'India to gallop at 9% for 20 yrs'

[Armand2REP]

I think it is "reasonable" to say, that China and India will one day be among the largest economies on Earth, due to sheer population size and economic growth.

The question is, when.

And nobody really knows.

In the 50-60s, everyone said USSR would be the biggest economy, in the 60s, everyone said Germany was going to take over manufacturing, then in the 70-80s it was Japan, then in the 90s it was the Asian tigers. The one thing they all have in common... their bubble burst. More and more people are realising that China is just another one of these bubble economies. The inputs that made China's economic miracle are over:

A) low wage labour
B) endless supply of labour
C) cheap electricity
D) coal/water/arable land
E) massive urbanisation

As China rides the tail of these depleting inputs, the only thing left to keep the Chinese economy running is massive capital investment which accounts for 93% of GDP growth and 50% of GDP (not including land sales). When the bubble pops, the input of capital investment and land sales are going bye bye and so is a large chunk of the Chinese economy.

 

[Known_Unknown]

A growth rate of 9% means nothing if inflation is running at 12 or 15%. Even if the per capita income has improved 7 times since 1980, we have to factor in the rise in prices of basic commodities since then. Many middle-aged and elderly Indians tell me that in the 1980's and earlier, things were more affordable. People mention that there was job stability, and a slow, but steady rise in incomes, with little or no inflation.

I don't belong to that generation, but I wonder how many of those that do on this forum agree with that view.

 

[Godless-Kafir]

India is planning a $1Trillion investment over the next 5 years in infrastructure and construction as compared to $500Billion invested over the last 5 years. So, that will help alleviate poverty and increase demand for Blue collar workers.

The first 10 years are the most crucial for sustaining a 9% growth for over 20 years. If China managed it, then I guess we can too. FM is trying to decrease govt expenditure as well, so I don't know how that will take us. PPP is very very crucial.

Can we have a source for this? If thats true that great news.

 

[Yan Luo Wang]

In the 50-60s, everyone said USSR would be the biggest economy, in the 60s, everyone said Germany was going to take over manufacturing, then in the 70-80s it was Japan, then in the 90s it was the Asian tigers. The one thing they all have in common... their bubble burst. More and more people are realising that China is just another one of these bubble economies. The inputs that made China's economic miracle are over:

This is actually what I said:

I think it is "reasonable" to say, that China and India will one day be among the largest economies on Earth, due to sheer population size and economic growth.

China today is already the 2nd largest economy on Earth, by both nominal and PPP measurements. So what I said is not a prediction, it is already true.

As for the rest, you guys have been predicting the fall of China every year, for the past few decades. Just recently you guys were all predicting that China would collapse during the Credit Crunch.

But if you want me to remove the word "India" from my above quote, then fair enough.

 

[p2prada]

Can we have a source for this? If thats true that great news.

India targets $1 trillion infrastructure investment: Ahluwalia - Economic Times

 

[Godless-Kafir]

I didnt know Standard Charter Bank employs Nostradamus and his team for research. These long term predictions have as much validity as a drunk gambler in Las Vegas.

 

[p2prada]

China today is already the 2nd largest economy on Earth, by both nominal and PPP measurements. So what I said is not a prediction, it is already true.

China has an undervalued currency. The economy may be 50% bigger than what it is now. There is still a lot of growth left for China.

 

[Godless-Kafir]

India targets $1 trillion infrastructure investment: Ahluwalia - Economic Times

It only says India targets 1 trillion, i am not sure how much close we can get to that but still good news. If this is true they should build some power plants in TN. The power production is pathetic.

 

[Iamanidiot]

Bharat Nirman Fund and India Infrastructure fund all are outside the consolidated fund of india and they are their primarily for indian infrastructure this is no speculation there,the funds are for real

 

[p2prada]

It only says India targets 1 trillion, i am not sure how much close we can get to that but still good news. If this is true they should build some power plants in TN. The power production is pathetic.

We achieved the last one even with the credit crunch. We have always achieved our targets in the last 10 years.

Japan is planning to invest nearly $100Billion in infrastructure for the Delhi-Mumbai freight corridor including the construction of 7 new cities along the route in the next 5 years.

 

[Armand2REP]

China has an undervalued currency. The economy may be 50% bigger than what it is now. There is still a lot of growth left for China.

China's currency is undervalued because it is in a bubble being suppressed by massive FX reserves. Once that bubble pops you will find it is actually overvalued. Capital flight will occur as everyone jumps off the sinking ship, including China's top 1%, and send the currency into nose dive. If China tried to appreciate its currency by double digits, she would collapse her export industry and send China into hyperinflation, again depreciating the currency. The US recently announced China is not a currency manipulator because they know what would happen demanding China to go double digits.

 

[p2prada]

China's currency is undervalued because it is in a bubble being suppressed by massive FX reserves. Once that bubble pops you will find it is actually overvalued. Capital flight will occur as everyone jumps off the sinking ship, including China's top 1%, and send the currency into nose dive. If China tried to appreciate its currency by double digits, she would collapse her export industry and send China into hyperinflation, again depreciating the currency. The US recently announced China is not a currency manipulator because they know what would happen demanding China to go double digits.

However there is still a lot of growth left for China. So, a lot of this seems speculation at best. It may never come to pass for another 30 years.

China is not at a position to strengthen the Yuan, but speculating China to blow up like Japan is fairly impossible considering China is still a much larger country and it's real estate is still not fully developed.

I would give China the benefit of the doubt for another decade or 2 until it's economy slows down to less than 5%.

 

[thakur_ritesh]

A growth rate of 9% means nothing if inflation is running at 12 or 15%. Even if the per capita income has improved 7 times since 1980, we have to factor in the rise in prices of basic commodities since then. Many middle-aged and elderly Indians tell me that in the 1980's and earlier, things were more affordable. People mention that there was job stability, and a slow, but steady rise in incomes, with little or no inflation.

I don't belong to that generation, but I wonder how many of those that do on this forum agree with that view.

Known_Unknown,

though i agree with high inflation rate, a lower growth rate is not all that a welcome phenomenon but we need to consider a few aspects here. for the first time a democratically elected government in india is seriously trying to curtail the huge fiscal deficit which when clubbed together with that of the states exceeds well over 10% of the gdp which is showing in debt to gdp ratio since loans in the last fiscal had touched an all time high as a % of gdp and as a result lowering our investment destination appeal and adding to unwanted pressures on the fiscal makeup of the country, so the attempt has been less subsidy where ever the common middle class can afford.

even today our tax to gdp ratio is a little over 10%, so the rule is very simple, people who can afford will have to shell out more, so in mid terms the subsidies will have to give way, then there is a definite supply demand mismatch in favor of demand with supply side either manipulated or with genuine shortfalls, add to all that the government's political agenda of increasing social security programs for the poor which when looked in the larger context stands justified.

the urban middle class has without a doubt benefited from the liberalization, what people when comparing with the past forget is that in those days they didnt have a television to buy or a car to buy or a phone (which reminds me, when india opened to mobile phones, india's teledensity was a mere 4%[in '94] to today's 66%) or the zeal to have every thing with them the moment they had taken up a job, today young people have their own house taken on a loan or otherwise by late 20s/early 30s, in contrast people of the older generation would go for one when they were nearing their retirement age so the urge to have everything and with the markets full of all those things certainly adds onto the expenses of living in today's india.

We achieved the last one even with the credit crunch. We have always achieved our targets in the last 10 years.

Japan is planning to invest nearly $100Billion in infrastructure for the Delhi-Mumbai freight corridor including the construction of 7 new cities along the route in the next 5 years.

P2P,

can you please put up a source for 500b usd being achieved (about to be, that is, in the 12th 5yr plan) since iirc the planning commission not so long back (some 6months back) had curtailed the figure down to 300-350b usd, which is what they thought was feasible thanks mainly to the telecom sector, with road sector taking a heavy beating because of which PM was rather miffed with kamal nath for all his tall claims and a rather tardy show, same with power sector.

 

[Armand2REP]

However there is still a lot of growth left for China. So, a lot of this seems speculation at best. It may never come to pass for another 30 years.

Growth where?? Exports have tapped out Western markets, the investment fueled construction boom is the only thing driving growth and it is sputtering out. Producers are already operating on thin margins as it is. Small business have not benefited from the lending splurge and seen the largest wipe-out of private enterprise in decades at the global downturn. Private consumption is on the decline as inflation eats away at disposable income. Then of course there is China's hidden inflation which is nearly twice MofCom numbers. Taking into account a double digit inflation rate, China's real economy isn't going much of anywhere. Remember that this is the nation that counts GDP based on electricity, rail, and bank loan figures.

China is not at a position to strengthen the Yuan, but speculating China to blow up like Japan is fairly impossible considering China is still a much larger country and it's real estate is still not fully developed.

Based on income, it has already blown up far larger than Japan. Property values are 20-30 times earnings compared to 12 at the height of the Japanese crash.

I would give China the benefit of the doubt for another decade or 2 until it's economy slows down to less than 5%.

Throw in the hidden inflation and it is already below 5%.

 

[nrj]

With Japan in crisis, there is going to be delay in planned 90$ Billion USD investment for Mumbai-Delhi corridor.

 

[Godless-Kafir]

We achieved the last one even with the credit crunch. We have always achieved our targets in the last 10 years.

Japan is planning to invest nearly $100Billion in infrastructure for the Delhi-Mumbai freight corridor including the construction of 7 new cities along the route in the next 5 years.

What! I thought all our 5years plans are dismal failures with huge corruptions.

 

[Armand2REP]

With Japan in crisis, you will see Chinese exports in crisis since they are the single largest destination for them. China touts the ability to expand private consumption, but Chinese disposable incomes have taken a nose dive...

China Annual Disposable Income per Capita and Trends

 

[Iamanidiot]

Armand If the CCP is in such a pile of poo on the domestic front why are they going gung ho on the international arena and trying to bite everyone.Surely thet might be having some aces right

 

[Aruni]

Although this thread is about India's economic growth, it has typically been taken over by people trying very hard to argue that China is worse off than Sudan. It is simply a ridiculous position to maintain that China has not done wonderfully well from an economic perspective.

It is way too simplistic to argue that China is over-dependent on Japan for its exports. Yes it may be one of its largest export markets, but US-China and US-EU trade is also very substantial indeed. Besides, a lot of what China exports is not exactly "luxury items" and as such for a sizeable proportion of its exports the demand will not suffer significantly. Western companies still think of China as the automatic destination to set up their manufacturing base should they think of moving their base offshore.

It is also not correct that domestic consumption in China is not significant. Yes, China would probably like this figure to be higher but if you look at the pace at which Western manufacturers and retailers are falling over one another to enter the Chinese market, it would be simply pig-headed to maintain that its domestic demand is not strong. Just look at the car manufacturers, for example.

China's biggest achievment has been to uplift hundreds of millions of its people out of destitution and misery. Today the incidents of chronic poverty, malnutrition, hunger and basic human suffering are thankfully much rarer than, say in 1990. Of course there is more growth to come. China is not even a middle income country (e.g. Brazil) yet, so there is plenty of potential left.

The one long term factor in favour of India vis-a-vis China is demographics. In the next 15-20 years China's labour force will age dramatically and this could pose some complications with regards to pensions, healthcare, skills in the economy, etc. India still has a very young population and this is likely to stand it in good stead in the long run.

But credit where credit is due please.

 

[Godless-Kafir]

With Japan in crisis, you will see Chinese exports in crisis since they are the single largest destination for them. China touts the ability to expand private consumption, but Chinese disposable incomes have taken a nose dive...

China Annual Disposable Income per Capita and Trends

Both of us are not great fans of China but let us look at it objectively. If you think Chinas main export destinations (US,Japan,Europe) are all going to go bankrupt for good then you can be sure China will have a huge fall but if you think these economies are going to bounce back like in the Regan era or the great depression then China is a key component in that rise.

When Japan was growing fast in the 60s till 80s it had exactly the same criticism thrown at it. Japan was accused of being the greatest copy cat and it cant retain its break neck growth rate and how it is a bubble built on export or how Honda,Toyota make flimsy cars that dont match up but all the jealous nay Sayers eventually lost and Japan emerged as one of the largest economies in the world. Same goes to Taiwan and it was the biggest copy cat for a while.

Even when Britian was growing 150 years back everyone accused it of copying Indian Textiles like Kashmir, Printed wear and other crafts and selling it cheap. Eventually a lot of Indian traditional industries went bankrupt because of industrialization of Textiles, Crafts, Agriculture, Ship building etc, In reality everything each of us accuse of in the other we too have been guilty off. So I dont see Chinas economy laying down and dieing because of some temporary glitch in the world economy. If anything they are turning inwards to explore the local market consumption like India and that turn may take a while.