Eternal Sunshine of an Ignorant Mind

Monday, March 9, 2009

China, India etc.

A few points:

1) China's exports account for around 10% of the world's trade. Chinese exports grow at around 25% a year. The world trade grows by around 15%. Now if we assume that this scenario would continue, then by 2020, China's exports would account for around 40% of the world trade. No country, ever, has been in that position. And the leaders of the world simply won't let that happen. Consequently, China's exports won't be allowed to grow at this rate till 2020. China realizes that. It also realizes that the slowdown in export related activites has to be compensated for by an increase in consumption. Presently, the Chinese consumption to GDP ratio stands at around 30-35% which is probably one of the lowest. So unless internal consumption drives China's growth in the next decade or so, the Chinese dream is all but over. An internal consumption growth dpends heavily on infrastructure, and hence one can see the Chinese govt paying so much attention to the growth of quality infrastructure in the country.

2) Compare the scenario in China to that in India. The Indian economy is one third in size, compared to the Chinese. Indian exports too are around one third as compared to China. So a growing Indian export industry is very much possible till 2020. However, along with that, India also needs to boost a)manufacturing and b)internal consumption. In case of India, the govt(for some God foresaken reason), has not yet undrestood the importance of infrastructure when it comes to boosting manufacturing and internal consumption. Thus the Indian dream and the Chinese dream both may be over by 2020, but for entirely different reasons. The Chinese are at least trying to foster infrastructure development and consequently internal consumption by realizing the problem. The Indian govt meanwhile is happy that we have an IT services revolution that gives us International prestige(not anymore I guess...) and that we have got Gandhi's items back through the private sector.

Rahul Dash

-Raferences:

1) Surjit Bhalla vs Anil Gupta on ToughTalk(NDTV Profit)
2) A recent issue of the Economist
3) WSJ
posted by Rahul Dash at 11:26 AM 5 comments