Delhi’s tortoise limbers up to Beijing’s hare

[Indian_Patriot]

Modi is our Deng Xiao Ping!

As an Australian-Indian i must say the Chinese have done phenomenally well..to the extent that in suburb in Melbourne where i live the local realestate agents cater pretty much exclusively to the Chinese market when selling new homes. Unbelievable!

 

[Jayanta]

 

[LeveragedBuyout]

Yep, Business is in our Blood :p

@US_statedept_retired @LeveragedBuyout your views on this topic ?

I am not familiar enough with the Indian economy to comment in detail, but briefly, I don't see how India can surpass China. I can see India surpassing the US, but not China.

-the strength and duration of Chinese GDP growth appears to be unprecedented.
-the Chinese growth model cannot be replicated, because it depended on a specific and transient opportunity: low energy prices, an American desire to outsource manufacturing to low-cost jurisdictions, Chinese leadership single-mindedly focused on growth to the exclusion of almost everything else (environment, rights of the population, respect for international law, etc.). America has little manufacturing left to send offshore, so unless China outsources manufacturing to India, India will not receive the same wave of manufacturing investment (and subsequent exports).
-A combination of China's rapid increase in share of global GDP, emergence as the dominant trading nation, and retrograde mercantilist policies (large and growing trade surpluses) means that global opportunities for exporting one's way to development are essentially over. If or when China starts running American-level gigantic trade deficits (i.e. never), the window of opportunity will re-open.

India will only surpass Chinese GDP growth because China is slowing, not because India is assuming Chinese levels of growth. The paradox is that because China is now one of the main engines of global growth, China's slowdown will also limit India's growth rate, even if indirectly.

 

[AshishDelhi]

I am not familiar enough with the Indian economy to comment in detail, but briefly, I don't see how India can surpass China. I can see India surpassing the US, but not China.

-the strength and duration of Chinese GDP growth appears to be unprecedented.
-the Chinese growth model cannot be replicated, because it depended on a specific and transient opportunity: low energy prices, an American desire to outsource manufacturing to low-cost jurisdictions, Chinese leadership single-mindedly focused on growth to the exclusion of almost everything else (environment, rights of the population, respect for international law, etc.). America has little manufacturing left to send offshore, so unless China outsources manufacturing to India, India will not receive the same wave of manufacturing investment (and subsequent exports).
-A combination of China's rapid increase in share of global GDP, emergence as the dominant trading nation, and retrograde mercantilist policies (large and growing trade surpluses) means that global opportunities for exporting one's way to development are essentially over. If or when China starts running American-level gigantic trade deficits (i.e. never), the window of opportunity will re-open.

India will only surpass Chinese GDP growth because China is slowing, not because India is assuming Chinese levels of growth. The paradox is that because China is now one of the main engines of global growth, China's slowdown will also limit India's growth rate, even if indirectly.

Very true. China is single party single vision and skilled society. India cannot claim to be same but things are improving. Rising china and india is beneficial for both.

 

[dray]

I am not familiar enough with the Indian economy to comment in detail, but briefly, I don't see how India can surpass China. I can see India surpassing the US, but not China.

-the strength and duration of Chinese GDP growth appears to be unprecedented.
-the Chinese growth model cannot be replicated, because it depended on a specific and transient opportunity: low energy prices, an American desire to outsource manufacturing to low-cost jurisdictions, Chinese leadership single-mindedly focused on growth to the exclusion of almost everything else (environment, rights of the population, respect for international law, etc.). America has little manufacturing left to send offshore, so unless China outsources manufacturing to India, India will not receive the same wave of manufacturing investment (and subsequent exports).
-A combination of China's rapid increase in share of global GDP, emergence as the dominant trading nation, and retrograde mercantilist policies (large and growing trade surpluses) means that global opportunities for exporting one's way to development are essentially over. If or when China starts running American-level gigantic trade deficits (i.e. never), the window of opportunity will re-open.

India will only surpass Chinese GDP growth because China is slowing, not because India is assuming Chinese levels of growth. The paradox is that because China is now one of the main engines of global growth, China's slowdown will also limit India's growth rate, even if indirectly.

Every economy has a saturation point beyond which it is bound to slow down. So China will also slow down is an inevitability, China has grown fast in last 30 years (14 years of double-digit growth out of 30), but that doesn't mean that another country can't reach that GDP level in, say 50 years with single-digit decent growth.

This part you wrote is rather odd: "America has little manufacturing left to send offshore, so unless China outsources manufacturing to India, India will not receive the same wave of manufacturing investment (and subsequent exports)". - America (or others) outsourced manufacturing to China because of the lower cost, now as the cost is rising in China, these companies are slowly leaving China for the same reason they came to China, i.e. cost. These manufacturing units will go to other countries where cost is low (just like it was China at some point).

India may not get all the outsourcing that are leaving China, neither India would want that to happen because of the environmental constraints, but we will keep our share of manufacturing and continue to focus on service sectors. Outsourced manufacturing is not the only way to growth. See, in spite of being slow and with all the political turmoil we have reached, albeit limping, to where China was 10 years back in terms of nominal GDP in USD (and China opened up in 1978 and since then growing at a pace, we reluctantly opened up in 1991). India will never surpass China? Why not?

India has/will have some distinct advantages over China: 1. A functioning democracy. 2. Higher English speaking population. 3. Much younger population compared to the aging population of China. 4. Greater acceptance and influence of Indian expats in major foreign countries including politics & corporations; providing us an effective & functioning lobby pitching for India where it matters.

Our democracy is maturing, education level is rising, people are becoming more connected and more informed with the penetration of technology in the grass root level..........there is no reason for us to be left behind, it is just a matter of time, nothing more, nothing less.

 

[LeveragedBuyout]

Every economy has a saturation point beyond which it is bound to slow down. So China will also slow down is an inevitability, China has grown fast in last 30 years (14 years of double-digit growth out of 30), but that doesn't mean that another country can't reach that GDP level in, say 50 years with single-digit decent growth.

This part you wrote is rather odd: "America has little manufacturing left to send offshore, so unless China outsources manufacturing to India, India will not receive the same wave of manufacturing investment (and subsequent exports)". - America (or others) outsourced manufacturing to China because of the lower cost, now as the cost is rising in China, these companies are slowly leaving China for the same reason they came to China, i.e. cost. These manufacturing units will go to other countries where cost is low (just like it was China at some point).

India may not get all the outsourcing that are leaving China, neither India would want that to happen because of the environmental constraints, but we will keep our share of manufacturing and continue to focus on service sectors. Outsourced manufacturing is not the only way to growth. See, in spite of being slow and with all the political turmoil we have reached, albeit limping, to where China was 10 years back in terms of nominal GDP in USD (and China opened up in 1978 and since then growing at a pace, we reluctantly opened up in 1991). India will never surpass China? Why not?

India has/will have some distinct advantages over China: 1. A functioning democracy. 2. Higher English speaking population. 3. Much younger population compared to the aging population of China. 4. Greater acceptance and influence of Indian expats in major foreign countries including politics & corporations; providing us an effective & functioning lobby pitching for India where it matters.

Our democracy is maturing, education level is rising, people are becoming more connected and more informed with the penetration of technology in the grass root level..........there is no reason for us to be left behind, it is just a matter of time, nothing more, nothing less.

I don't believe I said India will never surpass China, I just said I didn't know how it could. The growth differential required, and the decades that would be needed with such a sustained growth differential make it difficult to predict how this can be accomplished. Just like the situation today, where China is overtaking the US, was virtually unimaginable 30 years ago, the situation whereby India bypasses China is difficult for me to visualize.

You make good points about the strengths of India, and I agree that these strengths will help India develop economically. However, my point was that these strengths will not help India develop through manufacturing, as China did. India's bureaucracy is just not responsive enough, and too much weight is given to non-economic factors (protected classes, environment, political ideologies) to achieve the same kind of ruthless growth that China was able to.

Moreover, manufacturing will probably not be moved to India from China by American MNCs for two reasons.

1) Manufacturing is more than just the factory and labor, it also includes transport infrastructure, electrical infrastructure, and a supplier base located nearby. The costs of constructing an entirely new manufacturing ecosystem in India is daunting, and thus India's labor cost advantages over China may not be enough to overcome China's advantages in all of the other fields.

2) If manufacturing is relocated, it is far more likely to be relocated back to the US, where transport infrastructure is relatively good, energy is cheap, and IP can be protected from populist politicians and an activist judiciary. American manufacturers will address the labor cost issue by employing 3D printing and robotics, which is the future of manufacturing. The opportunity for large-scale employment through manufacturing is fading.

I wish nothing but success for India in its development efforts. However, I do not believe anyone will ever be able to replicate the Chinese model again, which means that India will have to achieve high growth through an as of yet unused model, and on top of this risk, it will have to sustain it for decades in order to begin closing the gap. That was the crux of my argument, and despite the great points you made, I stand by that conclusion.

 

[Steakhouse]

I don't believe I said India will never surpass China, I just said I didn't know how it could. The growth differential required, and the decades that would be needed with such a sustained growth differential make it difficult to predict how this can be accomplished. Just like the situation today, where China is overtaking the US, was virtually unimaginable 30 years ago, the situation whereby India bypasses China is difficult for me to visualize.

You make good points about the strengths of India, and I agree that these strengths will help India develop economically. However, my point was that these strengths will not help India develop through manufacturing, as China did. India's bureaucracy is just not responsive enough, and too much weight is given to non-economic factors (protected classes, environment, political ideologies) to achieve the same kind of ruthless growth that China was able to.

Moreover, manufacturing will probably not be moved to India from China by American MNCs for two reasons.

1) Manufacturing is more than just the factory and labor, it also includes transport infrastructure, electrical infrastructure, and a supplier base located nearby. The costs of constructing an entirely new manufacturing ecosystem in India is daunting, and thus India's labor cost advantages over China may not be enough to overcome China's advantages in all of the other fields.

2) If manufacturing is relocated, it is far more likely to be relocated back to the US, where transport infrastructure is relatively good, energy is cheap, and IP can be protected from populist politicians and an activist judiciary. American manufacturers will address the labor cost issue by employing 3D printing and robotics, which is the future of manufacturing. The opportunity for large-scale employment through manufacturing is fading.

I wish nothing but success for India in its development efforts. However, I do not believe anyone will ever be able to replicate the Chinese model again, which means that India will have to achieve high growth through an as of yet unused model, and on top of this risk, it will have to sustain it for decades in order to begin closing the gap. That was the crux of my argument, and despite the great points you made, I stand by that conclusion.

India miss their opportunity to used their vast labor work force to transform their nation as the manufacture hub in this world during the boom economy yrs in late 90's and mid 2000's that at least 10 yrs span China accelerated and achieved their manufacture industrial grow from 2 trillions to 7 trillions. During this period majority of world economy enjoyed the booming yrs without the credit crunch suffer from the financial crisis in 2008 and beyond. To think India will surpass China as a manufacture powerhouse and achieve a double digit growth very naive of the India economy planner without a realistic expectation.

 

[Indian_Patriot]

The economic potential of India is absolutely tremendous...we have the fertile land, we have enough natural resources such as coal, we even have significant deposits of natural gas and there is a lot of territory left to be explored. We are located close to the energy hub of the world i.e. the Middle East, if this can be effectively leveraged of for example through an undersea pipeline via Iran, we will receive an enormous fillip to our growth. We are a nation of 1.2B people living largely at peace and you would not believe the energy and confidence of our youth, it is palpable. The obstacles to our growth...weak infrastructure, energy shortfalls, stifling bureaucracy, outdated labour regulations, archaic land laws, corruption and even environmental degradation are all being tacked with gusto by the new administration.
Hi tech is an area where we can really excel at..just look at the achievements of our expats, the goddamn CEO of Microsoft is an Indian..jesus i mean Microsoft!
There is absolutely no reason why we can't achieve our rightful place under the sun and in the con comity of nations.

 

[Shotgunner51]

India has/will have some distinct advantages over China: 1. A functioning democracy. 2. Higher English speaking population. 3. Much younger population compared to the aging population of China. 4. Greater acceptance and influence of Indian expats in major foreign countries including politics & corporations; providing us an effective & functioning lobby pitching for India where it matters.

Why is a "higher English speaking population" an advantage?

Same data (in descending order of total English speakers):
Country Total English speakers % English speakers Eligible population
1) United States 298,444,149 94.20 316,823,000
2) India 125,226,449 10.35 1,210,000,000
3) Pakistan 92,316,049 49.00 188,400,100
4) Nigeria 82,941,000 53.00 156,493,000
5) United Kingdom 63,962,000 97.74 64,000,000
6) Philippines 57,292,884 56.63 100,437,852
7) Germany 51,584,000 64.00 80,600,000
8) Bangladesh 29,398,158 18.00 163,323,100
9) Canada 28,360,240 85.63 33,121,175
10) Egypt 28,101,325 35.00 83,289,500

China ranks 24 in this aspect, about same as Iraq and Kenya.

@Nihonjin1051 @DRAY

 

[Aepsilons]

Why is a "higher English speaking population" an advantage?

Same data (in descending order of total English speakers):
Country Total English speakers % English speakers Eligible population
1) United States 298,444,149 94.20 316,823,000
2) India 125,226,449 10.35 1,210,000,000
3) Pakistan 92,316,049 49.00 188,400,100
4) Nigeria 82,941,000 53.00 156,493,000
5) United Kingdom 63,962,000 97.74 64,000,000
6) Philippines 57,292,884 56.63 100,437,852
7) Germany 51,584,000 64.00 80,600,000
8) Bangladesh 29,398,158 18.00 163,323,100
9) Canada 28,360,240 85.63 33,121,175
10) Egypt 28,101,325 35.00 83,289,500

China ranks 24 in this aspect, about same as Iraq and Kenya.

@Nihonjin1051

Japan ranks low here, too.

 

[Shotgunner51]

Japan ranks low here, too.

Based on those 4 advantages, Japan will soon be beaten by the similar-numbered Nigeria, sad ...

 

[definitelynotIndian]

Japan ranks low here, too.

but you guys have Japanese. Sukhoi kawai desu

 

[dray]

I don't believe I said India will never surpass China, I just said I didn't know how it could. The growth differential required, and the decades that would be needed with such a sustained growth differential make it difficult to predict how this can be accomplished. Just like the situation today, where China is overtaking the US, was virtually unimaginable 30 years ago, the situation whereby India bypasses China is difficult for me to visualize.

You make good points about the strengths of India, and I agree that these strengths will help India develop economically. However, my point was that these strengths will not help India develop through manufacturing, as China did. India's bureaucracy is just not responsive enough, and too much weight is given to non-economic factors (protected classes, environment, political ideologies) to achieve the same kind of ruthless growth that China was able to.

Moreover, manufacturing will probably not be moved to India from China by American MNCs for two reasons.

1) Manufacturing is more than just the factory and labor, it also includes transport infrastructure, electrical infrastructure, and a supplier base located nearby. The costs of constructing an entirely new manufacturing ecosystem in India is daunting, and thus India's labor cost advantages over China may not be enough to overcome China's advantages in all of the other fields.

2) If manufacturing is relocated, it is far more likely to be relocated back to the US, where transport infrastructure is relatively good, energy is cheap, and IP can be protected from populist politicians and an activist judiciary. American manufacturers will address the labor cost issue by employing 3D printing and robotics, which is the future of manufacturing. The opportunity for large-scale employment through manufacturing is fading.

I wish nothing but success for India in its development efforts. However, I do not believe anyone will ever be able to replicate the Chinese model again, which means that India will have to achieve high growth through an as of yet unused model, and on top of this risk, it will have to sustain it for decades in order to begin closing the gap. That was the crux of my argument, and despite the great points you made, I stand by that conclusion.

India is not really trying to replicate the 'Chinese model' of manufacturing as an outsourcing destination for growth, we will be increasing our manufacturing capabilities to certain extent from the present level, we are already doing well as an auto & auto ancillary manufacturing hub, but service industry will remain our major focus area. Outsourcing of service already includes professional services like legal or medical assistance, it can expand to many other services starting from something as simple as private tuition to technical/professional courses, that area is going up in the value chain with the help of a large number of English speaking skilled professionals, and the potential is unlimited.

Just to show that manufacturing is not the only way to growth, China started liberalization in 1978, India started it late in 1991, China's GDP has grown by 5 times between 2004-2014, India's GDP has grown by 4 times between 2000-2010. Right now India's GDP is where China was 10 years back, growth is not impossible without manufacturing. Now, whether India will grow faster than China or not will depend upon multiple factors, but India has more growth potential left in it compared to China, China is already showing the signs of slowing down and India has just voted out an under-performing government. Besides, China has created some significant vulnerabilities in its economy to push for high growth rates during the period of sub-prime crisis, that will seek a correction.

About the shifting of outsourcing, there is no 'if', it has already started in China, FDI is declining in China, and it is moving out to ASEAN countries and South Asia, we are already seeing shifting of some manufacturing to Indian states, not much is going back to USA, because: 1. 3D printing and robotics has its limitations, labor cost will always be high in USA. 2. Asia is the biggest market of the world, manufacturing something in USA and transporting it to the other side of the globe has its own prohibitive cost. 3. Some countries may use incentives & tariffs simultaneously to encourage local manufacturing.

I think it is too early to draw any conclusion barring only one, that China will not be the last country in the world to become a developed nation.

 

[LeveragedBuyout]

India is not really trying to replicate the 'Chinese model' of manufacturing as an outsourcing destination for growth, we will be increasing our manufacturing capabilities to certain extent from the present level, we are already doing well as an auto & auto ancillary manufacturing hub, but service industry will remain our major focus area. Outsourcing of service already includes professional services like legal or medical assistance, it can expand to many other services starting from something as simple as private tuition to technical/professional courses, that area is going up in the value chain with the help of a large number of English speaking skilled professionals, and the potential is unlimited.

I agree that there is great potential in this model, but no country has ever developed to advanced status using this model. If India can accomplish it, great, but I must remain skeptical until it happens. Everyone else used the manufacturing model.

Just to show that manufacturing is not the only way to growth, China started liberalization in 1978, India started it late in 1991, China's GDP has grown by 5 times between 2004-2014, India's GDP has grown by 4 times between 2000-2010. Right now India's GDP is where China was 10 years back, growth is not impossible without manufacturing. Now, whether India will grow faster than China or not will depend upon multiple factors, but India has more growth potential left in it compared to China, China is already showing the signs of slowing down and India has just voted out an under-performing government. Besides, China has created some significant vulnerabilities in its economy to push for high growth rates during the period of sub-prime crisis, that will seek a correction.

Can you please show me your numbers? I don't have Chinese GDP for 2014, but using World Bank numbers for 2003-2013 (in USD), I get 5.6x growth for China, and for India over the same period I get 2.7x growth. Of course we can argue about currency effects and leverage, but that's a daunting gap in performance, and China's is from a higher base as well.

You mentioned Chinese debt and a possible correction; it's true that some kind of economic crisis in China might provide an opportunity for India to eventually surpass China, but because it's unclear how a crisis in China might affect world GDP (and in turn, Indian GDP), it's hard to say that such an outcome would be positive for India.

About the shifting of outsourcing, there is no 'if', it has already started in China, FDI is declining in China, and it is moving out to ASEAN countries and South Asia, we are already seeing shifting of some manufacturing to Indian states, not much is going back to USA, because: 1. 3D printing and robotics has its limitations, labor cost will always be high in USA. 2. Asia is the biggest market of the world, manufacturing something in USA and transporting it to the other side of the globe has its own prohibitive cost. 3. Some countries may use incentives & tariffs simultaneously to encourage local manufacturing.

I think it is too early to draw any conclusion barring only one, that China will not be the last country in the world to become a developed nation.

We agree that other countries will join the ranks of developed economies, and I have no doubt India will do so in the coming years as well. The question, though, what whether or how India could surpass China, and I am still unclear on that point.

 

[dray]

Why is a "higher English speaking population" an advantage?

Same data (in descending order of total English speakers):
Country Total English speakers % English speakers Eligible population
1) United States 298,444,149 94.20 316,823,000
2) India 125,226,449 10.35 1,210,000,000
3) Pakistan 92,316,049 49.00 188,400,100
4) Nigeria 82,941,000 53.00 156,493,000
5) United Kingdom 63,962,000 97.74 64,000,000
6) Philippines 57,292,884 56.63 100,437,852
7) Germany 51,584,000 64.00 80,600,000
8) Bangladesh 29,398,158 18.00 163,323,100
9) Canada 28,360,240 85.63 33,121,175
10) Egypt 28,101,325 35.00 83,289,500

China ranks 24 in this aspect, about same as Iraq and Kenya.

@Nihonjin1051 @DRAY

If my above post didn't answer your query, then let me point out that English is the business language of the world, it is also helpful for technical education and research, and it can be an asset for people working in the service industry. Being comfortable in English is an advantage, however, the ecosystem must be there to utilize its full potential. Otherwise, English will only help in running internet scam business like the number 4 in your chart.