Indian Economy

[puneets]

Suresh- My guess is that the Tamil version will be helpful to a person in some village in TN..who might be attending a school in which the medium of nstruction is Tamil.

It wouldn't increase the 'computing skills', but would at least make it easier for that person to pick up information about how to use a computer.

[suresh]

Suresh- My guess is that the Tamil version will be helpful to a person in some village in TN..who might be attending a school in which the medium of nstruction is Tamil.

It wouldn't increase the 'computing skills', but would at least make it easier for that person to pick up information about how to use a computer.

My point is that it quite a bit is already available and is free. So the promotion by Microsoft is noisome.

[Red_Indian]

I wouldn't give much value to anything Billy Boy says.

[jaydeep]

Check out hard bashing by Shankar Acharya with figures in Guest Column of Business Standard ... Here I m posting link from Rediff.

India is China's economic equal? Bah!

Jaydeep.

[PKBasu]

Shankar Acharya loves to denigrate India's economic achievements.
Communists (and Bengali economists who are fellow travellers of the Commies) love to do this because they are in love with China and a romantic image of what China has achieved (although all its achievements occurred AFTER it abandoned communism). Acharya isn't one of those, but he is an India-basher nonetheless.
That China's economic and social achievements since 1978 dwarf India's is a commonplace fact. But it's important to recognise that China benefitted primarily from the presence of two capitalist economies on its doorstep: Hong Kong (a British colony whose post-1950 wealth was fuelled by the capital and labour of rich people fleeing Mao's China) and Taiwan (where the political elites -- and some of the best brains as well as several of the leading bankers of pre-communist China -- fled in 1949). These two laboratories of capitalism became a world-class financial centre (second only to Tokyo in Asia, and fourth globally behind London and NY) and one of the hubs of the computer-hardware industry respectively. After 1984 (due to the Sino-British agreement, and Deng Xiaoping's market opening which was focused on inviting Overseas Chinese capital back to China, in specific economic zones that happened to be the specific cities from which the four main Overseas-Chinese ethnic communities emanated) Hong Kong effectively became China's, while Taiwanese began to invest in China too (initially in Fujian, where most local-Taiwanese are from, then in Shanghai-Suzhou, where most of the KMT elites came from). Had India expelled all its capitalists in 1947, and had they congregated in two centres like Hong Kong and Taiwan, only to be invited back in 1980, there might have been a valid comparison between the two.
Effectively China is now benefitting from Mao's folly (and the US and UK's support to those who fled to Taiwan and Hong Kong respectively). Without that there would be no Chinese economic miracle, as about two-thirds of all foreign direct investment in China in fact comes from those two sources.
That said, India needs to find some way to grow at least as fast as China over the next two decades. If it doesn't, the gap in income and wealth between China (plus Hong Kong and Taiwan) and India will be well-nigh unbridgeable. And when that happens, we'll be kowtowing to China the way the Tibetans have been (intermittently) for the past three centuries.

[jaydeep]

Thanks Prasenjit for ur outlook on this article by Shankar Acharya ... I was also shocked reading only bashing from him ... So I posted here to get exact picture from u ... And u put this whole comparison scenario very nicely, so novice like me to understood these things easily ... Again Thanks a lot Basuji.

Jaydeep.

[puneets]

Thanks for the post PKBasu. I've been reading quite conflicting articles on the above topic. It's nice to hear your side, and understand (in depth) the real basis of comparison.

[arjun2761]

Besides bashing Acharya, PKB does not contradict any of the facts in the article. I did not read the article to state that communism was the cause of China's success. Therefore, PKB just added the fact that the influence of Taiwan and Hong Kong was an important catalyst which most people now. And it is not just Acharya, there are many the US (who are certainly not commies) who believe in the China story as well.

Likewise, India's catalyst in several of our growth sectors (IT, BPO, Pharma etc.) is coming from our private sector (they just happen to be located in Bangalore, Gurgaon, etc. and not in islands).

[suresh]

Arjun, It might help you to do a google search for "Prasenjit Basu". Then, you will understand that PKB's comments are not based on casual thought but detailed
analysis because that is his job. Of course, you have the right to disagree with PKB

I wish Acharya had taken the trouble to give some references to where it was stated that India is on par with
China in gross economic terms. Those of us in India are painfully aware of the fact the China is way ahead of
us in many ways. Yet, I feel that we cannot ever use the Chinese model for our country. Think about it, in China,
one fine morning, it was decided that everybody must have only one child and that was pushed through. The closest
that we came to that was during emergency when Sanjay Gandhi and his cronies carried out forced sterlizations.
We all know what that led to. China is also keeping its currency at a fairly low level which keeps its manufacturing
costs very low. How can we compete with that? Take the case of Titan which was making good quartz watches.
A few years back they discovered that their production costs were more than that the price at which China was
selling similar watches. They were forced to reinvent themselves and moved onto the higher end watches and
jewellery. The point is that India (being a democracy) cannot imitate the Chinese.

By the way, unlike PKB, I am not qualified at all to comment on these things. So my remarks are casual.

[gbelday]

Take the case of Titan which was making good quartz watches.
A few years back they discovered that their production costs were more than that the price at which China was
selling similar watches. They were forced to reinvent themselves and moved onto the higher end watches and
jewellery. The point is that India (being a democracy) cannot imitate the Chinese.

That's exactly what happens in a truly "gloabalized" world. There is no need to imitate the Chinese. Indians have much more going for them than the Chinese. I think in a sense, the govt and it's policies really don't matter that much in the long run (after they have opened up the economy). Ultimately, it is the individuals that make a difference in a truly globalized world.

For those who haven't read "The World is Flat" by Thomas Friedman, I suggest you get hold of a copy. It is a very interesting book and I am glad I read it. It explains the new "gloabalized" world and kind of explains a lot of things (that we probably already know) with some really good examples.

[puneets]

"The world is flat" is a good read. Friedman is pro-India (as his Ed. cols in NYtimes clearly show)..and that makes the book sound even better

I liked the numerous examples that he gave in order to support his theory that the marketplace is flatenning.

[PKBasu]

Hey, Arjun has every right to bash me as much as he pleases!
Nobody denies that China's economic numbers are way ahead of India's. But the context is important; those who recite those tired statistics without the context are nothing but India-bashers. China did nothing to develop Hong Kong and Taiwan -- in fact, they prospered partly because all the capitalists were thrown out of mainland China. The PRC has succeeded merely by tapping into the financial and technological assets built up by its erstwhile refugees in those two major economic centres.
Deng Xiaoping was perspicacious enough to notice that bringing the capital of these overseas Chinese back to the mainland was the key to China's future. In 1984, the British signed a treaty obliging them to give up Hong Kong in thirteen years, which was by then among the world's major financial centres -- and one of the first consequences (in 1985) was that Hutchison Whampoa (one of the hongs that had driven the colonial economy) passed from British hands to those of Li Ka-shing. Li and the rest of the HK elite have driven China's growth in the succeeding period. Over two-thirds of China's FDI in the past twenty years has come from Taiwan and Hong Kong, and a similar proportion of its exports come from companies domiciled in those two places.
A second major factor that distinguished China in 1949 from India was that China had incredibly well-developed ports -- as the seven European powers had been competing against each other to build these up during the preceding century of the "unequal treaties". And Japan (which ruled Manchuria for 14 years, and the entire eastern seaboard -- Beijing, Shanghai, Nanjing, Fujian, Guangzhou, etc. -- for eight years) built up the industrial and financial infrastructure of that region to a level that was far superior to anything India had. It isn't a coincidence that the parts of China that were ruled by Japan are the most prosperous today (Manchuria was the industrial heartland in the 1950s, and Mao punished it with the great famine of 1958-60 that followed the failure of the Great Leap Forward; but Dalian -- which was Russian- and then Japanese-controlled Port Arthur -- is very prosperous again, as indeed are all the other east-coast cities that Japan once ruled; it also is no coincidence that the two most successful economies in Asia -- Korea and Taiwan -- were also Japanese colonies for 35 and 50 years respectively, but I'll leave that for another day).
A final point. China is currently barrelling well ahead of India. But its banking system is a gigantic mess, with about half their loans non-performing. Most of these loans have been shifted off their books by the government (at face value, thereby increasing moral hazard for the future), and the banks have been temporarily "rescued" by Singapore's government-investment corporation and other late-comer banks to Asia. This has provided China's banks (whose loans are already about 180% of GDP) with a temporary reprieve. But in 3-4 years (especially after the end of the Olympics-induced investment boom in 2008), China will face a horrible day of reckoning. When China's banks collapse, they will have a much more deleterious impact on the Chinese economy than the Japanese banks have had over the past 15 years. And China's demographics will also begin deteriorating by 2015, so the Japan 1990-2005 scenario could well be prolonged for China long after 2020 (having started around 2009!). India by contrast has a far more stable banking system whose problems were largely dealt with in a rational manner in 1992-95. Bricks and mortar are China's strength, India's are more intangible: the relative efficiency of its banking system, the endurance of its democracy, and its lead in human-capital development (shrinking now after China's tertiary-education spending binge of the past decade, but still not entirely eroded). And of course, like Suharto's Indonesia, China will face its day of political reckoning too once growth slows in the wake of the collapse of its financial system. India in 2020 is likely to have caught up even with a China that is turbo-charged by Taiwanese and Hong Kong capital.

[puneets]

PkBasu- I remember that I had seen the "population pyramid" argument somewhere while comparing China and India. Can you please elaborate more on that aspect..or maybe provide me with some link where I can get the info.

[arjun2761]

Arjun, It might help you to do a google search for "Prasenjit Basu". Then, you will understand that PKB's comments are not based on casual thought but detailed
analysis because that is his job. Of course, you have the right to disagree with PKB

I am fully aware of his distinguished credentials and have zero economic credentials myself. However, as some one who has China specific hedge fund investments as well as India based investments, I am bullish on both. Also, I do also read several premium investment newsletter with input from some of the best known financial and economic gurus in the US (and elsewhere), and his bullishness on India vis-a-vis China is shared by some but is the distinct minority view. In fact, even if you check out the much touted BRIC report (by Goldman Sachs) which presents the best case scenario for India that I have seen, we trail China by a big margin throughout its forecast period.

[India1989]

We should try to improve per capita income to 10,000 us dollars. Then our GDP will increase too. But it should be done before 2008.