India's Shining Decade

Surjit Bhalla, among my faorite economic columnists hits the ball out of the ballpark with this wonderful piece here in the Biz Std. link

Aaj ka must-read. Some select excerpts:

Two key conclusions emerge about Indian GDP growth. First, that this growth is now at a plateau level of 8-9 per cent. Second, that very soon, analysts and punters will have to change their Word documents to “India is the fastest growing economy in the world” rather than, “excepting China, India is the fastest growing economy”.

There are three separate reasons for this, all of which have been outlined numerous times before in these columns (and a detailed assessment was provided in Bhalla-2007*). The reasons refer to the broad determinants of economic growth — capital, labour and productivity. On the first, India is investing at the same rate as China (approximately 40 per cent of GDP), on the second, India’s labour force growth is about 1.8 per cent per year faster than China, and on the third, China has outpaced India by about 2 per cent per annum (for the last five years). Most of this outpacing has had to do with the deep and deeper currency undervaluation practised by the Chinese authorities which led to two unsatisfactory outcomes: the great financial crisis of 2008, and now the largest and fastest growing polluter of the world.

There's more:

I realise I am going out on a limb, because no one has even dared to project India to grow at even the same rate as China — and I am saying that India exceeds the China growth rate as early as 2010 (as it happens, this is the exact year forecast in Bhalla-2007). But I have good fortune on my side — my forecast of 8 per cent plus for Indian GDP growth for 2009-10 (made on April 18, 2009, “V–shape of things to come”, Business Standard) got an “endorsement” from India’s Finance Minister Mr Pranab Mukherjee when he claimed a few days ago that India’s growth could top 8 per cent this fiscal year.

What Indian policy-makers have not realised, and their counterparts around the world, especially China, do recognise, is that what international organisations say affects perceptions of the world, and affects our own negotiating positions. Take for example the assessment of poverty in India. We keep coming out with poverty lines and expert committee reports whose only terms of reference is to increase the rate or poverty to somewhere around 80-90 per cent (why they don’t reach 99 per cent poor is a mystery). China, on the other hand, refuses to let the Asian Development Bank even mention the word China in its poverty assessment report for all of Asia (presumably, China is situated in Europe). China does not ask for money for climate control, and Jairam Ramesh gets berated for sacrificing India’s interests by not begging for more aid.

Read it all.