Question

1

India'sComparativeAdvantage
 
Having read or heard about American companies outsourcing jobs to India, we may think that outsourcing alone is responsible for India's incredible economic growth, but Indian companies are responsible for more than we realize. Review the three segments of the case and write your responses as instructed.
 
Nations and businesses engage in international trade to obtain raw materials and goods that are otherwise unavailable to them or available elsewhere at a lower price than that at which they themselves can produce. A nation, or individuals and organizations from a nation, sells surplus materials and goods to acquire funds to buy goods, services, and ideas its people need. Which goods and services a nation sells depends on what resources it has available.
 
 
Read the case below and answer the questions that follow.
 
 
Part I: India, with a population of 1.2 billion, has experienced incredible economic growth in the past 15 years and is currently the second fastest growing country in the world (China is first). For the past 15 years, the country has shown an average annual growth rate of 6 percent, and analysts believe the country's annual growth rate may increase over the next 10 years. This growth is important to the country's population, which now exists in stark contrast between affluent cities and impoverished areas – on average, an Indian telephone operator earns less than $ 1 an hour, a medical transcriptionist about $ 2 an hour, and an accountant $ 10 an hour, and around 44 percent of the population live on under $ 1 a day.
 
Part II: India's road to success has been and will be extremely different from the organized route China has taken to expand its economy. China's all-powerful government is responsible for the country's growth, while India has a large number of entrepreneurs who are determined and willing to do what it takes to make money. Indian companies are growing at remarkable annual rates of 15 to 25 percent. However, Indian consumers are also contributing to this growth. Personal consumption accounts for 67 percent of India's gross domestic product, only 3 percent behind the United States, which has the highest personal consumption rate.
 
Part III: American companies have moved their operations to India to take advantage of inexpensive labor, but India boasts a growing number of its own successful blue-chip companies, such as Infosys, Tata Consultancy, and Wipro. Infosys, for example, designs and maintains software for almost 300 Fortune 500 companies. India's manufacturing sector has also become a global force. Once sluggish and inefficient, the manufacturing industry has benefited from recent economic reforms as well as a plentiful supply of engineering talent and inexpensive labor. Above all, what appears to be driving India's growth is an enthusiasm to succeed. This enthusiasm may be attributed to India's emergence as an independent society ready for change – and what a change!
 
 

What is India's comparative advantage in global competition?

Multiple Choice

Low-cost labor

Access to natural resources

Production of agricultural commodities

Open land for building growth

Innovation and expertise in manufacturing

Answer 1

Low Cost Labor

India's comparative advantage in global competition is Low-cost labor. American companies have moved their operations to India to take advantage of inexpensive labor. Many companies are now exploring their operations manufacturing or else in India as it costs them less than what it will cost them if they produce in their own countries or outsource to other countries. India has huge population and so access to low cost labor.