Very little to cheer about
India is inching closer to China in growth. This is because the latter is slowing down. The World Bank estimates India’s growth rate will inch up towards that of China by 2015.india Updated: Jan 17, 2013 22:26 IST
The World Bank estimates India’s growth rate will inch up towards that of China by 2015. This may sound like news to cheer about till you read the fine print that says this is because China’s economy is slowing and not due to any Herculean feat by India’s policymakers. China’s growth rate over the past 40 years has been unrivalled in human history, and it was bound to taper off as the economy grew to become the biggest after the US. Despite this, China’s growth will remain higher than what the World Bank estimates India can achieve in the medium term. The fastest we have grown is a five-year spell of close to 9%, well short of the 10% plus China was clocking over most of the previous decade as it overtook France, Britain, Germany and Japan. It can now afford a sedate trot at 8%, which on current indications appears to be the outer limit of India’s potential to grow.
Slice China’s growth and the contrast gets starker. Its manufacturing-driven economy has piled up foreign exchange reserves in excess of $3 trillion, half again as much as India’s current GDP. And this mountain will keep growing as its trade surplus endures, despite Beijing — like New Delhi — having to scour the globe for energy. India, on the other hand, is grappling with mounting fiscal and trade deficits. More importantly, its recent high growth has been jobless, a big chunk of its population trapped in agriculture as factory employment simply did not keep pace. This strains government finances as poverty reduction is driven by handouts rather than new employment avenues. The advantages of outsourcing are self-limiting and no country has broken into the ranks of developed nations without an industrial revolution.
The alternative development paths chosen by Beijing and New Delhi have a bearing on the physical and social infrastructure of the two Asian neighbours. China has most of its ports, highways and power plants in place to sustain a steady state of growth. It is touch-and-go for an India beset by shortages in its electricity grid and transport networks. Life is indeed better across the Wall with gains in poverty reduction, health and education that India can only fantasise about. It is 33 notches above India in the World Bank’s latest human development index. This is a yawning gap given the populations of both countries. The message is clear: social engineering can’t hope to match economic growth in improving the lives of the people. Although their political compulsions differ, China has provided India with a template for development that holds key lessons.