'As China greys, India set to become world's growth engine'

'As China greys, India set to become world's growth engine'

TORONTO: If it was India's $35 computer that was splashed in Canadian news last week, now it is the country's relentless growth story that's making headlines here.

Writing under the headline "Meet the world's next growth engine", the National Post daily Wednesday said that while the rest of the world grapples with the consequences of declining birth rates and mass retirements from workforces, India is set to reap benefits of demographic bulge.

Though India's planners have a tough job on their hands of creating infrastructure and jobs and providing education to keep the momentum of growth, the rest of the world needs to ready itself for an era of relentless Indian expansion, the newspaper said.

"The potential is huge and it will happen... these things will happen, and they will transform us," the paper quoted Joseph Caron, former Canadian high commissioner in India, as saying.

While China is set to grey even before getting rich because of its one-child policy, India, on the other hand, has youth on its side, the paper said.

"By 2020, it will add an additional 110 million people to its working ranks, the single largest increase in the global labour force," the paper said, quoting a Goldman Sachs report released Wednesday.

Though its demographic dividend is arriving 20 years after its peers in East Asia because of more gradual declines in its death and birth rates, India is now prepared to cash in on that dividend, the paper said.

According to the Goldman Sachs report, demographics alone would contribute four percent of annual growth in India for the next 20 years.

Based the country's last year's GDP of $1.2 trillion, this projection amounts to almost $50 billion in the first year alone, compounding thereafter.

But India's planners have a lot of work to do to make that potential a reality, the paper said, adding that creating jobs required to absorb its new workers is their major challenge.

"Typically, countries go from an agricultural base, then into manufacturing and then services. India, to some extent, has skipped the bit in the middle," said Kevin Grice, senior international economist at Capital Economics in London.

Compared to 57 percent workforce employed in agriculture, only 19 percent is employed in India's manufacturing/industry sector. Industry has to ramp up its share to sustain growth, the paper said.

"The demographic dividend is one side of the coin; it can be a great disaster if people aren't educated to meet the needs of the growing economy," the newspaper quoted former high commissioner Caron as warning Indian planners.

as Chinese government trys to persuade people that CHinese economy is not overheated,India government trys to persuade people that india economy is not overcool.

that is the difference between CHina and India

BTW, I think that black Africa is set to be the the world growth engine, instead of India, because black Africa is more younger than India...hahahaha:happy_2:

China has peeked most nations are trying to get out before the Chinese bubble bursts. The combination of fake Chinese numbers, overinflated real estate, greying population and one child policy is going to be a bigger decline than witnessed in Japan when their bubble burst. Chinese never became the consumer market hyped by the multinationals; with the communists party owning most of the factories and the real PPP still at 3rd world levels China is overhyped and probably the most dangerous place to be invested right now, companies like Google are already looking for the exit.

India's GDP is one and a half times greater than Africa's entire GDP. Africa lacks even the infrastructure that India has, has an economy dependent almost entirely on agriculture (while India's economy is based on services), and recieves very little foreign investment.

Instead of posting useless comments, why don't you post something useful?

hahah. here is a simple game of "replacement"

Grow up my little bad boy oops bad guy

India's growth depend on the agriculture and you think so, then i can happily call you ****** . more than 60% of GDP from services sector and rest from manufacturing and agriculture (less than 10%). get your status properly before opening your foul mouth.

by the way could you explain the GDP and entire GDP concept.

Look at Chinese billionaires on Forbes billionaire list, how come there are so few compared to other countries?? and for a large economy?? Simple the communist party still owns all the factories and very few individuals are gaining wealth to fix this the party has created a real estate bubble to make it look live individuals are participating but they are not. Another question why does a country so large have little consumer spending power???Answer same as above. China will remain a cheap manufacturing base until a cheaper place is found with cheaper labor and resources simple fact of economics. (that place may already be found).

Your new found wealth has got to your head. Agriculture accounts for only a small % of our GDP.

USA and other European countries have already started looking for a cheaper alternative to manufacturing in China. They have lots of options like Philippines , Vietnam and to some extent India as well .
I have included India as next destination due to availability of young population needed for such industries.

I think you know what happens when someone pour a bucket of water over Overheated object.
Same thing is going to happen once your FDI starts to pull out.

China is a paper tiger, just waiting for a wind to blow it up.

Greyinggggggggggggggggggggg...................dece lerateddddddddddddddd..........

+++
Policy Hits Target as Economic Growth Cools
Statistics show government policies worked by slowing GDP growth and checking inflation in the second quarter

Experts say second-quarter statistics reflecting a slower pace of GDP growth illustrate the effectiveness of recent Chinese government macroeconomic policies in areas ranging from heavy industry to real estate development.

In general, according to government and financial analysts interviewed by Caixin, second-quarter data suggests the economy is cooling exactly as macroeconomic planners had hoped. They also say the data supports calls for staying the policy course.

Moreover, many analysts were surprised to find that government policies worked so well that GDP growth decelerated faster than expected, and alongside unexpectedly low consumer price inflation.

Industrial production and the rate of fixed investment growth also declined beyond expectations.

The government said the nation's GDP expanded 10.3 percent in the quarter compared to the same period 2009, slipping from the 11.9 percent year-over-year growth posted in the first quarter.

And the deceleration is expected to continue. Wang Tao, chief China economist for UBS Securities, said she expects to see 8 percent GDP growth in the fourth quarter, which would bring full-year growth to between 9.5 and 10 percent, on the back of a slower growth for heavy industry.

"Going forward, the slowdown will continue," Wang told Caixin.

The latest figures came as no surprise to Sheng Laiyun, spokesman for the National Bureau of Statistics (NBS). On July 15, he said the economy would continue chugging along within an expected growth range, noting that second-quarter GDP growth was quite high yet in line with second-quarter averages between 2000 and 2009.

But other analysts failed to forecast many of the statistics pointing to such rapid deceleration, such as a 2.8 percentage point decline from May to 13.7 percent for industrial added value of large companies in June. The average growth rate in this area forecast by 18 economists previously surveyed by Caixin was 15.1 percent.

Zhang Weihua, deputy director at the NBS Statistics Industrial Statistics Division, told Caixin the June slowdown reflected government macroeconomic tightening and a comparatively good performance in June 2009.

Government policymaking for energy and emissions was cited as a linchpin by Wang Yuanhong, a senior researcher at the State Information Center Economic Forecasting Office.

Policies encouraging energy conservation and emissions cuts "expanded, and more effort was made to close and transform energy intensive enterprises, thus impacting industrial growth," Wang said.

Electricity data reflected the one-two punch of the government's energy-emissions policies. Although nationwide electricity production rose 11.4 percent year-on-year in June, down from 18.9 percent in May. Heavy industry electricity consumption grew 16.1 percent from a year earlier, down 8.9 percentage points from May's figure.

May marked a step-up in central government pressure on industries to reduce energy consumption and pollution. Policymakers reacted to a first-quarter increase in nationwide energy consumption per unit of GDP, which ran against the grain of government plans for power and emissions reductions outlined in the 11th Five-Year Plan.

Pressure tactics included more government controls on new industrial projects, accelerated shutdown schedules for outdated plants, and electricity price adjustments.

Wang Qing, Morgan Stanley's Greater China chief economist, said the nation's energy-saving and emissions-reduction policies pulled down June's industrial added value growth by 1.5 percentage points.

The year-on-year added value growth rate for China's energy-intensive industries was 4 percentage points lower in June than in May, according to NBS. This decline contributed directly to an overall 1.5 percentage point reduction in industrial value-added growth for June, year-on-year.

Investment Impact

Meanwhile, China's urban fixed asset investment grew 25.5 percent in the first half, while the growth rate for planned investment for existing projects declined 1.7 percentage points to 27 percent, suggesting an ongoing slowdown for investment.

Nevertheless, real estate investment continued to climb at a brisk pace: Property development investment grew 38.1 percent in the first half over the same period 2009.

How long will the property party last? Perhaps not much longer, said Shi Lei, an analyst for Bank of China's Global Financial Market Department.

Shi expects government real estate control policies to trigger a decline for new development projects in the fourth quarter, adding that the sector's investment cycle is six months to a year.

Shen Jianguang, chief economist for Mizuho Securities Greater China, said real estate controls have slowed China's overall economy at a time of weaker demand from Europe importers and the government's push to save energy and reduce emissions.

And based on these factors as well as the central government's stricter controls on local government fund-raising platforms, Shen says, growth will continue to slow until it reaches a sustainable level. He's also counting on the rising influence of Chinese consumers.

"Growth in exports and investment will slow," he said. "Going forward, only (domestic) consumption can maintain stability."

And the latest economic data suggests that the economy may be clearing a path for consumption via unexpectedly weak inflation.
The government said the consumer price index grew 2.9 percent year-on-year in June, but that was down 0.6 percent from May. Economists previously surveyed by Caixin had forecast an average 3.3 percent CPI in June.

Overall, Sheng explained, the government in the first half emphasized inflationary expectations and liquidity issues. Lower prices for food dragged own CPI as vegetables and fruit flooded the market in June.

The State Information Center's Wang said this year's tight money supply and a significant decline in investment, as well as relatively low world commodity prices, helped ease inflationary pressures.

And although inflationary pressure eased from the perspective of CPI, significant uncertainty remains.

Sun Mingchun, chief economist for Nomura Securities Greater China, said prices for grain, pork and other foods, as well as housing rents, will increase in the weeks to come in response recent flooding in some parts of the country. He expects a sharp increase for inflation in July.

NBS said the nation's grain harvest this summer was down 0.3 percent from the previous year, ending six consecutive years of bumper harvests. The autumn grain crop, which comprises more than 70 percent of the nation's harvest, may be impacted by recent flooding in Jiangxi and other provinces.

CPI also could nudge higher in the second half because energy price reforms for water, electricity and natural gas were delayed during the first half.

Researchers at Huatai United Securities predict future inflation will be tied to supply shocks rather than demand growth.

Yet in the face of higher inflation forecasts and the second quarter slowdown for GDP growth, government planners are expected to stick to their current policy direction.

UBS' Wang predicts no changes for macroeconomic policy over the next few months: 11 percent GDP growth and a more than 40 percent increase in exports during the first half of the year are good reasons not to relax policy or try new incentives.

In the real estate industry, policymakers may wait for control measures to take full effect before deciding whether to introduce new policies or change direction.

Besides, the government has more macroeconomic tools in its bag, ranging from government investment projects and local bond issues, to fiscal revenue and spending arrangements. These leave room for more possible responses if the economy slips in the second half.

The National Development and Reform Commission recently announced 23 new projects for developing western regions worth a total 682 billion yuan. These sorts of investment projects may pick up speed in the third quarter.

1 yuan = 14 U.S. cents

the governmental revenue of the paper tiger grows 30% more than last year.

the yearly governmental revenue of China is more than the whole GDP of India.

So? When 20 years back China was almost equal to India in GDP, was it not a great country and civilization? For ancient civilizations that have lasted thousands of years it is funny to see some of you getting so much ahead of yourself for the events of the last few years.

China's GDP was 8-10 years back where India's is now. The difference may increase for a while before it begins decreasing. We admire China's achievements but there is nothing that can't be replicated in India or even done better.

The game is on. I hope both countries inspire each other and keep each other on their toes. Better for the people of the two countries.

well,what a magic of digit!

but such a digital magic can not tell you how wide the gap BTW china and India is .

china's GDP in 2000 was 1 trillion ,almost as much as India's today.but china in 2000 was much ahead of India today. the "1 trillioj GDP" in 2010 is worth much less than "1 trillion USD GDP " in 2000.


Judging from the pentrating rate of household applicance,infrastructure, per capital electric comsumption, per catpial food consumption, India today is almost 2-3 decades behind china.

Judging from the illiteracy rate,infant motality, life expentancy, India today is almost 3-4 decades behind CHina.