India still tortoise, China the hare

[size=10pt][size=10pt]India still tortoise, China the hare[/size]
By William Pesek,

The more important divide between India and China is the pace of growth. Its something to which officials in New Delhi are paying more and more attention, and that bodes well for Asias third-biggest economy. Chinas success is increasingly acting as a catalyst for change in India.

Sitting in Mumbai traffic for two hours to travel a short distance is enough to shake even the most enthusiastic India bulls.

India’s infrastructure needs are painfully apparent the instant one arrives in the second-most-populous nation. From bumpy roads to flaky telecommunications to clogged ports to omnipresent shantytowns, India has a long way to go to join the world's most developed economies.

One gets a very different view visiting major Chinese cities. Beijing’s recently opened airport is Exhibit A. It’s a hypermodern, state-of-the-art monstrosity that offers a hint of the world-class infrastructure you will encounter downtown.

The more important divide between India and China is the pace of growth. It’s something to which officials in New Delhi are paying more and more attention, and that bodes well for Asia’s third-biggest economy. China’s success is increasingly acting as a catalyst for change in India.

Investors have long since stopped viewing things in simplistic India-versus-China terms. Even Finance Minister P Chidambaram admits China has a serious head start in terms of growth rates, infrastructure and foreign investment.

Balancing conflicts

Yet there can be little doubt that, looked at through the lens of one of Aesop’s best-known fables, India is currently the tortoise and China is the hare. In the fable, the hare races forward only to burn out before reaching the finish line, allowing the slower-moving tortoise to win the race. The moral of the story is avoiding complacency. Anyone who has visited China recently or met with its policy makers knows smugness isn't the problem. It's more about balancing conflicting needs to grow rapidly while cooling things down to tame inflation. Pulling that off is requiring more than conventional tools like monetary and fiscal policies.

The idea of China as the hare and India as the tortoise has been mentioned before. Yet operating in China’s shadow is lighting a fire under officials in New Delhi. The question is whether India’s infamous bureaucracy is getting the message quickly enough.

“We want to catch up with China,” Mr Chidambaram told the Wall Street Journal last week. Doing so, he said, requires “greater political consensus on the needed reforms.”

The trouble is, Mr Chidambaram and Prime Minister Manmohan Singh are hostages of a political system that often moves at tortoise-like speed thanks to a smorgasbord of conflicting interests.

China dreaming

“I’m talking about the fact that they are in the position to take some decisions which we are not,” he said, adding that “We have to follow a process that is more consultative, more deliberative and more amenable to judicial scrutiny.”

If ever there was a time for India to look outward — and forward — it’s now. Turmoil in credit markets, slowing global growth and accelerating inflation are threats to the outlook. This isn’t the time to let political squabbling get in the way of longer-term prosperity.

India will have to get used to growing more slowly for a while. Some economists say growth will ease to about 7 per cent, compared with the almost 9 per cent rate that India has enjoyed in recent years. It’s a setback for a nation struggling to reduce poverty.

Growing better

Rising food and energy costs complicate things further. Reserve Bank of India Governor YV Reddy has been steadily raising rates since late 2004. The key is to get more out of the growth that India produces. That means deregulating most industries, cutting red tape in New Delhi, attacking corruption and getting over the nation's aversion to foreign investment. Governments in Asia tend to get hung up on gross-domestic- product headlines. They are often misleading.

The mathematics of such figures in China can overlook the human element -- how China is largely all hardware and no software. World-class infrastructure can only take a nation that censors Google so far. Rather than empowering local entrepreneurs to create indigenous companies, China is often more interested in buying overseas names. China also faces a challenging year with overheating risks, swooning stocks and slowing US growth.

Nor do GDP figures explain how some of India’s advantages aren’t all they seem. The hype about Bangalore being Asia’s Silicon Valley ignores how the old economy — poor roads, transportation systems and power grids — holds back the new economy. And having a young population only helps if you create enough good jobs in the future.

Indian cappuccino

Dilip Parameswaran, head of Asia credit research at Calyon, Credit Agricole SA’s investment-banking unit, finds it useful to think of India as a cappuccino. “There’s coffee at the bottom and lots of froth at the top,'” he says. “It can take a while to get to the coffee. People want more coffee and less froth.”

Adds Pranab Kumar Choudhury, Vice Chairman at ICRA Ltd, “India needs to keep investors from getting frustrated that reforms are moving too slow.”

Even if India slowed to 7 per cent, such growth is nothing to sniff at. It’s no reason to delay efforts to replicate India's success with software and back-office operations elsewhere in the economy. Here, China’s enviable place in the spotlight is playing an unheralded role.

Source: Bloomberg News
[/size]

[size=10pt]I have always said that the all powerful Planning Commission is
a useless baggage of text book IAS wallas..Sixty years on look what
they planned and made India into.[/size]

it is good that some give serious thought about our shortage.

reasons are many
1) in China nearly 90% of population contributes for GDP/NDP grouwth. Whereas in India nearly 50% of population (most women) are not given participation in education, equal employment opportunities.
2) China believes in productivity whereas Indians aims on speculation without contribution
3) Tax evasion is considerably low in China than In India.
4) china encourage exports with low cost labour and their currency is a controlled currency - whereas in India exports/imports means hawla trading/pumping money through P/N notes hedge funds for speculation and conerning the benefits by few businessmen.
5) Government function in China is different than in India. In the name of democracy, benefits, freedom are enjoyed by a very few
6) China opens their land very little for FII/FDI where infrastructure is great - in India entire nation is kept opened without infrastructgure.
7) China's cheap labour, better producitivity, concentration on mass production is no comparison with India.
8) huge land reserve in China is also a great advantage to them

India is totally far behind when comparing not only with China but also with many other countries.

Let us see one example - US Dollar value is falling against all Global currencies expect Indian Rupee - there is a very serious fall for Indian Rupees.

Respected Prime Minister cannot take refuge under conflicting parters in UPA ruling coalition.

something very serious development is taking place adverse to Indian economy.

It is the high time for Government to reconsile the situation and do some thing better in the worst hit time.

We Indians should learn many lessons from Chinese. They walk a talk. And that is exactly, wo dont follow.
What is the use of 7 p.c. growth when the inflation is touching 11.6 +
How the great Mr. Chdambaram and Mr. Manmohan Singh could combat. They cant take offensive actions because of coalition Govt. The Common Minimum Programme. Both CMP and CPM are destroying country's interests and drowning Indian Economy and Indians at the same time.

Don't forget when the Hare falls asleep, the Tortoise invariably wins

no comments

True..we are still 10 years behind china...

India vs China Economy: Comparing the Economies of India and China is to embark on an old puzzle that has fascinated smart people for centuries. Although it is urgent and important to discuss it because China and India are the world's next major powers. It is also important because the two countries have embraced very different models of development.

Looking at the Similarities between the Economies of India and China, both are conscious of their role in the world economy. Both seek to play a bigger political role on the world stage. China is already doing that as a permanent member of the U.N. Security Council. Now observing the Differences between the Economies of India and China we see that China is taking tangible but slow steps towards embracing private entrepreneurship. India on the other hand is continuing to struggle with making things easier for multinationals. Although the differences are arguably narrowing, but the first-order effect of all this is still “a big difference”.

In general, FDI has been positive to both the Economies of India and China. It has provided goods and services that did not otherwise exist. It has also introduced competition into moribund sectors.

Both countries have clocked up strong economic growth since 1980, China at a spectacular 9 per cent plus and India at nearly 6 per cent. Both countries have opened up to international trade and capital in the past quarter of a century, decisively in China and more hesitantly in India.

China's per capita GDP growth has averaged 8 per cent in the 25 years since 1980, more than double the growth rate of Indian per capita GDP. Somewhere between 1975 and 1985 China's average income is believed to have surpassed India's. Since then it has kept moving ahead. By 2003 China's per capita GNP was at least 70 per cent higher than that of India's and her economy was more than twice as large as India's. Much of China's growth was powered by labor-intensive manufactured exports, which took the share of manufacturing in GDP to nearly 40 per cent, compared to a mere 16 per cent in India.

Other indicators like living standards were just as decisively in China's favor by the turn of the millennium. China's poverty ratio was less than half India's 35 per cent. Female adult literacy was nearly double India's pathetic 45 per cent. Life expectancy in China was a solid 8 years higher than that in India.

Looking at the future, it is easier to forecast a widening of the existing Economic disparities between China and India than a reduction.

“We want to catch up with China,” Mr Chidambaram told the Wall Street Journal last week.
but Manmohan singh aid 'India has an edge over china' click the link to see that http://www.dnaindia.com/report.asp?newsid=1244630

we dont think india's most urgent need as to be Infrastructure but an positive attitude,
We opened our economy in 1991, that time we had hardly sufficient foreign exchange, we have came a long way then in such a short time, we are now the contenders of a Superpower from a cash strapped nation,
our growth is organic unlike china which manipulates its currency for facilitating its exports.......
India has its own market and does not depend on other economics much for its foreign exchange.

....
the rest as they say is history
http://www.xlr8india.co.cc/2009/03/superpower-material.html

The reply #2 i doubt is based on facts as there is hifgh economic imbalance in China ,perhaps the highest in the world,then how would its 98% of population contribute to its growth.....................
http://www.xlr8india.co.cc/2009/03/superpower-material.html

India is no way a Tortoise...It can beat China in next 10 years!!

http://[img]http://orkut.vidpoke.com....gif[/img] Got a webcam. Create a Videopoke Now!

hahaha very good article ...

just imagine the population in India... Feel happy for the current position of India

It is good that atleast few people are worried about India/s growth