Ten reasons why India would grow almost as strongly as it has done in the past many years
FDI: China habitually gets more than $150 billion in foreign direct investments every year. As a percentage of GDP, it hovers between 7% to 10%. In sharp contrast, Indian policy makers start whooping with joy when FDI crosses $20 billion. Not to mention that FDI has almost never exceeded even 0.5% of GDP. Now, we all know that foreign investments will dry up. But since most of India’s GDP growth has been driven by domestic investment, we will be the least adversely affected. Let’s say FDI inflow declines by a whopping 50% or about $10 billion. That works out to one-tenth of one percent of GDP. Do your own maths!
EXPORTS: There are horror stories floating around of how hundreds of thousands of jobs are being lost because exports are slowing down and declining. A recent government survey says that half a million jobs were lost in the last quarter of 2008 because of contracting exports. Half a million jobs gone is bad news indeed. But compare that with an admission by the Chinese government (A government that is loathe to admit anything!) that 20 million jobs were lost in the same period and you suddenly get a fresh perspective on where India stands compared to other nations. Also remember, exports from India still hover around 15% of GDP, one of the lowest figures among major economies in the world.
CONSUMPTION: The Indian economy resembles that of the United States in many unique ways. One of the most striking similarities is that related to consumption. Consumption accounts for just about 35% of GDP in China while it constitutes about 65% of GDP in India. One reason why GDP growth in China kept racing ahead of India was huge increase in investments year after year while consumption expenditure can really grow at more modest levels. When bad times come, consumption might stagnate in India while investment is bound to plunge in China. No wonder, the Indian GDP growth rate will moderate from about 9% to about 7% in 2008-09 while it is poised to crash from 13% to 6% in China. Slow and steady is often better!
FDI: China habitually gets more than $150 billion in foreign direct investments every year. As a percentage of GDP, it hovers between 7% to 10%. In sharp contrast, Indian policy makers start whooping with joy when FDI crosses $20 billion. Not to mention that FDI has almost never exceeded even 0.5% of GDP. Now, we all know that foreign investments will dry up. But since most of India’s GDP growth has been driven by domestic investment, we will be the least adversely affected. Let’s say FDI inflow declines by a whopping 50% or about $10 billion. That works out to one-tenth of one percent of GDP. Do your own maths!
EXPORTS: There are horror stories floating around of how hundreds of thousands of jobs are being lost because exports are slowing down and declining. A recent government survey says that half a million jobs were lost in the last quarter of 2008 because of contracting exports. Half a million jobs gone is bad news indeed. But compare that with an admission by the Chinese government (A government that is loathe to admit anything!) that 20 million jobs were lost in the same period and you suddenly get a fresh perspective on where India stands compared to other nations. Also remember, exports from India still hover around 15% of GDP, one of the lowest figures among major economies in the world.
CONSUMPTION: The Indian economy resembles that of the United States in many unique ways. One of the most striking similarities is that related to consumption. Consumption accounts for just about 35% of GDP in China while it constitutes about 65% of GDP in India. One reason why GDP growth in China kept racing ahead of India was huge increase in investments year after year while consumption expenditure can really grow at more modest levels. When bad times come, consumption might stagnate in India while investment is bound to plunge in China. No wonder, the Indian GDP growth rate will moderate from about 9% to about 7% in 2008-09 while it is poised to crash from 13% to 6% in China. Slow and steady is often better!
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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