India can grow like China if domestic issues settled: Nick Bloom

huaxia rox

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India can grow like China if domestic issues settled: Nick Bloom - Rediff.com Business

The share of manufacturing in India's gross domestic product can go up to 30 per cent if the country implements labour reforms and relaxes regulations, according to Nick Bloom, professor, Stanford University. He tells Dilasha Seth in an interview that India could grow as fast as China if the country sorts out its domestic challenges. Excerpts:

With India's economic growth down to 5.3 per cent in Q2, what are the deterring factors according to you.

Domestic issues are India's real problems rather than external ones. So my analogy is like, India is like a boxer with a hand tied behind its back. The government has tied the hand behind with labour regulations, permits, licensing, etc. So, if the second hand is unleashed, then India can grow faster.

Imagine that you are a businessman, and want to open a factory. It is really hard with so much of regulation, so you move to Singapore, Hong Kong or US.

Are you saying that if India addresses these domestic hurdles, it can tread a high growth path like China?

If the domestic issues are sorted out, India's growth rate could be at least as fast as China. The government could increase growth by getting rid of most of these regulations.

India's growth rate is lower than China's, as China is a more free market. There are much less labour regulations and the rule of law is very strong.

So what can drive India's growth in the medium rate is going to be how much the government can do to push through the retail FDI (foreign direct investment) and the land acquisition Bill.

The manufacturing sector has been a drag on the overall economy...

India has a very small manufacturing sector. Every country around the world, which have achieved a massive growth rate, is through manufacturing. No one has really been able to achieve high growth like agriculture to services.

The National Manufacturing Policy aims at increasing the share of manufacturing from 15 per cent to 25 per cent in the next decade. Do you think that is doable?

India's labour is way cheaper than China's. So people are moving out from southern China to inland parts of Indonesia. They would happily invest in India and India's share in manufacturing could possibly go up to 30 per cent if it eases the labour regulations, allow FDI and ease the licence procedure.

If I am a big multinational company and thinking where to set up my factory, I think of two options - India and Vietnam. India has cheaper wages than Vietnam, but Vietnam is a lot of relaxed place. There is some corruption, but I can get my way and run my basic business.

But if I go to India, I would sign a partnership with the government and I am worried about the uncertainty. I think there is a huge pool of people who wants to invest over this side. If you see the amount of money pouring over Vietnam and Indonesia and China, a part of that could come to India.
 

bengalraider

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Well thank you captain obvious!

the issues mentioned are very well known to almost anybody who has bothered to follow domestic industrial policy within India as well, we first had our basic economic plan ready with the " Bombay plan of 1946" that took 4 decades to adopt as our government decided to go down a populist socialist route instead. It's a very difficult task to undertake tough reforms in a multi-party democracy.
 

huaxia rox

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Well thank you captain obvious!

the issues mentioned are very well known to almost anybody who has bothered to follow domestic industrial policy within India as well, we first had our basic economic plan ready with the " Bombay plan of 1946" that took 4 decades to adopt as our government decided to go down a populist socialist route instead. It's a very difficult task to undertake tough reforms in a multi-party democracy.
1 indians tend to blame the 'multi-party democracy' for or use it as an excuse to explain the slow growth of indian economy but i really dont see democracy is the correct reason.....there are many democratic countries can develope their economy real fast then why india so special??

2 indians tend to make others believe their economy has been doing good for the last 2 decades....well i agree to some extent but who hasnt been growing??even many african countries have.....but i dont know which country in the world would cut their numbers of poor people by decreasing the poverty line.....if your economy is really growing why you are doing this??? and your salary is even lower than vietnamese??

3 indians tend to make people believe their country has too many poor people because brits have taken too much from the country leaving nothing besides the democratic system and india began free market open up too late which was nearly 20 years after prc but my questions here are......the US adopted the free market economy maybe 100 years before prc and many other countries.......do you see which country use the 'too late in free market' as an excuse to calm its people? and which asian country wasnt in a shit hole situation right after ww2? be it japan or south korea.....war created much more problems for them than the 'the brits left nothing for india'...

4 the topic of the article is 'India can grow like China if domestic issues settled'.....i completely agree but how you do that??? being democratic is never the reason a country cant get rich....but india has some problems other democratic countries dont have.......which are.....different religions actually hate each others....different communities different castes simply cant tolerate each others.....these are real reasons behind the chaotic situation in india....from day one the uk created the country called india.....people in the man made country should understand making different people in a country would surely result in 'domestic issues'......

so my conculsion is its not because india is being democratic.... but one country......so when these issues metioned can be settled??? may be never.......
 
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hello_10

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1 indians tend to blame the 'multi-party democracy' for or use it as an excuse to explain the slow growth of indian economy but i really dont see democracy is the correct reason.....there are many democratic countries can develope their economy real fast then why india so special??

2 indians tend to make others believe their economy has been doing good for the last 2 decades....well i agree to some extent but who hasnt been growing??even many african countries have.....but i dont know which country in the world would cut their numbers of poor people by decreasing the poverty line.....if your economy is really growing why you are doing this??? and your salary is even lower than vietnamese?? :ranger:

3 indians tend to make people believe their country has too many poor people because brits have taken too much from the country leaving nothing besides the democratic system and india began free market open up too late which was nearly 20 years after prc but my questions here are......the US adopted the free market economy maybe 100 years before prc and many other countries.......do you see which country use the 'too late in free market' as an excuse to calm its people? and which asian country wasnt in a shit hole situation right after ww2? be it japan or south korea.....war created much more problems for them than the 'the brits left nothing for india'...

4 the topic of the article is 'India can grow like China if domestic issues settled'.....i completely agree but how you do that??? being democratic is never the reason a country cant get rich....but india has some problems other democratic countries dont have.......which are.....different religions actually hate each others....different communities different castes simply cant tolerate each others.....these are real reasons behind the chaotic situation in india....from day one the uk created the country called india.....people in the man made country should understand making different people in a country would surely result in 'domestic issues'......

so my conculsion is its not because india is being democratic.... but one country......so when these issues metioned can be settled??? may be never.......
sir I would like to answer you in few points as below:

1st, per capita income of China was less than India till 1991, when economic reforms took place in India, and it could grow by around 5.35% only for the 12 years of 1991 to 2002. while China grew by around 10% since 1981 when economic reform took place in China. with that, population of China in fact reduced during last 22 years while population of India was around 800mil till 1990, and now its around 1.25 billion. hence, we now find per capita income of China on PPP around 3.0 times to India by 2012. check these data's as below :

India GDP - per capita (PPP) - Economy

China GDP - per capita (PPP) - Economy

India GDP - real growth rate - Economy


2nd, number of Middle Class of India is over 350mil, more than total population of India at the time of freedom in 1947, leaving rest of 500mil 'under class' and around 400mil 'poor'., out of this "excess" 600mil population which is worth for nothing but consume hefty subsidies etc too, on the top of that :toilet:

India grew enough since 1947, when there were 2% rich and 90% poor, with 8% 'under class' only. but this 'extra' 800mil population has covered every success of India :facepalm:

Growth Rate of India was around 8.5% in between 2003 to 2011, which is considerably good but it could only give a good support to economy, is result of mainly home demands, which is quite good. but India does need to do much more to solve few basic issues :thumb:

=>
We have new GDP Per Capita on PPP calculation for India considering the year 2012, is as below:

now poverty of India is because of its over population. Most of the problems of India is because of its Over Population and India has to reduce its population only. otherwise India has around 350mil Upper Middle Class, more than total population in 1947, whose per capita income on PPP is similar to the Very High HDI countries like Argentina, Poland, Saudi Arabia etc. one day I calculated as below:-

first, we find GDP on PPP of India was $4.45tn in 2011 but its still manipulated by the US/UK since 2007. as, till 2006, we had a different way of measuring GDP on PPP which used to include estimated undocumented part of GDP also. and I remember, this way GDP of high population 'developing' countries was around 50% to 80% higher, and for the middle order countries like Brazil/Turkey it was around 10% higher. and for the developed nations, the difference was hardly around 1% to 3% by that "Old Method" which was in application till 2006. like as below:

"There are, however, practical difficulties in deriving GDP at PPP, and we now have two different estimates of the PPP conversion factor for 2005, India's GDP at PPP is estimated at $ 5.16 trillion or $ 3.19 trillion depending on whether the old or new conversion factor is used," it said.

It's official: India's a trillion-$ economy - Times Of India
means, GDP of India on PPP was already $5.16tn in 2006. again we have India's growth rate since 2007 as below:

India GDP Annual Growth Rate

here we find, "Average Growth Rate" of India from first quarter of 2007 till the December quarter 2012, stood at around 7.7%, on 'annual' basis. hence considering GDP on PPP of India at $5.16tn in 2006 by Old Method, we may calculate its value by 2012, after 6 years since early 2007, as below:

GDP on PPP of India by end 2012 = 5.16*1.077*1.077*1.077*1.077*1.077*1.077= $8.053tn

but we would also get to know that PPP value consider value of goods and serivces in US$ term, means we would include the factor of inflation of United States also. and even if we consider average 2.0% inflation of US for those six year in between early 2007 to 2012, with considering an overall factor of just 1.10 this way, then GDP on PPP of India comes around = 8.053* 1.1= $8.86tn by 2012. and it still hasn't included 'Value Added' effects also........

again, we know that share of agriculture was around 17% in India's GDP in 2012. therefore, we find share of agriculture in indian economy, 0.17 * 8.86= $1.506 trillions, on which 50% population of india is dependent. means around 600mil people based on agriculture in india have per capita income around = $2,500 on PPP by 2012, which is itself similar to the lower middle order countries.

this way, 8.858 - 1.50 = $7.36tn is left for rest of 600mil people based in industry and service in India, with per capita income of around $12,366 on PPP which is higher than Brazil..........

again, we have news that 25% of the population of cities are either in slum or in bit better condition only. so we would consider per capita income of 300mil living in cities in low condition at hardly $3,000 which takes a share of $900bil from its GDP. hence we are then left with around 7.36 - 0.90 = $6.46tn, around, for rest of 300 mil people living in cities, the so called Middle Class of India with per capita income around $21,533 on PPP this way.

but it is estimated that out of total 600mil people based in agriculture sector, it also has around 50mil Lower Middle Class with Per Capita Income around $12,000 on PPP. (as we know that agriculture has higher share of 'undocumented' part, with that, Agriculture also has higher share of non-taxable business of India.) so we find total middle class of India around 350mil with per capita income around $20,000 on PPP which is similar to Very High HDI countries like Argentina, Poland, Saudi Arabia etc, which is more than total population of India at the time of freedom in 1947 :ranger:
 
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huaxia rox

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1 what i mean is i doubt how real is the growth of india (i mean i seriously doubt those figures)....if your economy has been really growing like you claimed why your salary is so low?? why you cut down your poverty by lowing down the poverty line??? seldom does any country which is really growing in economy choose to do that i think......

2 ppp is not the only measurement for 1 country.,......gdp in dollar term per capita reflexes much more than ppp in real developed countries......

3 how a country defines the meaning of being middle class is different......indians may have your own standard.....

4 gdp of 1 country does have meaning but how wealthy 1 person is is also important.....otherwise if africa becomes 1 nation they also have a huge gdp of economy especially measured by ppp by country.......

5 i cant see your point here very clearly......i think what your are saying is.....you think indian economy has been doing good???
 

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Well thank you captain obvious! .
it seems he is saying is " if india could be like china , then india would look like china "

heck in that case , i'll do my PhD in economics at stanford where the MAN is a professor !

qn is ,, is it really so ........ or rather rediff.com misquoting him ??
 
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hello_10

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1 what i mean is i doubt how real is the growth of india (i mean i seriously doubt those figures)....

if your economy has been really growing like you claimed why your salary is so low?? why you cut down your poverty by lowing down the poverty line??? seldom does any country which is really growing in economy choose to do that i think......

2 ppp is not the only measurement for 1 country.,......gdp in dollar term per capita reflexes much more than ppp in real developed countries......

3 how a country defines the meaning of being middle class is different......indians may have your own standard.....

4 gdp of 1 country does have meaning but how wealthy 1 person is is also important.....otherwise if africa becomes 1 nation they also have a huge gdp of economy especially measured by ppp by country.......

5 i cant see your point here very clearly......i think what your are saying is.....you think indian economy has been doing good???
sir I repeat the same thing again as below, then we may talk futher:

1st, below is the IMF report and it clearly states that per capita income of India was higher than China till 1991, when economic reforms took place in India.
(please check the same on any Chinese newspaper too, to confirm :thumb:)

China GDP - per capita (PPP) - Economy
India GDP - per capita (PPP) - Economy

2nd, growth rate of India averaged around 5.35% for the 12 years of 1991 to 2002, "not very bad", in fact. but it again averaged around 8.5% for the 9 years of 2003 to 2011, which is 'pretty good' as Indian growth is mainly because of domestic demands, please check the same IMF data as below :thumb:

India GDP - real growth rate - Economy

3rd, population of India increased by around 50% since 1991 while that of China in fact decreased since 1981, when economic reforms took place there, due to their One Child Policy. hence if you check this same tables, it clearly shows, how Per Capita Income of China came above to India since 1991 and now its around 3 times to that of India by 2011 :china:

China GDP - per capita (PPP) - Economy

India GDP - per capita (PPP) - Economy

I would welcome healthy talks in this regard but first put these few basic things in your mind. :thumb:

and if you want to have more ideas behind China's growth, get to know that "Investment to GDP" ratio of China was maintained nearly 50% for last few decades, with investment in infrastructure well above 10% to GDP too during this period, hence fueling a miracle growth for china for last 30 years, which is unmatched with any other known example :china:

=> total number of Middle Class of India would stand at around 350mil, with per capita income around $20,000 on PPP, check my last post again, post#5 :thumb:
 
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shiphone

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the truth is : in India

below 2 dollors per day = poverty

above 2 dollors , you could call them 'middile class' Already...it's quite ' unique standard' in the world
 

bengalraider

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@huaxia- i have only one thing to tell you- China has grown faster than any other country on earth due to it's complete and utter disregard for Environmental norms and human rights ,For the environmental point one need only see the smog that covers Beijing year in and year out while we have managed to reduce the same to a great extent in Delhi. before the India bashers here get there groove on let me explain. In India we have to listen to people before undertaking development projects we cannot simply steamroll villages to build skyscrapers (pudong river city delta area in shanghai being a case where acres of rice paddies were appropriated overnight). we cannot inundate thousands of villages and ask millions to shift home arbitrarily as was done to create the three gorges reservoir, we are hobbled by our democracy but that very crutch is also our strength for each and every development project that does go ahead only goes ahead after the local people all agree to it.Modern China has a gleaming facade true, but much like the great wall it too has been built on the bones of countless thousands. 45 million in the "great leap forward" itself.
 

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@huaxia- i have only one thing to tell you- China has grown faster than any other country on earth due to it's complete and utter disregard for Environmental norms and human rights ,For the environmental point one need only see the smog that covers Beijing year in and year out while we have managed to reduce the same to a great extent in Delhi. before the India bashers here get there groove on let me explain. In India we have to listen to people before undertaking development projects we cannot simply steamroll villages to build skyscrapers (pudong river city delta area in shanghai being a case where acres of rice paddies were appropriated overnight). we cannot inundate thousands of villages and ask millions to shift home arbitrarily as was done to create the three gorges reservoir, we are hobbled by our democracy but that very crutch is also our strength for each and every development project that does go ahead only goes ahead after the local people all agree to it.Modern China has a gleaming facade true, but much like the great wall it too has been built on the bones of countless thousands. 45 million in the "great leap forward" itself.
Sour grape
You go on living in your subjunctive mood and future tense world, and take good care of your own environment and human rights, if you you can make any progress at the meantime, do it please, we appreciate your efforts.
 
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hello_10

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I would compare India with the Asian Newly Industrialized Countries as below, leaving Japan, Korea, Taiwan, Singapore as they are among the industrialized nations and Malaysia is too small to be compared.....

=> Newly industrialized country - Wikipedia, the free encyclopedia

hence, we have "Average Growth Rate" of last 32 years of China, India, Philippines, Thailand, including Indonesia as below: (since 1980)

1st, China: 9.998% since 1980 to 2011
China GDP - real growth rate - Economy

2nd, India: 6.3% since 1981 to 2011
India GDP - real growth rate - Economy

3rd, Philippines: 3.3% since 1980 to 2011
Philippines GDP - real growth rate - Economy

4th, Thailand: 5.4% since 1980 to 2011
Thailand GDP - real growth rate - Economy

5th, Indonesia: 5.2% since 1980 to 2011
Indonesia GDP - real growth rate - Economy
here we can see that India could maintain around 6.3% growth rate for the 31 years of 1981 to 2011, which is quite high as compare to the 3 biggest economies of ASEAN. but population growth rate of around 1.9% since 1981 has added 500mil extra people during this period, which has pulled India down. hence India's per capita income is around same as that of Philippines, Indonesia...::tsk:

and here we have a "miracle" growth rate of China, around 10% for the last 32 years to 2011, with controlling its population too through One Child Policy etc, and hence its per capita income is around 3 times to that of India while per capita income of India was higher than that of China till 1991, the year when economic reforms took place in India.......
 

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