India's Comparative Advantage

Having read or heard about Canada 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, sell 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.

Part I: India, with a population of $1\mathrm{.}1$ 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 Canadian, which has the highest personal consumption rate.

Part III: Canadian companies have moved their operations to India to take advantage of inexpensive labour, 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 labour. 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!

A trade advantage with the best chance of surviving is one based on:

Multiple Choice

production efficiency.

technology.

worker know$-$how.

a monopoly of a resource.

lack of a resource.