Essay Sample on Economic Boom: Market Forces & State Policies

Introduction

The economic development of a country is dependent on the policies formulated by the state and the nature of the market. The state regulates trading activities in the country by the formulation of policies either to support or limit certain trading activities in the country. Market forces are also a major determinant in the overall performance of the country's economy. When the market is favorable for trading activities the economic boom due to the income generated from the trading activities. The government controls the market sector introducing taxes, subsidies and other policies in trade regulation. The state authority also regulates international trade by introducing trade tariffs and trade barriers.

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The policies adopted by the Indian and South Korean government in market regulation and assimilation of the private sectors were similar. However, there were differences in how the policies worked in the two countries. The bureaucratic approach adopted by India as a control for both the public and private sectors yielded substantial benefits to the country's economy. However, South Korean industrialization was characterized by export trading where most of their products were traded abroad.

Why It Took India So Long to Open up Trade With the Rest of the World

The bureaucratic approach formally used by the Indian government was introduced by their colonizers who were the British. Therefore, after the country attained its independence the prime minister was unwilling to continue trading with other countries. The policies adopted were for India to grow economically without relying on any other country. However, the industrialization that took place in the 1960s led to a massive introduction of industries in the country. India was able to produce substantial products that could not be consumed locally. The country also required compliments from other countries, and it was impossible to obtain these imports without foreign currencies reserves.

Globalization also led to the opening up of the Indian market to the rest of the world. The world became a global village with free access to many parts of the globe. The raw materials required for the industries could be obtained easily with good market relations with the rest of the world. The policies restraining trading with other countries had to be abolished to facilitate the growth of the country's economy.

Free Trade

Free trade refers to policies adopted by a country that do not restrict imports and exports. Citizens of countries with free trade agreements are allowed to exchange goods freely without imposing trade tariffs. Free trade policies are essential for economic development. A country engaging in free trade reaps massive benefits both from a political and economic perspective. Indian free which exists between 10 Southeast Asian countries, has immensely facilitated the economic growth in India.

Import substitution refers to trade policies that are introduced to replace foreign imports with domestic products. The policy restrains the importation of goods that can be produced locally. This policy is crucial when a country is experiencing a balance of payments deficit. The country discourages importation and works to improve exports to ensure equilibrium in the balance of payment. However, in cases where there are trade agreements to conduct free trade between countries, the import substitution policy may be considered a violation of the agreement. Free trade policies are better than import substitution policies when a country wants to achieve economic growth.