Why India's Economy Fares Better Than Others

[Chinese-Dragon]

additionally a large share of chinese export is to hong kong (2nd highest after usa). This almost as good as domestic consumption i suppose.

That is a good point.

I don't know why some people still list China and Hong Kong separately.

 

[Ras]

India is entering a very dangerous period...she will have very high growth but if infrastructure is not developed rapidly, inflation will make life hell for the poor. One way out of it is inclusive growth which means rapid growth of labor intensive industries. If the service sector continues to set the pace,the poor-rich divide will become very very big.

 

[Nomenclature]

India is entering a very dangerous period...she will have very high growth but if infrastructure is not developed rapidly, inflation will make life hell for the poor. One way out of it is inclusive growth which means rapid growth of labor intensive industries. If the service sector continues to set the pace,the poor-rich divide will become very very big.

It's not just infrastructure, but also education. FT recently have a good article on this topic.

FT.com / Reports - Demographics: Indian workers are not ready to seize the baton

Some quotes from the article

“In all likelihood, India will not be able to benefit from this reduction in the growth of China’s labour force, simply because India is not ready to have a manufacturing sector as large as China’s,” says Laveesh Bhandari, founding director of Indicus Analytics, the New Delhi-based economics research house. “Infrastructure is limited and too expensive, and the human capital base is not deep enough.”
...
While nearly 13m young Indians are entering the workforce every year, India’s vocational training system has the capacity to train just 3.1m a year. Many young people lack even rudimentary skills.
“We do not have people who are actually functionally literate,” says Mr Bhandari. “Most of our labour force is inappropriate for the mass manufacturing practices that China has excelled at.”

 

[CardSharp]

India is entering a very dangerous period...she will have very high growth but if infrastructure is not developed rapidly, inflation will make life hell for the poor. One way out of it is inclusive growth which means rapid growth of labor intensive industries. If the service sector continues to set the pace,the poor-rich divide will become very very big.

There seems to be a gap between well paying service industry jobs and no jobs at all. This is the spot that manufacturing usually fills.

 

[Nomenclature]

There seems to be a gap between well paying service industry jobs and no jobs at all. This is the spot that manufacturing usually fills.

It depends. Entry-level skilled manufacturing jobs in China actually pays better than entry-level service jobs.

I think the Indian service sector is more export-driven comparing to the Chinese service sector which is almost entirely driven by domestic demand. So you have a lot of Indian engineers who are highly paid because they're essentially competing with the Americans or Europeans. Consequently you have this oasis in a desert situation, I was absolutely shocked when I learned in another thread how much of India's GDP comes from its top 5 cities.

 

[Tractor]

As for my undestanding,the title using the word 'fare' instead of some other words like 'develop' just emphasizes stability of economy.And exports mentioned by some other posts effected on people's daily life just indirectlly although they play key roles in ones' economy.

 

[InPhilTraitor]

India is entering a very dangerous period...she will have very high growth but if infrastructure is not developed rapidly, inflation will make life hell for the poor. One way out of it is inclusive growth which means rapid growth of labor intensive industries. If the service sector continues to set the pace,the poor-rich divide will become very very big.

True no country became developed with out a manufacturing base, and India should clear gear towards developing a solid manufacturing and infrastructure sector.

People moving to Cities from rural areas cannot take Service sector jobs, manufacturing provides a bridge and so there should be more emphasis on vocational courses. As well as an eye to towards developing secondary cities.

 

[CardSharp]

It depends. Entry-level skilled manufacturing jobs in China actually pays better than entry-level service jobs.

I think the Indian service sector is more export-driven comparing to the Chinese service sector which is almost entirely driven by domestic demand. So you have a lot of Indian engineers who are highly paid because they're existentially competing with the Americans or Europeans. Consequently you have this oasis in a desert situation, I was absolutely shocked when I learned in another thread how much of India's GDP comes from its top 5 cities.

Yes I meant Indian service sector jobs. They pay much better than most manufacturing jobs in China because (as you say) they service western money sources, whereas Chinese jobs service Chinese customers.

 

[Ras]

Yes I meant Indian service sector jobs. They pay much better than most manufacturing jobs in China because (as you say) they service western money sources, whereas Chinese jobs service Chinese customers.

Yes they pay better but they don't employ that many...it is easier to teach a assembly line worker to put in a bolt in a line for 8 hours but far more difficult to teach the same person to do programming. The only part of the service industry which could get a lot of people employed is the call sector industry.Anyone who knows English could potentially do it.But India is losing that sector to countries who will do the job even cheaper.

If India does not expand manufacturing, India is in trouble regardless of if the GDP grows by 15% every year.

 

[CardSharp]

Yes they pay better but they don't employ that many...it is easier to teach a assembly line worker to put in a bolt in a line for 8 hours but far more difficult to teach the same person to do programming. The only part of the service industry which could get a lot of people employed is the call sector industry.Anyone who knows English could potentially do it.But India is losing that sector to countries who will do the job even cheaper.

If India does not expand manufacturing, India is in trouble regardless of if the GDP grows by 15% every year.

Yep that was what I was trying (and failing) to get across. Only manufacturing can provide the sheer volume of jobs needed to raise the living standard significantly.

 

[muse]

India surging to record trade deficit
By Raja Murthy

MUMBAI - India's tearaway economy, with an 8.8% growth rate, may drive the country's trade deficit to a record US$135 billion this fiscal year. That trade gap could mean big trouble lies ahead, or it might simply be a measure of the country's increasing strength.

For the present, the deficit threatens to widen as the global economic recovery remains sluggish and as some countries, such as the United States, India's second-largest trading partner, turn towards protectionism. The trade gap in the year to March 31, 2010 was an estimated $102 billion, down from $118 billion in the previous 12-month period.

Commerce Secretary Rahul Khullar told reporters that the trade gap - which rose to $56.6 billion in the April to August period - was "very, very large" but one that can be managed.

A deficit drains India's foreign exchange reserves. That can weaken the country's currency, at present hovering at around 46 rupees to the US dollar, which in turn drives up the cost of imported goods, including oil. Foreign exchange reserves declined by $828 million to $284.5 billion in the week to September 10.

Picking up the pace of exports would help to reduce the deficit, but the US House of Representatives this month passed two bills that would force government departments to reject some imports. The "Made in America Act" compels congress to buy only goods and services made in the United States; introduced by Democrat Marcy Kaptur, the House approved it by an overwhelming 371-36 vote. The Berry Amendment Extension Act requires the Department of Homeland Security to reject purchase of products not made in the US. (The Berry Amendment Act was enacted in 1941 mandating the Department of Defense to procure only home-made items). Both bills requires senate approval before becoming law.

Other US governmental departments and consumers might join the protectionist herd. Ohio Governor Ted Strickland has already banned offshore outsourcing of government information technology projects, attracting condemnation by India's information technology industry leaders - the Indian IT industry generates one-third of its $60 billion revenues from exports from the US.

Indian protests against the US clampdown on imports come with some irony - given New Delhi's protectionist period in the 1970s and 1980s, when the country was awash with the "Be Indian, Buy Indian" slogan.

Supporters in the US of its anti-import direction appear also to have forgotten the shrill screams towards the end of the last century against Indian and Chinese protectionist policies, and American crusades for global free trade. The "free-ness" quotient in free trade apparently fluctuates with self-interest.

Som Mittal, president of the New Delhi-based National Association of Software and Services Companies, India's top information technology industry body, criticized the US protectionist moves as "a disturbing trend".

Since exports have buoyed India's prosperity in recent years, the emergence of a large trade deficit is rousing considerable anxiety, even though exports for April-August period surged 28.6% to $85.27 billion. In August, exports grew a lower 22.5% compared with a year earlier to $16.64 billion, down from the more than 30% growth in the three months through June.

In contrast, imports increased 32.3% in August from a year earlier to $29.7 billion and at a 33.1% rate for the April to August period to a record $141.9 billion

Optimists, however, see this import-heavy trade deficit as actually reflecting a stronger domestic manufacturing sector, with India's 13.8% industrial growth rate as of July driving up demand for overseas-made machines and other capital goods.

"A significant chunk of the imports are in capital goods, which means the trade deficit is not such a great concern," said Ajay Sahai, director general and chief executive of the Federation of Indian Export Organisations (FIEO), an industry body. "Much of the imports are for the rapidly growing power sector."

Even so, Sahai said exports such as textiles and pharmaceuticals may be hurt by US protectionism. The Commerce Ministry has also expressed concern that already struggling export sectors could face setbacks, including carpets, electronics and agricultural produce.

In response, it is urging exporters to turn more to new markets in Africa, Latin America, Asia and the Commonwealth of Independent States (CIS), the 12 countries of the former Soviet Union. To help them, the government last month announced fresh tax sops and incentives worth $227 million to exporters.

Exports have to double to around an annual $400 billion to bridge the deficit that will otherwise increase with rising imports.

Sakthivel said government incentives did help exporters to penetrate new markets. This month, an FIEO study of India's export trade with 110 countries indicated a 20% increase in export volumes in more than 60% of nations surveyed since the Commerce and Industry Ministry introduced a "Focus Market Scheme" in 2006 to diversify India's export base.

The FIEO report said India's exports to eight out of 15 Latin American countries surveyed showed growth in excess of India's overall annual export growth rate of 22.58%. Similar above-average export growth was found in 32 out of 52 countries in Africa, five out of 10 CIS countries surveyed and two out of five East European countries.

Exporters could be further inspired to look elsewhere with other new US protectionist measures, such as the Foreign Manufacturers Legal Accountability Act of 2010, which makes foreign manufactures liable to be sued for faulty products whose innards contain imported components.

It means hiring a registered agent to handle any potential liabilities in the US. Officials of the Confederation of Indian Industries say this costs Indian exporters between $300 million and $500 million annually.

The Barack Obama government is also increasing the cost of an H-1B visa for foreign workers by $2,000, adding an estimated $250 million annual bill to the Indian IT industry.

India - and China - could progressively find the US a harder market to penetrate, as the anti-import measures of Obama and US legislators, worried about securing votes amid high unemployment, gather momentum in the hope of creating more jobs in the US.

One important benchmark, the latest US Consumer Reports Employment Index, in September continued its downward journey, showing a decline to 49.1 in September from 50.2 in August. A measure below 50 shows more jobs lost than gained in the past month. Prospects look bleak for workers in the United States - and for Indian exporters in the US.

 

[huzihaidao12]

I really doubt, India's economic growth figures, not attack, but the academic, India's growth came from what? Only service is not possible, domestic consumption? Where is the specific growth of India's domestic consumption data?

If India's 9% growth is true, then that can provide a good reference, we can learn, but I doubt it.

 

[Jade]

India surging to record trade deficit
By Raja Murthy

MUMBAI - India's tearaway economy, with an 8.8% growth rate, may drive the country's trade deficit to a record US$135 billion this fiscal year. That trade gap could mean big trouble lies ahead, or it might simply be a measure of the country's increasing strength.

For the present, the deficit threatens to widen as the global economic recovery remains sluggish and as some countries, such as the United States, India's second-largest trading partner, turn towards protectionism. The trade gap in the year to March 31, 2010 was an estimated $102 billion, down from $118 billion in the previous 12-month period.

Commerce Secretary Rahul Khullar told reporters that the trade gap - which rose to $56.6 billion in the April to August period - was "very, very large" but one that can be managed.

A deficit drains India's foreign exchange reserves. That can weaken the country's currency, at present hovering at around 46 rupees to the US dollar, which in turn drives up the cost of imported goods, including oil. Foreign exchange reserves declined by $828 million to $284.5 billion in the week to September 10.

Picking up the pace of exports would help to reduce the deficit, but the US House of Representatives this month passed two bills that would force government departments to reject some imports. The "Made in America Act" compels congress to buy only goods and services made in the United States; introduced by Democrat Marcy Kaptur, the House approved it by an overwhelming 371-36 vote. The Berry Amendment Extension Act requires the Department of Homeland Security to reject purchase of products not made in the US. (The Berry Amendment Act was enacted in 1941 mandating the Department of Defense to procure only home-made items). Both bills requires senate approval before becoming law.

Other US governmental departments and consumers might join the protectionist herd. Ohio Governor Ted Strickland has already banned offshore outsourcing of government information technology projects, attracting condemnation by India's information technology industry leaders - the Indian IT industry generates one-third of its $60 billion revenues from exports from the US.

Indian protests against the US clampdown on imports come with some irony - given New Delhi's protectionist period in the 1970s and 1980s, when the country was awash with the "Be Indian, Buy Indian" slogan.

Supporters in the US of its anti-import direction appear also to have forgotten the shrill screams towards the end of the last century against Indian and Chinese protectionist policies, and American crusades for global free trade. The "free-ness" quotient in free trade apparently fluctuates with self-interest.

Som Mittal, president of the New Delhi-based National Association of Software and Services Companies, India's top information technology industry body, criticized the US protectionist moves as "a disturbing trend".

Since exports have buoyed India's prosperity in recent years, the emergence of a large trade deficit is rousing considerable anxiety, even though exports for April-August period surged 28.6% to $85.27 billion. In August, exports grew a lower 22.5% compared with a year earlier to $16.64 billion, down from the more than 30% growth in the three months through June.

In contrast, imports increased 32.3% in August from a year earlier to $29.7 billion and at a 33.1% rate for the April to August period to a record $141.9 billion

Optimists, however, see this import-heavy trade deficit as actually reflecting a stronger domestic manufacturing sector, with India's 13.8% industrial growth rate as of July driving up demand for overseas-made machines and other capital goods.

"A significant chunk of the imports are in capital goods, which means the trade deficit is not such a great concern," said Ajay Sahai, director general and chief executive of the Federation of Indian Export Organisations (FIEO), an industry body. "Much of the imports are for the rapidly growing power sector."

Even so, Sahai said exports such as textiles and pharmaceuticals may be hurt by US protectionism. The Commerce Ministry has also expressed concern that already struggling export sectors could face setbacks, including carpets, electronics and agricultural produce.

In response, it is urging exporters to turn more to new markets in Africa, Latin America, Asia and the Commonwealth of Independent States (CIS), the 12 countries of the former Soviet Union. To help them, the government last month announced fresh tax sops and incentives worth $227 million to exporters.

Exports have to double to around an annual $400 billion to bridge the deficit that will otherwise increase with rising imports.

Sakthivel said government incentives did help exporters to penetrate new markets. This month, an FIEO study of India's export trade with 110 countries indicated a 20% increase in export volumes in more than 60% of nations surveyed since the Commerce and Industry Ministry introduced a "Focus Market Scheme" in 2006 to diversify India's export base.

The FIEO report said India's exports to eight out of 15 Latin American countries surveyed showed growth in excess of India's overall annual export growth rate of 22.58%. Similar above-average export growth was found in 32 out of 52 countries in Africa, five out of 10 CIS countries surveyed and two out of five East European countries.

Exporters could be further inspired to look elsewhere with other new US protectionist measures, such as the Foreign Manufacturers Legal Accountability Act of 2010, which makes foreign manufactures liable to be sued for faulty products whose innards contain imported components.

It means hiring a registered agent to handle any potential liabilities in the US. Officials of the Confederation of Indian Industries say this costs Indian exporters between $300 million and $500 million annually.

The Barack Obama government is also increasing the cost of an H-1B visa for foreign workers by $2,000, adding an estimated $250 million annual bill to the Indian IT industry.

India - and China - could progressively find the US a harder market to penetrate, as the anti-import measures of Obama and US legislators, worried about securing votes amid high unemployment, gather momentum in the hope of creating more jobs in the US.

One important benchmark, the latest US Consumer Reports Employment Index, in September continued its downward journey, showing a decline to 49.1 in September from 50.2 in August. A measure below 50 shows more jobs lost than gained in the past month. Prospects look bleak for workers in the United States - and for Indian exporters in the US.

Most of the issues discussed are short term issues concentrating mostly on imports-exports, protectionism, service sector and US… India or for that matter China is much more that….Now regarding protectionism, can US succeed, I doubt, protectionism hurt the domestic US market more than it will hurt Indian economy and market forces will force US to reverse its decision on protectionism….now second is it correct to think that imports export deficit in favor of imports is bad?…again IMO, it is incorrect. Imports are much more important than exports for any economy, as Imports are the sources of technology, consumptions and demand. US is an example where import export deficit is huge and in favor of imports. Exports are just a way of financing imports.

 

[RobbieS]

I really doubt, India's economic growth figures, not attack, but the academic, India's growth came from what? Only service is not possible, domestic consumption? Where is the specific growth of India's domestic consumption data?

If India's 9% growth is true, then that can provide a good reference, we can learn, but I doubt it.

I believe increase in domestic consumption has increased. Share some data in case you find it.