By Bishwajit Okram
Simple facts of the two fastest growing economies of the world say, Chinese dragon is way ahead of Indian elephant in terms of their respective future economic growth. For India, the elephant needs to be winged to fly; she can not afford to wait for the evolution of a flying Elephant, writes Bishwajit Okram, Financial Controller, C&F Group, Ireland.
China will take over USA in 2018 as the world’s largest economy, says an economic game published in the December 31st edition of the Economist.
India is nowhere near the two; interestingly at the least, nowhere near China. The economic barometer is pointing towards a Chinese economic world no later than 2020.
The underpinning facts of Chinese economy overwhelm those of India’s.India vs. China
China’s annual appetite for steel consumption is 868% more than that of India’s in 2010. Steel is a vital raw material for any development particularly in infrastructure and manufacturing industries.
China’s energy consumption is 598% more than that of India’s. Energy is like blood in a human body to business. It shows how hard the economy is working to produce more gross domestic product (GDP). The result in 2011 says, China’s GDP growth is 9.2% where as India’s will be 7% as the prime minister, Dr Manmohan Singh, reckoned.
The economic growth of China is paying off now: they have more than 200 billionaires as compare to 69 of India in 2010. They spend around $192 billion in public health, where as India spent only $65 billion, when the population is now very close. Life expectancy is 75 year in China 75 but in India it is around 65 only.
China’s expenditure on health care system is nearly 5 times that of India.
The gap between India and China is widening in terms of values of most social indicators of living standards, such as life expectancy, infant mortality rate, mean years of schooling, the coverage of immunization. 97 percent of Chinese children are immunized with DPT vaccine, in contrast with India’s meagre figure of 66 percent.
India’s prime minister announced that he was ashamed of the fact that India still has many malnourished children despite being fastest economies of the world.
In the field of research and development, India has not made a dent yet. The fact that in 2011, 12.3% of residential patents registered in the world is from China , a massive increase in its registration , suggest that they are truly emerging as a world leader in innovation. Recently the world has been taken aback with China’s announcement of sending astronauts to the moon and sending a well designed space station after USA is abandoning its own.
China became competitive faster than any other countries over the last one decade. This is one reason why companies would like to flock in China. According to the world competitive ranking China is at 31st position as compare to India, which is at 50th position.
The only area, India has a point to smile, is their domestic consumption which is not far off from that of China’s. China’s retail sales in 2009 were $360b, which is just 25% more than that of India’s.
Strong retail sales are a sign of strong domestic market. This can also be interpreted in different ways: China has a huge potential for its retail market as the domestic market is still yet to be exploited.
Another critical negative factor for India’s economy are the inflation and the unemployment rates, which much bigger than China’s. India’s average inflation rate for 2011 was 9%, where as China’s inflation was less than 6%. The Unemployment rate of India was nearly 9%, when China had 4% which is considered negligible according to international standard. India’s credit rating is BBB- where as that of China’s is AA-. This is one reason, why India’s overseas funds withdrew a net $380m in 2011 compared to record inflows of $29bn in 2010.
China still has net foreign assets of $2 trillion or more. The biggest of all is that China has $3 trillion foreign exchange reserve, the highest in the world where as India has only $314 billion as at the end of 2011.
Recent announcement of the government of India of huge food subsidies is fraught with many economic ills. Dr Manmohan Singh, the prime minister of India said in his new year’s speech that India need pare back subsidies and implement tax reform because he was concerned about fiscal stability in future.
The Nobel Laureate in Economics, Prof. Amrtya Sen once said that the distinctions are important for the emerging economies which are trying to decide where to emerge. India needs no horse race competition with China in relation to the economic growth figure but with the other aspects of social values developments, quality and standard of living developments, democratic values and political liberties.
Over the last two decades, in all the social indicators, India has persistently declined even in the areas of social development indicators as compare to Bangladesh, Sri Lanka, Nepal and even Bhutan. Bangladesh has taken over India in nearly all the social indicator.
Many more Indians have various deprivations, undernourished, unschooled, and medically uncared much, Prof. Sen pointed in a recent seminar at New Delhi.
Financial times quoted Kunal Kumar Kundu, senior economist at Roubini Global Economics in Delhi as saying that at the end of the day, it was all about attractiveness of the market. Remember, even Indian investors were now more prone to investing outside of India than they were within India, given the various issues they are facing – policy paralysis and corruption.
India needs to pull its shocks especially by the policy makers and politicians. India is not dying; but India is simply not staying fit to fight for global economic dominion. The pulse rate, through the economic stethoscope, says India’s economic pulse is much slower that that of Chinese.
It is time to put wings on the elephant, rather than waiting for an evolution of flying elephant, lest China will be the next USA, not a hearty choice for India.