Why classify us with Somalia and Pakistan on visa policy system, China asks India

[AgentOrange]

The two most common ways to measure GDP per capita are nominal and purchasing power parity (abbreviated PPP). Nominal is an attempt at an absolute measure, a sort of immovable standard that remains the same from country to country. It is the original concept of GDP. In contrast, PPP is an attempt at a relative measure, taking factors of each country into consideration in order to put a number on a person’s standard of living within that country.

A rule of thumb for understanding GDP’s PPP and nominal is that PPP is how much of a local good (like real estate, labor, or locally grown produce) a person can buy in their country, and nominal is roughly how much of an internationally traded good (diamonds, DVD players, Snickers bars) a person can buy in their country.

Thus, developing countries tend to have a higher (better) PPP than nominal, while developed countries have higher nominal than PPP. You can get dinner for $10 or a DVD player for $100 in the US, or you can get dinner for $2 or a DVD player for $100 in China. If you compare a Chinese making $20 a day to an American making $150 a day, the Chinese is slightly poorer in dinners than the American (1/10 of income versus 1/15), but is a lot poorer in DVD players than the American (5x income versus 2/3 of income). See how that works?

Nominal and PPP are identical in the US, because USD is used as the benchmark. But in all of the most developed countries except the US, the nominal is higher.

Another way to think about this is that, as a country’s citizens get richer and richer, they are more easily able to acquire international goods, but any good that must be provided by others of its own rich citizens, like college education, health care, taxis, etc. is going to get more expensive.

Brilliantly explained dude. If I wasn't so hungover from yesterday, I'd literally gan bei to that!

 

[Aepsilons]

I keep equating everything to GAS purchases because it's an easy to grasp example. To fully represent the full productivity and strength of an economy, you *must* take into account trade and transactions that occur across borders. And that's where PPP falls flat because ultimately the world's reserve currency, the dollar (against which all other currencies are measured) will be taken into account.

Your hypothetical regarding Pak currency doesn't fly because for that to be the world's reserve currency, we would have to assume that Pakistan was the world's number one economy and all that would entail. In which case, you would have to give me some numbers like how big their economy was, their per capita GDP, and the exchange rates of other currencies vs Pak currency. etc etc etc. And I'm not an economist by any means so it's not my job to explain why your hypothetical is a waste of time.

Well said. Based on economics, the PPP of developing countries will be substantially larger than developed nations. Japan, in this case is a hyper-developed nation, India is developing. America is a hyper-developed nation, China is developing. I hope that helps others understand this without making it too difficult to comprehend.

 

[jeypore]

Another way to think about this is that, as a country’s citizens get richer and richer, they are more easily able to acquire international goods, but any good that must be provided by others of its own rich citizens, like college education, health care, taxis, etc. is going to get more expensive.

I get it, just that swed's have more international purchasing power for international goods compare to US, in terms of per capita (that is what you are equating too), but because of social programs and other basic necessities there purchasing power is less compare to US, even though they are higher.

So as the US economy is growing over the years and so is Japan's, why Japan's is going down, should not the wealth per capita increase with it, so in tern Japan PPP?

 

[Aepsilons]

I get it, just the swed's have more international purchasing power for international goods compare to US, in terms of per capita (that is what you are equating too), but because of social programs and other basic necessities there purchasing power is less compare to US, even though they are higher.

So as the US economy is growing over the years and so is Japan's, why Japan's is going down, should not the wealth per capita increase with it, so in tern Japan PPP?

Japan's economy is still in the process of weathering through the economic slowdown in 2008-2010. Historically , however, Japan's GDP growth rate was always around 1-2% range, given the saturation. Japan, as a nation of 128 million, is oversaturated, and already hyper-developed. There is not much to develop except the necessary updating in technology, health care , which are already one of the highest in the region, world. At present, Japan's GDP per capital is around $38,000 per annum. Which is equivalent to the standard GDP per capita in the European Union.

Regarding the United States. They still have a credible industrial capacity, thus they have substantial industrial output. Japan on the other hand , we have outsourced most of our industrial and manufacturing labor abroad. There are 4,500 companies based in China and China is a major manufacturing source for Japan; there are also 1,300 companies in Philippines, some 1000 in Thailand, 1200 or so in Indonesia, some 1000 in India. Japanese Economy (home) is primarily service oriented now. This is the reason why Japan's industrial growth rate is not as high as it was once was in say the 1970s, 1980s. And that's why one has to appreciate that reality when analyzing Japan's industrial sector vs other competitors (China, USA, Korea).

In regards to India. India is a developing nation but it has a lot of potential. Its population is over 1.2 billion (that's 10x Japan's), and thus potential for growth is there; economically, militarily. Eventually, say by 2050-2060, India's economy (GDP nominal) will surpass ours simply because of the shear size of the Indian economy. Due to India's population, it will take time for the economic trickle down ot manifest, but rest assured it will manifest. Gradually.

The same in regards to China's. And this is why China will be the Pre-eminent economic power by 2050-2060. They already have a $9 Trillion Economy now and they're still developing. By the time China's gdp per capita is in parity with say ours, their overall GDP nominal will be already around $34-36 Trillion (this is conservative estimation).

 

[jeypore]

@AgentOrange
@Nihonjin1051

Last question of the day because I really had time today, I will be really busy for next 2 months....
So, If a Country Like Pakistan invites all foreign firms, and opens it's market like Dubai did (complete Open Market), after the infusion of foreign investment; the net result of Pakistan GDP Nominal should sky rocket or not?

 

[AgentOrange]

@AgentOrange
@Nihonjin1051

Last question of the day because I really had time today, I will be really busy for next 2 months....
So, If a Country Like Pakistan invites all foreign firms, and opens it's market like Dubai did (complete Open Market), after the infusion of foreign investment; the net result of Pakistan GDP Nominal should sky rocket or not?

Pakistan's GDP would indeed increase. However, that's a simplistic response. The security environment in Pakistan is concerning - even to Chinese investors. And a host of other factors such as corruption and red tape will determine how efficiently Pakistan is able to utilize the money that comes in.

India is trying to attract FDI but is shooting itself in the foot by making it harder for China to invest. As you can see, contrary to what some of your countrymen believe, any potential investment destination needs money more than the investors need to invest. Or more simply the seller (i.e. the country promoting itself in the hopes of generating more FDI) needs to woo the buyer and not the other way around. Money goes to where it's needed and where adequate returns can be made.

To get back to the original point of this thread, if it's too hard for China, China will simply take its money elsewhere and it will be India who will lose out.

 

[Aepsilons]

@AgentOrange
@Nihonjin1051

Last question of the day because I really had time today, I will be really busy for next 2 months....
So, If a Country Like Pakistan invites all foreign firms, and opens it's market like Dubai did (complete Open Market), after the infusion of foreign investment; the net result of Pakistan GDP Nominal should sky rocket or not?

Absolutely. The main issue with Pakistan , in regards to the reasons why there is a delay in Japanese investment in the country, is due to the protectionist policies in the country. There are some legal hurdles foreign FDIs have to go through in Pakistani courts to even establish businesses. Its not reasonably easy to start new start-ups in Pakistani. And to an extent this is a reality that is common also in India (one issue that has prevented further Japanese investment in India has been the proverbial red tape in India; it takes too long to start businesses; as there is a hierarchy). India and Pakistan need to create an environment that it allows seamless integration of FDI into the country, procure legal points by identifying (transparently) which areas FDIs can take part in the national economic sector.

Aside from these insipid barriers, there is really no reason why nations like Pakistan and India cannot experience the same growth as say Singapore, UAE. In fact, nations like Pakistan have 1) large skilled population, 2) natural resources. There is simply no reason why Pakistan cannot be a regional economic power.

That said, the country needs to take care of 2 proverbial elephants in the room:

A) Tackling the security threats that delay international investor confidence
B) Enabling an environment that allows seamless FDI into the country's economic sector (ergo, removing barriers to new businesses)

 

[Aepsilons]

Pakistan's GDP would indeed increase. However, that's a simplistic response. The security environment in Pakistan is concerning - even to Chinese investors. And a host of other factors such as corruption and red tape will determine how efficiently Pakistan is able to utilize the money that comes in.

Very well said, bro. Pakistan really is lucky to have a partner like China , an all weather partner, that has poured billions of capital into the country despite the security threats to Chinese businesses and workers. Second, China has even given a blind eye to the corruption in Pakistan , which is a real real threat to further economic partnerships.

Pakistan has to tackle the insipid corruption in its political establishment. Pakistan should learn and take into consideration China's own anti-corruption policy and intiative. Apply this as well.

Third, Pakistan has to deal with the security threats. Terrorists remain a reality and threaten not only Pakistani citizens, and armed forces personnel, but they target also the safety of overseas investors and businesses in the country. Investors have to be reinforced in knowing that they will have ROI in their tangible assets in the country.

India is trying to attract FDI but is shooting itself in the foot by making it harder for China to invest. As you can see, contrary to what some of your countrymen believe, any potential investment destination needs money more than the investors need to invest. Or more simply the seller (i.e. the country promoting itself in the hopes of generating more FDI) needs to woo the buyer and not the other way around. Money goes to where it's needed and where adequate returns can be made.

BINGO. The regulations in India has always been the bane for Japanese investors. Not only that, but the tax regimes in the country. Abe has talked to Modi about this, the latter promising to handle this as soon as possible. But nothing has been done about it. If India fails to realize this and tackle the barriers to foreign FDI, then our investors will go elsewhere. Countries like Bangladesh , for example, have no barriers to FDI. And Sheikh Hasina of Bangladesh have already been courting our Keidenren reps to bring businesses from India into Bangladesh.

 

[jeypore]

@AgentOrange
@Nihonjin1051

God, you both sound statesman like, especially Mr. AgentOrange (Before his previous post). Great discussion guy's, I have to go, but I can tell you one thing about me. I am one of those person, who has taken the challenge of FDI, corporate level, into India, based on future of India and the growth potential it gives, I feel more positive now especially after the Gov't change. By being here for while, What I learned and seen is that Indian economy is worth way more then what is projected in the net or raw data.

Thanks...

 

[Arya Desa]

denisovans are in attack mode.

 

[AgentOrange]

denisovans are in attack mode.

Why are you so grumpy, IQ80? Are you mad someone was using your craphole this morning when you had to go #2? You know, the one you so diligently dug out by the side of the road last night, with your own hands?

 

[Icewolf]

denisovans are in attack mode.

 

[Arya Desa]

View attachment 148583

 

[Arya Desa]

Why are you so grumpy, IQ80? Are you mad someone was using your craphole this morning when you had to go #2? You know, the one you so diligently dug out by the side of the road last night, with your own hands?

Why are denisovans so angry all the time?

 

[AgentOrange]

Why are denisovans so angry all the time?

Yeah, you mad.