Economic Growth and Living Standards Paper Example

Introduction

Economic growth can be defined in simple terms as an increase in the total real income of a country or its output. It can also be referred to an improvement in the quality of life of a people in that country or the quality of their living standards like in literacy levels, healthcare access, and life-expectancy. More often economic development is considered by other scholars as the increase in the capacity of a nation in the production of commodities. Gross Domestic Product (GDP), Gross National Product (GNP), inflation, unemployment, domestic debt, investment levels, income inequality, measures of livings standards of citizens or wellbeing and levels of citizens' happiness are some of the matrices that can be used to gage the economic development of a nation. Per se, the standard of living of a people can be said to be the quality of life that people enjoy within a state. Such that the living standard of a people is dependent on the level of development of a nation, the respect to the rule of law, the availability of better housing, clean environment, political stability and religious freedoms. Thus the focus of the paper will be to elucidate the causal relationship between economic development and standard of living with the case study from Kenya an underdeveloped country and India, a fast-rising global economy.

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Selected Countries: Kenya and India

The two countries that will be used in the paper are Kenya, an African underdeveloped country, and India, a fast developing economy of the world. Kenya is underdeveloped and the standard of living of her people are very poor. She suffers burdens of stagnant economic growth due to corruption, political instability, inability to tap on natural resources, higher dependency on foreign aid, poor infrastructure, and more consumptions than production. However, the economy is supported by a robust tourism sector, agriculture, and surging direct foreign investments. The potentiality in the available natural resources which are untapped gives hope for a future increased economic growth according to the World Economic Situation Prospects 2017. (2017). On the contrary, India is a fast developing economy witnessing a phenomenal economic growth in the past decade. The political stability, technological advancements, partnerships hence decreased poverty levels, increased GDP, and an engaged labor force. Such factors depict the need to analyze the relationship between economic growth and standards of living through the lenses of these two countries.

India and Kenya`s Economic Growth and Standard of Living

Kenya`s economic growth in the past decade has been stable in the Sub- Saharan Africa with an average of 4.37 percent growth rate. According to Were, 2016, the GDP growth of Kenyan economy was at 5.8 percent in 2016. He further postulates that the main drivers of the economy were service delivery, industry, and agriculture. However, in 2017, the real GDP declined to 5 percent in the year 2017 according to him. The fall in the GDP was facilitated by the political instability in the country that saw prolonged divisive and ethnic-based elections and disputed presidential elections. The political class called for boycotts in the consumption of certain products due to political reasons. In addition, the investors were also scared due to the uncertainty of the markets. The prolonged droughts also affected the economy which is dependent on rain-fed agriculture hence affecting crop and food production. The caps affecting the lending rates of commercial banks subdued credit growth.

The GDP of Kenya as at 2009 just after the world financial crisis was 29.5 billion and a growth rate of just 2.6 percent (Okoth, 2017). In the wake of the global financial crisis which saw the recession affect many countries globally, Kenya was recovering from one of the worst economic turmoil of her time following the post-election violence of 2007. Okoth also advances that in 2007, the GDP was at 31.96 billion USD while it increased to $ 35.9 billion in the year 2008. In 2007, the country witnessed a political instability that was precipitated by a disputed general election. The crisis affected the tourism industry as it scared tourists away and most foreign countries had an advisory caution on their citizens to avoid visiting Kenya. Consequently, the country manufacturing and transport sector also suffered a great deal of losses hence the decrease in the GDP of the nation in 2007, therefore, by the time the world was experiencing a recession, and Kenya had gone through a worse situation already and was stabilizing.

It is imperative to note that Kenya made substantial political, economic and structural reforms that have been the driving force of economic growth, political gains and social development for the past decade. However, the economic growth of the country is still threatened by the climate change that affects agriculture and wildlife conservation, inequality, unemployment, foreign debts and overdependence on foreign aid. The constitution 2010 that was enacted by the country triggered a lot of economic governance structure which has devolved more functions and responsibilities to the local people hence access to more opportunities.

Some of the main sectors that drive economic growth in Kenya include agriculture, natural resources, and financial services, manufacturing, and wholesale and retail. Agriculture supports the economic growth of the country as it provides major export commodities like tea, coffee, rice, wheat, and flowers. Staple foods are produced that feeds the nation like maize and a major employment sector for the people is derived from agricultural practices. Tourism can attract foreign money due to the availability of wildlife, and tourist attraction sites. Natural resources like land and soda ash have immensely contributed to the economic growth of the nation. However, unemployment, foreign debts, negative ethnicity, nepotism, and corruption are major deterrents to economic growth in Kenya (Okoth, 2017).

The rate of economic growth in India in 2015 was at 8 percent and dropped to 7.11 percent in 2016 and a further decline by 6.72 percent according to the (Statista, 2018). In the year 2008, the GDP of India was 1.187 trillion USD despite the recession which the world experienced at the time. From 2004/2005 financial years of 2008 to 2009, the GDP of India increased significantly by nine percent for the four year period. Statista also advances that in 2015, it had a GDP of 2.112 trillion USD, in 2016 it was 2.264 trillion USD, and thus India was not affected much by the financial crisis of 2008. It was because India`s economy is not heavily reliant on the external markets and global capital flow and trade.

One of the major reasons for the economic growth in India is because the economy is anchored on strong human capital (Goyal, 2014). India has the largest labor force in the world due to its population. The people are available to work and make contributions to their economy. Large populations help the country to produce goods and services. Human capital is thus the skills and knowledge that the labor force is equipped with to deliver on the production of various goods and services. As such, both the government and the private sector have invested in developing the capacity of human capital to acquire the much-needed skills to deliver goods and services thus growing the Indian economy.

Technological ecosystem has been instrumental in driving the economic growth of India. Technology has increased productivity but again, the Indian population has embraced technology hence innovation, and innovative ideas have helped steer the economic drive of the country. Physical capita which refers to the availability of resources made to a population in the labor force. The government of India through other mechanisms like the Startup India and other initiatives are geared towards empowering the people more so the small business owners to venture into business. It is whoever imperative to mention the stable political leadership of the country that fosters such economic growth to the people. Good governance in India has made it possible for the entrepreneurs and investors to invest in the country with the confidence of the future prosperity. Political stability and good governance allow the people to invest their money in the economy and expect good returns in turn.

Comparing Economic Growth and Standards of Living Between the two Countries

The standard of living in Kenya is very high, and the majority of the general public is not able to afford the high cost of commodities. Inflation is high which has been fueled by systemic and systematic corruption in government. Public resources are plundered, and there is lack of accountability to resources of the state. The citizens are not empowered by the state, and they cannot afford basic services like education, good health care services, basic needs, and poor entrepreneurial environment. The government is not able to pay the workforce sufficient salaries hence the rampant strikes in the civil servants. Poor health facilities have seen the majority of the population die from curable diseases like malaria. Education which can empower the public is not properly funded hence most people are still illiterate. The majority of graduate youths are also unemployed despite their qualification and education. Political instability, nepotism, and corruption have scared away the majority of investors from Kenya, and the local population lives amongst themselves with fear of ethnic violence as witnessed in the year 2007 and 2008 post-election violence. According to the Medium Corporation in the U.S (2017), such factors postulates that the wealth of the nation is held by less than 0.1 percent of the total population, which is an indicator of the extent of income inequality in Kenya.

In India, the story is different a bit. Despite the sharp economic growth, the standard of living in India is also high, and the majority of the population is migrating from the rural areas to the urban centers to look for green pasture. The high population has seen a large number of people living in abject poverty and not able to afford basic commodities. However, the government has initiated programs to empower the people, and more people are absorbed in the workforce. The educational training is available for people. Even though some Indian citizens are not able to get employed, they have a good education. Indian citizens are also privileged to have good healthcare services that assist the population. The religious culture of the Hindu and political stability help the people to live in happiness, and harmony.

Extent of Living Standards

As such, India performs better in both the living standards and economic growth than Kenya. India has a faster-growing economy than Kenya because it has good governance. The leaders of Kenya are accused of being corrupt and at one time had been prosecuted in the ICC for crimes against humanity. The freedom of people are not guaranteed, the bank interest rates are very high, poor levels of education, large unemployment cases, nepotism, and overdependence on foreign aid affects the economic growth of Kenya. India makes economic partnerships with other nations. Such facilities are geared to empower the human capital with the use of physical capital thus enhancing creativity and innovation for economic growth.

India is also performing better than Kenya in the living standards since the majority of the populations are in the workforce, and the government can provide basic services like better education and healthcare services to the citizens. The low-interest rates from banks enable the people to take loans besides the government giving...