China is the world’s largest trading nation, enjoying the largest favourable balance of trade. It is the world’s largest exporter of manufactured products. China’s top five export categories are computers, telecommunications equipment, telephones, integrated circuits and light fixtures. India is still struggling with export of low value-added petroleum products, cut and polished diamonds, jewellery and pharmaceuticals. Unless India invests substantially in next generation value chains, it will not be able to sustain a high rate of economic growth for long. India has neither the capacity nor the capability of manufacturing and exporting high technology products. It needs a strong determination and action to promote a technology-led growth. Unfortunately, its international trading partners will do everything to prevent such a situation.
China first built its industry before it became a full-fledged World Trade Organisation member, only to take advantage of WTO norms to boost its exports. On the country, import-based Indian economy is facing increasing pressure from WTO and, now, proponents of the Regional Comprehensive Economic Partnership (RCEP) free trade agreement between the 10 member states of ASEAN — namely, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — and six Asia-Pacific states combining China, Japan, India, South Korea, Australia and New Zealand, to further open up its import avenue. This may have a serious adverse impact on India’s intended local manufacturing-led economic growth.
Former Reserve Bank of India governor Raguraman Rajan’s prediction at the World Economic Forum in Davos that India will eventually surpass China in economic size and will be in a better position to create the infrastructure being promised by the Chinese side in South Asian countries appears to be highly unconvincing. Although, Rajan may be absolutely right that Indian economy will continue to grow while growth rate slows down in China. Sitting over the world’s largest dollar hoard outside the US, China is expanding its global economic influence through a massive aid-and-trade initiative across Asia, Africa and South America that will more than compensate any export constraint in its traditional markets in North America and Europe. China’s economic growth in 2018 — at its slowest pace in nearly 30 years — is forecast to go down further to 6.3 per cent in 2019. However, that is little to India’s gain. On the contrary, China poses the biggest threat to India’s manufacturing industry, which contributes less than 20 percent to the country’s GDP as against China’s 40 per cent. Currently, India runs the biggest trade deficit with China in its international trade. It is likely to grow in the coming years.
Paradoxically, China's public sector enterprises account for a bigger share of the national economy than its burgeoning private sector. In India, the public sector, which laid the foundation of the country’s economic growth for many years, is on sale. This appears to be the biggest mistake of the successive governments since 2000. And, it is specially so when the country’s private sector does not have enough financial strength to fund large scale projects with longer gestation period. Surprisingly, few talk about the financial mismanagement and losses of India’s private sector enterprises that have slammed lakhs of crores of rupees worth non-performing assets (NPAs) on the country’s state-owned banks. Private sector bad loans forced the government announce a $32 billion bailout package to help the lenders set aside funds for the soured loans and kickstart new lending. For 30 years until 2015, the public sector-led Chinese economy averaged a 10 percent annual growth rate. Even today, China’s public sector accounts for a bigger share of the national economy than its burgeoning private sector.
It is true that India, today, is the world's fastest-growing large economy, and will probably remain so for years if not decades to come. The IMF had forecast a 7.4 percent economic growth for India in 2018. India’s growth predictions from other international banks vary from seven percent (Standard Chartered) to a high of 7.5 percent (Nomura). And, China’s maturing economy may not ever again match such stellar growth numbers. But, given India’s current technological strength and private sector investment incapability, such a growth rate is not going to bring the country’s economy anywhere near China in a foreseeable future. Notably, the private sector’s expansion in India, except in the automotive and textile sectors, has been mostly under the shadow of the public sector. (IPA Service)
INDIA
INDIA’S GDP GROWTH COMPARISON WITH CHINA’S IS UNFAIR
INDIAN ECONOMY IS UNLIKELY TO EVER CATCH UP WITH CHINA
Nantoo Banerjee - 2019-01-28 11:26
Those comparing the People’s Republic of China’s economic slowdown in 2018 with India’s projected higher economic growth in the current financial year and beyond and suggesting that the country’s GDP will catch up with China in another 15 years or so are living in a fool’s paradise of false prosperity. China’s economy, which reportedly grew by 6.6 per cent in 2018, is worth $14 trillion. The size of India’s economy is worth only $2.6 trillion, or less than a fifth of China’s. The GDP of the United States of America, the world’s largest economy, at the end of 2018 was around $ 20.66 trillion. The US reported an economic growth of only about 3.5 per cent, less than 50 per cent of India’s seven-percent-plus. The economic base of both the US and China is too vast compared with that of India. The annual growth rate of the massively large economies of the US and China, the second largest, is bound to slow down as their overall sizes grow bigger and bigger. Compared to the sizes of these two economies, India’s economy, so-called the world’s sixth largest, is still very small in terms of its population. Even at eight percent GDP growth per annum, Indian economy is not going to get any closer to China’s in any foreseeable future. India’s economy may have outgrown China’s in 2018, but it is nowhere near China in technological strength and competence.