LETHALFORCE
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We might think of this as being good news for India, as the latest IMF global forecast predicts that the GDP growth rate in that country will be above that of China in 2016. And of course it is good news in one manner, as it means that the poor people of India will be getting better off. But it's also not unalloyed good news. For the switch comes as a result of slowing Chinese growth, not rising Indian. And it's also true that India ought to be growing faster than China. Poorer countries should grow faster than richer ones and India is significantly poorer than China.
Here's one report on the matter:
The bright spot in the IMF's report is this: India will be the fastest growing major economy in 2016, with projected GDP growth of 6.5 percent against China's 6.3 percent.
If you want to see the glass as half empty, one has to point out that India's overtaking of China in 2016 will be the result of a slowing down of Chinese growth rather than just superior performance by India. At 6.5 percent, India will still not have achieved the kind of growth it did over 2003-08.
Quite so and here is the IMF itself:
Lower growth in China and its implications for emerging Asia: Investment growth in China declined in the third quarter of 2014, and leading indicators point to a further slowdown. The authorities are now expected to put greater weight on reducing vulnerabilities from recent rapid credit and investment growth and hence the forecast assumes less of a policy response to the underlying moderation. Slower growth in China will also have important regional effects, which partly explains the downward revisions to growth in much of emerging Asia. In India, the growth forecast is broadly unchanged, however, as weaker external demand is offset by the boost to the terms of trade from lower oil prices and a pickup in industrial and investment activity after policy reforms.
That is good news in a way, of course it is. Modi is at least making moves towards the right sort of structural reforms that the Indian economy needs. As a significant energy importer India also gains from those lower global fossil fuel prices. And what is lost to the predicted slight slowdown in global growth is made up for by those factors. So, yes, that's just fine, India will be growing. And, as a result of that slowdown in growth in China it is predicted that India will grow (just) faster than China.
However, it's also true that this should be happening. It's a standard prediction of development economics that poorer countries should grow faster than richer ones. This is because such growth is "catch up" growth. When you're out there at the technological edge of what it is possible to make, and at the limits of human knowledge of how to make those things, then further economic advance can only come by inventing new ways to do old things or new things to do. This is, as anyone who has ever tried to have an original idea will tell you, difficult. However, if you're well inside that technological limit then it's possible to grow more rapidly. One can simply observe the outside world, note that "Ah, that's the way you do that!" and then go off an do it. Yes, that's obviously a bit simplistic but it is the basic point being made.
Given that by some measures (PPP GDP per capita in this case) India is less than half as rich as China ($5,450 to $11,870) then India should be growing faster than China. That is hasn't been as a regular matter shows the limitations of the economic policies that have been followed.
So, yes, it is good news that India will be growing strongly in 2016. But that it will be growing faster than China is something we really should have been expecting all along.
My latest book is "23 Things We Are Telling You About Capitalism" At Amazon or Amazon UK. A critical (highly critical) re-appraisal of Ha Joon Chang's "23 Things They Don't Tell You About Capitalism".
http://www.forbes.com/sites/timwors...dias-growth-to-be-faster-than-chinas-by-2016/
Here's one report on the matter:
The bright spot in the IMF's report is this: India will be the fastest growing major economy in 2016, with projected GDP growth of 6.5 percent against China's 6.3 percent.
If you want to see the glass as half empty, one has to point out that India's overtaking of China in 2016 will be the result of a slowing down of Chinese growth rather than just superior performance by India. At 6.5 percent, India will still not have achieved the kind of growth it did over 2003-08.
Quite so and here is the IMF itself:
Lower growth in China and its implications for emerging Asia: Investment growth in China declined in the third quarter of 2014, and leading indicators point to a further slowdown. The authorities are now expected to put greater weight on reducing vulnerabilities from recent rapid credit and investment growth and hence the forecast assumes less of a policy response to the underlying moderation. Slower growth in China will also have important regional effects, which partly explains the downward revisions to growth in much of emerging Asia. In India, the growth forecast is broadly unchanged, however, as weaker external demand is offset by the boost to the terms of trade from lower oil prices and a pickup in industrial and investment activity after policy reforms.
That is good news in a way, of course it is. Modi is at least making moves towards the right sort of structural reforms that the Indian economy needs. As a significant energy importer India also gains from those lower global fossil fuel prices. And what is lost to the predicted slight slowdown in global growth is made up for by those factors. So, yes, that's just fine, India will be growing. And, as a result of that slowdown in growth in China it is predicted that India will grow (just) faster than China.
However, it's also true that this should be happening. It's a standard prediction of development economics that poorer countries should grow faster than richer ones. This is because such growth is "catch up" growth. When you're out there at the technological edge of what it is possible to make, and at the limits of human knowledge of how to make those things, then further economic advance can only come by inventing new ways to do old things or new things to do. This is, as anyone who has ever tried to have an original idea will tell you, difficult. However, if you're well inside that technological limit then it's possible to grow more rapidly. One can simply observe the outside world, note that "Ah, that's the way you do that!" and then go off an do it. Yes, that's obviously a bit simplistic but it is the basic point being made.
Given that by some measures (PPP GDP per capita in this case) India is less than half as rich as China ($5,450 to $11,870) then India should be growing faster than China. That is hasn't been as a regular matter shows the limitations of the economic policies that have been followed.
So, yes, it is good news that India will be growing strongly in 2016. But that it will be growing faster than China is something we really should have been expecting all along.
My latest book is "23 Things We Are Telling You About Capitalism" At Amazon or Amazon UK. A critical (highly critical) re-appraisal of Ha Joon Chang's "23 Things They Don't Tell You About Capitalism".
http://www.forbes.com/sites/timwors...dias-growth-to-be-faster-than-chinas-by-2016/
