Tigers, beware! Here comes the dragon
Just because our GDP growth rate is now second only to China's, people knowledgably start spouting about 'tigers' and 'dragons', writes Ravi Srinivasan.india Updated: Jun 14, 2007 02:19 IST
The Indian economy has passed a plethora of milestones in the past few weeks. We have become a trillion dollar economy, with a trillion dollar stock market (by market capitalisation). Economic growth speeded up another gear, ending the last fiscal at an all-time high of 9.4 per cent for the year.
Going by the figures for industrial output for April, which clocked a growth rate of 13.6 per cent, despite a high base, and predictions of a 'near-normal' monsoon, indications are that gross domestic product (GDP) growth will be nudging the 10 per cent mark this year - a figure which looked ambitious just a couple of years ago.
As a nation, we tend to be prone to extreme mood swings. A few defeats are enough to turn our cricketers from heroes to zeros. If the Sensex upticks a few percentage points, the economy is on a roll. And just because our GDP growth rate is now second only to China's, people knowledgably start spouting about 'tigers' and 'dragons'.
Indians, of course, are not the only ones doing the 'India-China' comparison. Because of an accident of geography and a coincidence of demographics, the two nations are now clubbed together as a matter of course in debates on subjects as diverse as global warming and banking reforms.
The term 'Chindia' has now entered the lexicon of business-speak. But just because we have roughly comparable populations and GDP growth rates does not mean that India can be bracketed with China.
A couple of days ago, Nobel prize-winning economist and long-time China watcher Michael Spence spoke to China Daily about the line which separates men from boys. In the post-war period, Spence pointed out, only 11 economies have managed "sustained high growth."
Eight of them are in Asia: China, Singapore, Hong Kong, Taiwan, South Korea, Thailand, Malaysia and Indonesia. "Sustained high growth" means a GDP growth rate of 7 per cent or higher, for 25 years or more.
Another significant commonality was that all these 'sustained growth' economies leveraged global demand to drive domestic growth - in other words, exports were the key growth driver. India's growth has largely been driven by domestic demand. China's share of world trade is more than five times India's, and the gap is widening.
By that reckoning, India has about a couple decades to go at the same clip before even qualifying for the club. Meanwhile, Spence estimates that China can sustain its current rate of growth for another two decades!
So how come everybody's talking Chindia? India's "demographic dividend" of a younger population and its democratic system of governance are cited as the major reasons.
The former is real - China's National Academy of Social Sciences estimated that China might start facing labour shortages as early as 2009 - the latter is a non-quantifiable notion.
I prefer to stick to the maths.