Indian Economy

As we had often come back to discussing economic benefits/impact of sports I thought it was about time for an economic discussion forum.
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Re: Indian Economy

Post by prasen9 »

Oh, manufacturing is perhaps better than agriculture especially given issues with natural resources, climate change, higher yield crops these days, etc. But, the point is not that. The point is why is it better than say healthcare or software or services or any other industry. The government picked one to subsidize. I would have broadened the base and used the extra taxes for reducing the deficit or social projects in healthcare or education, etc. Or cut the tax rate more broadly than just manufacturing. Not really convinced that encouraging manufacturing is the way forward. And that too "new manufacturing"; I guess the definition could use extensions of existing companies too. I do not know.
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Re: Indian Economy

Post by PKBasu »

Yes of course the definition includes new manufacturing facilities (factories) for existing as well as new companies. Some of the existing manufacturers (eg, Foxconn, the maker of Apple iPhones) were upset by the "new" categorization, but they too are being incentivized to expand their production.

Manufacturing has generated employment and raised productivity for every economy that has achieved prosperity. Healthcare of course is important, and needs to receive government support (which it does, since governments spend a fair amount on it). But successful manufacturing generates employment, in turn (via the incomes of those employed in industry) generating demand for other goods and services (as well as higher tax revenues from the scaling-up of production). An economy cannot be based on just agriculture and services -- as the US and UK have belatedly realized. For a developing economy, industry is hugely important as a way to absorb workers from low-marginal-productivity jobs in agriculture to much higher-productivity jobs even in basic manufacturing (producing textiles, garments, shoes, toys, processed-food). Farms can replace 10 workers with one tractor, 25 workers with one combine-harvester -- and those 35 workers can generate far more output-value (5-10 times as much) by working in labour-intensive manufacturing. Successfully bringing about that transition is the key to the first stage of economic development for every country -- starting with Britain in the 1750s, Germany and the US in the 1865-1915 period, Japan from 1880 onwards (and again from 1950 onwards), Korea, Taiwan in the 1960s and beyond, etc.
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Re: Indian Economy

Post by prasen9 »

A few points. The Indian government is notoriously bad with respect to healthcare. In fact, we are about #170 out of 188 countries based on expenditure/GEP. India spending more but is still woefully bad.

We need to be careful with FoxConn. They are really big con artists. They have tried to pull a fast one on Wisconsin. Read this: Empty factories, no plan They may have a decent business record in China but they have tried to dupe many in different countries. India should be very vigilant so as not to give them subsidies without verifying things.

I do think we have the opportunity to grow by investing in services and other technologies, e.g., biotech, etc. But, yes, in the long run, for sustained growth, we would need manufacturing (broadly construed).

You are possibly right. I can only think of Hong Kong as the exception. And the oil-producing countries in the middle east. But, of course, we do not have that jackpot.
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Re: Indian Economy

Post by jayakris »

What they never told you when they said India was the worst performing emerging economy

What do you all think? The author (Abhishek Banerjee of IISc) makes the point that some of the countries which had less contraction than us from Covid had much greater drops in the values of their currency... Like RUS and BRA having 20 to 30% drops in their currencies while the Indian Rupee held up remarkably well at around 75 with respect to the dollar. But the contractions are reported in local currencies, so the "effective contraction" (my term) that we had may not be bad compared to others. Is this right?

As always, I don't understand economics, especially financial economics -- and then I find that everybody is talking about apples and oranges anyway.

So, did we really have a very bad contraction, like the worst in the world, or not?

Would love to hear PKB's view (though I expect that his view may be similar to mine, which is to generally be positive about whatever mess the BJP government has taken us to :) )

And, here are some numbers and details from Udit Misra in IE, to add some olives and pomegranates to apples and oranges - Five main takeaways from the Q2 GDP data
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Re: Indian Economy

Post by prasen9 »

jayakris wrote: Tue Dec 01, 2020 2:10 am As always, I don't understand economics,
Nobody does. :-) It's complex and fuzzy.
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Re: Indian Economy

Post by Sin Hombre »

Great twitter thread

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Re: Indian Economy

Post by prasen9 »

I do not understand what is great. I want to see what the bottom-line is. Certainly having access is possibly better than not. But, social media has many negative effects. I will wait for some studies to study the final impact of this. Who are the losers and what happens to them? Is there a net gain in quality of life, human development? Or is it just another side entertainment? Etc.

If I were forced to say yes or no, I would possibly say this is a good thing. But, I want to get more information.
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Re: Indian Economy

Post by prasen9 »

For all the bluster about the Modi miracle, development, etc., Bangladesh now has a higher per-capita income than us. They overtook us in about 2017, etc. See: Bangladesh vs India per capita income
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Re: Indian Economy

Post by arjun2761 »

prasen9 wrote: Fri May 05, 2023 6:56 am For all the bluster about the Modi miracle, development, etc., Bangladesh now has a higher per-capita income than us. They overtook us in about 2017, etc. See: Bangladesh vs India per capita income
Pointless comparison as its most likely a blip. IMF projections has India ahead in April 2023. In per capita PPP terms, the gap is even bigger.

Credit to Bangladesh for pulling themselves up from being one of the worst countries in the world but the their growth is mostly demographically driven as their population is growing twice as fast as ours. Their populations also leaving to to do low skilled work at a much higher rate as their remittances is a much higher percentage of their GDP than India's. Interestingly enough, some are even leaving to work in India.

Their only real economic success is the low cost low skilled RMG (garment) export sector. It looks like they also have a higher percentage of women in the workforce. They don't have the high tech, defense, space, or overall economic clout that India has. I doubt if anyone even really equates the two other than both India and Bangladesh are among the poorest countries in the world.
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Re: Indian Economy

Post by SaniaFan »

arjun2761 wrote: Fri May 05, 2023 7:17 pm I doubt if anyone even really equates the two other than both India and Bangladesh are among the poorest countries in the world.
Actually this is the only thing i was thinking about. We always talk about our political might and clout in world affairs but really has it not come at the cost of making the lives of its people better? Much of Europe now may have lesser clout than India but quality of life is much better. Are we just feeding of the pretentious pride of our clout? Have we failed use it to make the the lives of our people better?

I wonder what is the typical path of country's growth. It becomes more powerful first in terms of world affairs and then the standard of life of its people improves or both can go hand in hand. India certainly has more clout now but I some how feel that the standard of life has not improved at the same rate. Could it have been different?
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Re: Indian Economy

Post by prasen9 »

The point is not that Bangladesh is much better. The point is indeed that we are still really poor. And, despite the talk of Modi is the only savior, etc. of the country and fantastic development claims, progress has been about the same as before. The comparison to Bangladesh shows that other countries are also hving the so-called "miracle" that only Modi the savior was supposed to be capable of.
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Re: Indian Economy

Post by arjun2761 »

SaniaFan wrote: Sat May 06, 2023 2:13 am
arjun2761 wrote: Fri May 05, 2023 7:17 pm I doubt if anyone even really equates the two other than both India and Bangladesh are among the poorest countries in the world.
Actually this is the only thing i was thinking about. We always talk about our political might and clout in world affairs but really has it not come at the cost of making the lives of its people better? Much of Europe now may have lesser clout than India but quality of life is much better. Are we just feeding of the pretentious pride of our clout? Have we failed use it to make the the lives of our people better?

I wonder what is the typical path of country's growth. It becomes more powerful first in terms of world affairs and then the standard of life of its people improves or both can go hand in hand. India certainly has more clout now but I some how feel that the standard of life has not improved at the same rate. Could it have been different?
If you look throughout history, the more powerful countries have also generally become wealthier. Of course, a lot of that was for capturing resources of other countries to enrich themselves as we saw in the muslim conquests of India and the European conquests throughout Asia and Africa.

However, even now, China is the large country which has improved their standard of living the most in recent times (considering their per capita GDP was similar to India around 30-40 years ago) and they have certainly also become a powerful nation. Europe on the other hand has been on the decline in some aspects and even then their spending on defense is a lot more than India's if you add up the spending of the top 3-4 EU nations (and that of UK).

India's standard of living has been improving over the last 20-30 years but not at the rate of China. The bigger issue for India is that British rule had left India completely impoverished and then after independence the misquided socialist regimes gave rise to very low growth rates for the first 40-50 years after independence. Given the size of India's population, it will be quite a while before India becomes a developed country on a per capita GDP basis. Even China today has a per capita GDP that is similar to countries like Mexico which are mostly considered as developing countries.
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Re: Indian Economy

Post by prasen9 »

I think more than the size clout, the per capita (and yes taking into account ppp) data is more indicative of general prosperity of the people. Size also sometimes become a deterrant. China has not been able to do what South Korea has or Japan has, etc. But maybe they started late. Size clout has to be managed well. Throughout history, we have not tried to get into other countries, etc. because we had fertile lands, etc. In today's world, there is nothing wrong in getting into other countries in an ethical manner (not colonial or neocolonial exploitation) and we should really try to do that. China's getting RSA and Iran together is a big success and I think if that sticks, China will reap benefits among both countries. It already has huge investments in Africa, some in colonial styles. Our size should provide us some clout in that respect to reap benefits among these countries. Especially in Africa, where there is still huge opportunity because their population is going to boom. Africa is going to have more people than Asia put together by 2050. I hope we are putting our foot inside that door because that is where there is money to be made ethically.
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Re: Indian Economy

Post by srini »

arjun2761 wrote: Mon May 08, 2023 8:03 am
SaniaFan wrote: Sat May 06, 2023 2:13 am
arjun2761 wrote: Fri May 05, 2023 7:17 pm I doubt if anyone even really equates the two other than both India and Bangladesh are among the poorest countries in the world.
Actually this is the only thing i was thinking about. We always talk about our political might and clout in world affairs but really has it not come at the cost of making the lives of its people better? Much of Europe now may have lesser clout than India but quality of life is much better. Are we just feeding of the pretentious pride of our clout? Have we failed use it to make the the lives of our people better?

I wonder what is the typical path of country's growth. It becomes more powerful first in terms of world affairs and then the standard of life of its people improves or both can go hand in hand. India certainly has more clout now but I some how feel that the standard of life has not improved at the same rate. Could it have been different?
If you look throughout history, the more powerful countries have also generally become wealthier. Of course, a lot of that was for capturing resources of other countries to enrich themselves as we saw in the muslim conquests of India and the European conquests throughout Asia and Africa.

However, even now, China is the large country which has improved their standard of living the most in recent times (considering their per capita GDP was similar to India around 30-40 years ago) and they have certainly also become a powerful nation. Europe on the other hand has been on the decline in some aspects and even then their spending on defense is a lot more than India's if you add up the spending of the top 3-4 EU nations (and that of UK).

India's standard of living has been improving over the last 20-30 years but not at the rate of China. The bigger issue for India is that British rule had left India completely impoverished and then after independence the misquided socialist regimes gave rise to very low growth rates for the first 40-50 years after independence. Given the size of India's population, it will be quite a while before India becomes a developed country on a per capita GDP basis. Even China today has a per capita GDP that is similar to countries like Mexico which are mostly considered as developing countries.
British rule left India impoverished, but China was no less affected due to British opium export trade to China and Japan's occupation...so much so that Chinese remember it as a century of humiliation. So both countries were left equally impoverished by 1950s., but China woke up to the reality relatively earlier and started its economic reforms in 1978 by opening up FDI (though it officially became a WTO member n 2001) and India started its in 1991. It was more of a compulsion in 1991 when payments crisis (thanks to that) ushered in reforms. So there was a 13 year head start China had.

Here is the GDP comparison of China vs India from IMF data.
ChinaVsIndia (1).png
ChinaVsIndia (1).png (23.43 KiB) Viewed 447 times
Now if we observe the GDP chart, you can see that India now is at the same GDP level that China was in 2007 (around 3.8 T) which is around 15 years in terms of time period difference. So its not as if China achieved an economic miracle or something in the 45 years since it started its reforms.

Now if we extrapolate India's GDP for next 5 to 10 years, we can see it would rise from 3.8 T to 12 T or so by 2034. As per all projections from IMF, World bank etc, China's growth rate is going to drop further from current 5.2% to 3% or so by 2028 while India's is supposed to maintain a minimum of 6% for next 20 years. So the gap between China and India is bound to decrease by 2034. There is no magic here, its just in the demographic dividend, more population in working age is more GDP. China is in the path of decreasing demographic dividend due to one child policy for too long. So politicians like Modi can get away with projecting India's rise from 10th rank in economies from the time he became PM in 2014 to #5 now and #3 in his almost confirmed 3rd term to largely gullible voters in India. Real/Nominal GDP is not what one can use as a measure of development. Only insightful would realize the real development is when you talk per-capita and both China, India continue to lag in per capita but the progress they made also can't be ignored as both nations could pull out lot of people from the poverty.
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Re: Indian Economy

Post by Saffron Lenin »

srini wrote: Sun Aug 13, 2023 3:31 am
arjun2761 wrote: Mon May 08, 2023 8:03 am
SaniaFan wrote: Sat May 06, 2023 2:13 am
Actually this is the only thing i was thinking about. We always talk about our political might and clout in world affairs but really has it not come at the cost of making the lives of its people better? Much of Europe now may have lesser clout than India but quality of life is much better. Are we just feeding of the pretentious pride of our clout? Have we failed use it to make the the lives of our people better?

I wonder what is the typical path of country's growth. It becomes more powerful first in terms of world affairs and then the standard of life of its people improves or both can go hand in hand. India certainly has more clout now but I some how feel that the standard of life has not improved at the same rate. Could it have been different?
If you look throughout history, the more powerful countries have also generally become wealthier. Of course, a lot of that was for capturing resources of other countries to enrich themselves as we saw in the muslim conquests of India and the European conquests throughout Asia and Africa.

However, even now, China is the large country which has improved their standard of living the most in recent times (considering their per capita GDP was similar to India around 30-40 years ago) and they have certainly also become a powerful nation. Europe on the other hand has been on the decline in some aspects and even then their spending on defense is a lot more than India's if you add up the spending of the top 3-4 EU nations (and that of UK).

India's standard of living has been improving over the last 20-30 years but not at the rate of China. The bigger issue for India is that British rule had left India completely impoverished and then after independence the misquided socialist regimes gave rise to very low growth rates for the first 40-50 years after independence. Given the size of India's population, it will be quite a while before India becomes a developed country on a per capita GDP basis. Even China today has a per capita GDP that is similar to countries like Mexico which are mostly considered as developing countries.
British rule left India impoverished, but China was no less affected due to British opium export trade to China and Japan's occupation...so much so that Chinese remember it as a century of humiliation. So both countries were left equally impoverished by 1950s., but China woke up to the reality relatively earlier and started its economic reforms in 1978 by opening up FDI (though it officially became a WTO member n 2001) and India started its in 1991. It was more of a compulsion in 1991 when payments crisis (thanks to that) ushered in reforms. So there was a 13 year head start China had.

Here is the GDP comparison of China vs India from IMF data.
ChinaVsIndia (1).png
Now if we observe the GDP chart, you can see that India now is at the same GDP level that China was in 2007 (around 3.8 T) which is around 15 years in terms of time period difference. So its not as if China achieved an economic miracle or something in the 45 years since it started its reforms.

Now if we extrapolate India's GDP for next 5 to 10 years, we can see it would rise from 3.8 T to 12 T or so by 2034. As per all projections from IMF, World bank etc, China's growth rate is going to drop further from current 5.2% to 3% or so by 2028 while India's is supposed to maintain a minimum of 6% for next 20 years. So the gap between China and India is bound to decrease by 2034. There is no magic here, its just in the demographic dividend, more population in working age is more GDP. China is in the path of decreasing demographic dividend due to one child policy for too long. So politicians like Modi can get away with projecting India's rise from 10th rank in economies from the time he became PM in 2014 to #5 now and #3 in his almost confirmed 3rd term to largely gullible voters in India. Real/Nominal GDP is not what one can use as a measure of development. Only insightful would realize the real development is when you talk per-capita and both China, India continue to lag in per capita but the progress they made also can't be ignored as both nations could pull out lot of people from the poverty.


Economy never wins election...if economy were such a huge factor for election, PV Narsimha would never lose election. Neither Atal Vihari bajpehi would lose election...Narratives win elections!

2024 election is still very open!!! Congress and Regional parties still control narratives in large part of country...
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