distribution and lack of employment. According to the latest statistics, India is largely dependent upon its agricultural sector that provides 17.32% share to the GDP and 47% employment. Secondary sector of the economy is accounted for 29.02% share of GDP, and it produces 22% job out of the total job creation in the economy. Tertiary shares largest portion to the GDP (Bragoli and Fosten 2018). It is accounted for 53.66% of GDP share out of total GDP. However, it produces only 1% of the job out of the total available job (Sindhuja et al. 2018). These figures of the GDP share and job employment indicates that the Indian economy is growing at a substantial rate towards development, however, with the low GDP share from the tertiary sector has constrained it from being a developed nation. Additionally, the vast amount of population and rise in the birth rate around the state has been dampening the demographic situation of the population of the state.
Coming to Germany, it can be seen that it is a highly developed social market economy. Though it has troubled past, however, presently Germany ranks 1st among the European Union member countries according to its economic value. From the world perspective, it can be seen that presently it is the 4th largest economy in the world according to the GDP value and if the GDP at PPP value is considered, then it ranks 5th (Lauk 2018). According to the 2017 data, Germany is accounted for 28% of the euro economic area, and it is the founding member of Eurozone that has aided its economy to have a large amount of growth (Lee and Werner 2018). Considering the GDP per capita in PPP model, it can be seen that Germany ranks 17th in the world and it has low Gini coefficient compared to India. With Gini index of 30.7, it can be seen that Germany too has the wide extent of biasedness, when it comes to wealth distribution. However, the situation is not as bad as India (Heinisch and Scheufele 2018). GDP share of Germany from the agricultural sector is as low as 0.7%, and the secondary sector is accounted for sharing 30.2% of the GDP (Isik 2018). When it comes to the tertiary sector, then 69.1% GDP is sourced by this sector only making Germany a highly developed economy that does not depend on its primary sector to have growth as compared to the India (Quintano and Mazzocchi 2018). According to the same source, from the perspective of the employment in Germany, it can be seen that agriculture is only sharing 1.6% job, whereas industrial sector provides 24.6% of job, however, when it comes to the service sector, then it is accounted for 73.8% job creation making the tertiary industry one of the central part that depicts the growth of the economy.
Source: (Jayadev et al. 2018)
From the above figure, it can be seen that the GDP of Germany is almost one and half times compared to Germany. However, if the PPP value can be considered, then the Indian GDP ranks ahead of Germany. Considering the growth rate of the GDP, it can be seen that India is one of the fastest growing economies in the world that has been facing a high amount of growth during the last one decade, whereas the GDP growth rate of Germany is 2%, which is much lower than India. According to the forecast, India will soon become the fastest growing economy in the world surpassing the Chinese growth rate.
The unemployment rate of Germany and India, both are high compared to their neighbouring nations. However, they have managed to reduce the same over the year. Considering the case of Germany, it can be seen that during last years, Germany’s unemployment rate has fallen by a large extent and presently it is hovering somewhere around 3.4 (Heise and Pusch 2018). Considering the price of fall in the unemployment rate, it can be told that the state will reduce its unemployment rate lower than 2% in coming days.
India one the other hand has been enjoying lower employment rate since last one decade. Though during 2008, the price of employment was small, however during the successive period it has increased substantially.
Considering the unemployment rate of the present date, it can be seen that it is rising again as the government has taken the initiative to incorporate all the unemployment people into consideration. Once the government can include all the unemployed population into the tabulation, then the unemployment rate of the state will further rise.
Inflation is one of the primary macroeconomic variables that highlights the standard of living of a state. Below figures underline the standard of living of both the economy.
Considering the case of Germany, it can be seen that the state has a falling inflation rate that highlights the better purchasing power to the people of the country.
Contrary to this, Indian inflation rate has been rising sharply over the years. From the pattern of the present inflation rate of the Indian economy, it can be seen that the state had its higher amount of inflation during the end of 2017 when the inflation was as high as 5.21 (Sahu 2018). It has indeed reduced the purchasing power of the population and lowered the standard of living too.
Utilizing the HDI index, the standard of living of the population can be well defined. as it can be seen from the below, figure that Germany has a right amount of HDI index that has provided a better standard of living to the population of the state, whereas, in case of India it is still struggling to enhance its standard of living.
Source: (Jayadev et al. 2018)
Considering this it can be stated that, though India has high GDP in PPP terms compared to Germany, however, it has failed to enhance the standard of living of its population.
Ease of doing business
Considering the figure below it can be seen that India ranks a lot below than Germany in terms of ease of doing business.
Source: (Jayadev et al. 2018)
With the lower ease of doing business rank, there will be fall in the investment and the economy will thrive to grow. Thus considering this, Germany has better position compared to India (Singh and Jaiswal 2018).
This is an excellent microeconomic variable that entails the standard of living.
Considering both the above figures it can be entailed that consumer confidence in case of India is much higher than Germany. However, the government of Germany has been trying hard to pull the index values so as to provide the economy with a better standard of living.
Higher disposable income depicts better standard of living considering this; selected states can be contested in order to find who possess a better standard of living (Paturot 2018).
From the above figure, the disposable income of the Indian population can be seen, which is much lower than the figure below that is depicting the disposable income of the German population.
Germany’s disposable income is rising at a fast rate, and it is higher than India that showcases it has a better standard of living.
Source: (Jayadev et al. 2018)
The above figure shows that India has a lower amount of life expectancy compared to Germany depicting it has a lower standard of living. Contrary to this, Germany is way ahead to India meaning it has a higher standard of living (Adekunle et al. 2018).
Comparison of the standard of living
from the comparison of the above macro and microeconomic variable of both the countries, it can be seen that India with its large population and fertile land has surpassed the Germany economy in terms of the output, however, with close observation it can be seen that Germany is way ahead than India and possess much amount sustainability compared to the India. India has more than 58% of population below the poverty line compared to this, Germany has only 16% population of the state under the poverty line showcasing the growth of the economy and the rate of development along with job creation in the state Source: (Jayadev et al. 2018). Though the unemployment value of Germany is higher than India, however, considering the fact that government of India has deliberately reduced the unemployment figure by not registering the unemployed person. According to the study, if all the people who do not have any job are being registered, then India would be having the highest number of the unemployed population around the world. Additionally, per capita income and average net salary figures tell a complete lie regarding the economy of India because these are highly biased due to a large number of population in the state. Though Germany ranks below India in purchasing power, however, overall microeconomic figures entail an entirely different story. Germany has a Human Development Index of 0.920, whereas India’s value is 0.624 showcasing that Germany is way developed compared to India and additionally, the standard of living of Germany is better that of India too (Rajan et al. 2018).
Above discussion has showcased that there is the enormous microeconomic difference between India and Germany. Though from the macroeconomic performance of both the states it has been hard to say who is better from the other due to the fact that there is indeed a tiny amount of difference between them. However, considering the HDI index, it can be seen that Germany is way ahead than India and it has good potential to grow in future too. On the other hand, poverty-stricken and biasedly distribution of wealth with the amalgamation of the ever-growing population of the state has restricted the growth path of the nation. To conclude, it can be stated that it is true that India has better macroeconomic variable compared to Germany, however when it comes to standard of living, then Germany is light year ahead of India.
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