India versus China, part 3: No contest

Amit Varma's post China v India points us to a very interesting piece by Shankar Acharya enitled India is China's economic equal? Bah!

Acharya, a former Chief Economic Adviser to the Government of India, does not pull his punches: "Let me put this bluntly: as an economy, we are simply not in China's league." His table shows the stark differences:

CHINA versus INDIA
ECONOMY/SCALE	Units	Year	China	India	China to India ratio
Population	Million	2003	1288	1064	1.2
GDP (PPP)	$ billion	2003	6090	2908	2.1
Per capita GDP growth	%	1980-2004	8.2	3.7	2.2
Share of manufacturing in GDP	%	2003	39	16	2.4
Living standards
Per capita GNP (PPP)	$	2003	4980	2880	1.7
Life expectancy	Years	2002	71	63	1.1
Female adult literacy rate	%	2003	87	45	1.9
Under 5 mortality	Per 1000	2003	37	87	0.4
Under 5 malnutrition	%	1995-2003	12.1	45.8	0.3
Poverty ratio (% below $1 a day)		2001 & 2000	16.6	34.7	0.5
INFRASTRUCTURE
Electricity production	Billion kwh	2002	1640.5	596.5	2.7
Goods hauled (Railways)	Ton-km billions	2002	1508.7	333.2	4.5
Container traffic (ports)	Millions	2003	61.62	3.9	15.7
Air freight	Ton-km millions	2003	5650.6	580.0	9.7
Telephones (land + Mobile)	Per 1000	2003	424	71	6.0
EXTERNAL SECTOR
Merchandise exports	$ billion	2004	593.4	81.0	7.3
Service exports	$ billion	2004	62.4	51.3	1.2
FDI inflow	$ billion	2004	60.6	5.5	11.0
Tourist arrivals	Millions	2003	33.0	2.4	13.8
Forex reserves	$ billion	2004	614.5	135.2	4.5

Sources: World Development Indicators (2005); Institute of International Finance, RBI and CSO. 2004 data for India refer to the fiscal year 2004-05.

Footnote: Links to China vs India blog posts part 1 and part 2.

Comments

[Edward Hugh]

I think we need to be careful with such comparisons. Whatever the relative merits of the China/India cases, India is still showing a strong performance in recent years, and in the longer run, for reasons too numerous to start on here, India may be more sustainable than China.

This quarter's growth figures were hardly unsatisfactory:

"Confounding expectations, India’s economy grew 8.1 per cent in the April-June quarter, a full percentage point higher than the country’s top finance official had forecast just a week ago.

Finance Minister Palaniappan Chidambaram had said in Washington last week that gross domestic product would come in at 7.1 percent. Market forecasts ranged slightly higher at 7.3 percent.

Robust expansion in the manufacturing and services sectors powered the faster-than-expected economic growth, with services up 15.2 percent over the previous year."

Financial Times

http://news.ft.com/cms/s/ae308ec0-31b0-11da-9c7f-00000e2511c8.html

[Akshay]

The question never was whether India was China's equal, the question is whether India can surpass or equal China.
If you see India is not even in self-denial about their current position.

[New Economist]

Akshay, I agree. That is indeed the fundamental question. I wrote about it in a previous post, Can India surpass China?, and have also covered various aspects of the issue in my other posts on India.

Despite the many well-known problems facing India, it is possible. But only if the moribund economic reform agenda can be revived. You certainly have a talented Prime Minister who knows what needs to be done - but sadly, he appears hamstrung.

[jay patel]

i am confident that india will surpass china in the near future. China with its collapsed, out of dated communist system will go no where. china is low class laborer who have no brains. They only know how to eat and laugh. india is composed of educated, wisedom people. India gave china Buddhism,shaolin kungfu, and mediatation..

[toshiro nagamura]

Jay patel above is an idiot. China has a much better education system than India, and it is free. Chinese infrastructure is at least two decades more advanced than India's. Without infrastructure, India is nothing, it can only outsource customer service to Dell. India today is more socialist and corrupt than China.

[Arthur Eckart]

I wonder how the comparisons would look like if Hong Kong was taken away. China's PPP is not reflected domestically, because it exports a large proportion of its goods and capital to foreigners through a weaker currency. China wouldn't have a somewhat higher PPP to begin with if it wasn't for export-led growth (to maintain some levels of output and employment). However, living standards in China and India continue to be at Third World levels. It won't be easy to lift two billion people out of poverty, which are huge disadvantages for China and India.

[Phillip Wong]

These comparison don't include Hong Kong. If Hong Kong were added, it would be even more dramatic. Even GDP excludes Hong Kong and Macau. But Hong Kong and Macau ARE part of China, so they should be included. The statement "China and India continue to be at Third World levels" comes from someone who probably hasn't been to China. Sure, there is poverty, but as Hurricane Khatrina proved, even America has a lot of poverty.

[Arthur Eckart]

Phillip, where does it say Hong Kong is not included? I haven't been to Africa either. However, why should I not believe the international organizations when they say it's generally poor like China and India. Why do you assume China and India aren't Third World countries when about half of the poorest people in the world live in those two countries? Also, how do you measure or define that "America has a lot of poverty."?

[Gunjan]

Arthur is clueless. China is not in the same league as the poorer African countries, and neither is India. Does he know that China already consumes more PER-CAPITA cement than US, and is going to consume as much PER-CAPITA steel as US in 2007 ? And this comparison is with a resource-hogging country like USA where people like to drive massive SUVS on concrete lanes designed to be wide enough for them. And btw, I am from India not China. Facts are facts. India is only 9 years behind China. When growths are exponential offcourse a 9 year difference looks massive. Btw, China's percapita income now is what USA had in 1951. AND that was considered a developed country!!! China is almost there- the problem is, lot of people are jealous, especially when they find out 7 out of the 10 tallest buildings in the World are in China, and 9 are in Asia. The Age of Asia has dawned, watch out for more such statements from frustrated nationalists outside Asia who hate to see their country's dominance fade in every single area one by one (cement,steel, roads, magnetic levitation trains, city infrastructure, manufacturing, services, education, women's level in politics and science, engineering, cellphones, cars, computers, software, innovation, broadband, r&d, gaming, even trips to Moon and Mars, the list goes on and on, and getting longer every year...)

[Arthur Eckart]

Gunjan, I have no doubt you think Africans still live in the bushes, while Chinese are becoming so rich. Also, I have no doubt you view non-Asians (i.e. Europeans and Americans) that way. However, your dreams have nothing to do with reality. Let me know when you get a real clue.

[zhang]

jay patel
i am confident that india will surpass china in the near future. China with its collapsed, out of dated communist system will go no where. china is low class laborer who have no brains. They only know how to eat and laugh. india is composed of educated, wisedom people. India gave china Buddhism,shaolin kungfu, and mediatation..

Those are pretty harsh words. I don't know if you will come back to this forum or not, but I would like to point out that the literacy rate of women in India is only 45% as indicated by the table. Maybe you should work on something called reading comprehension before you go bash on other's education system when as the table indicate; India is the one with lower literacy rate. Also "wisedom people" have violated many grammatical errors; perhaps you are trying to say India is full of people with wisdom. See? No extra E. But that aside, many scholarly treasures such as Buddhism, Shaolin Kungfu, and Meditation, have also been brought to Korea and Japan. (ps. I am not too sure what mediatation is either, perhaps spell checker is a little too sophisticated for "wisedom people") They even borrowed Chinese writing system. Yet, Chinese aren’t arrogant and bitter towards them even though China has far greater influence on them than any influence Indian culture had on China. China only yearns to catch up with them.

I am sure the essence of Buddhism will like us to keep in mind that, it is one thing to feel proud of what one can contribute to the greater good of mankind and another to be arrogant and smug. As we can see the once great civilizations of Roman, Greek, Egyptian, and Babylonian contributed greatly to the development of Western culture, yet it’s hard to say those ancient cultures are dominating the ways of modern day Europeans. Greeks are notorious to call non-Greek speakers barbarians; The Romans were highly prejudiced against the unsophisticated German of their time; Egyptian and Babylonians are totally undermined by foreign cultures today. India might suffer a fate similar to all of the above if people like you don’t wake up from your bigotry and end those self-defeating egotistical train of thoughts. How can you make mockery of Chinese culture when India’s most well educated elite personals are taught in English, clearly foreign? Civilizations evolve in cycles; just because your ancestors are proud people, doesn’t necessarily you have anything to be proud of yourself.

You see jay patel, as much as you like to proclaim the wonderfulness of world’s largest democracy. Perhaps you have over looked your own casting system, the world takes notice of millions of the so call “untouchables” living as “one-dollar poor” in city slumps. Life for these people is too bleak for freedom/democracy to mean anything. Another great flaw in India’s democratic system is that constituents can not vote out of their district. One only needs to observe the current abolition of rickshaws in Indian cities to realize how much of a farce this so called representative government truly is. 80% of rickshaw pullers are immigrants from outer impoverished districts, therefore none these people are allowed to vote locally. Local representatives wouldn’t be compelled to voice for these folks to policy makers, not surprisingly the policy was made with no second thoughts on retraining of these soon to be out of work poor fellas.

Btw, if you know anything about Shaolin Temple, you would find that it was after 30s of founding the temple that an Indian monk named Bodhidharma was received. He has only contributed two exercise regimes to monks of that temple. The real hardcore martial arts originated from Shaolin temples are actually developed by outlaws seeking asylum from the government authorities. Further more, Shaolin Temple was disbanded and burned to the ground to be rebuilt many times due to government suppressions. The last time Shaolin was disbanded was during the Cultural Revolution in the 50s by our beloved asshole Mao. It wasn't until the 80s that it was reopened. The point is, every time the temple has to rebuild, warrior monks had to also reinvent a lot of routines.

Also, the Theravada tradition says Siddhārtha Gautama was born around 566 BCE. One of their legends says that his birthplace is Lumbini in the Shākya state, one of a small group of old oligarchic republics in what is now Southern Nepal at the border with India. Further more, recently an important archaeological discovery was made, consisting of the earliest known Buddhist manuscripts, recovered from somewhere near ancient Gandhara in northwest Pakistan. Could Buddhism be originated from Nepalese? How did Pakistani end up having the oldest manuscripts?

[Santosh Shah]

Arthur Eckart wrote: "I wonder how the comparisons would look like if Hong Kong was taken away...Phillip, where does it say Hong Kong is not included?"

Arthur Eckart, you are a troll and you know absolutely nothing about economics. Hong Kong is a separate economic entity from mainland China, it also has independent customs laws. That was the deal for the 1997 handover. Go do a simple Google search. The data above for China DOES NOT include Hong Kong, Macau and Taiwan.

I am Indian, BTW. China is well ahead of India. If we were to include Hong Kong, China would be even more advanced.

[Arthur Eckart]

Santosh, I'm sure everything you say about me fits you perfectly (and stop changing your name, everyone knows you're Chinese). So, that's the limit of your argument? You could have at least cut and pasted something. The link below states Hong Kong is: "The Special Administrative Region of the People's Republic of China" You couldn't even answer my question "Where does it say Hong Kong is not included?" Screaming is not proof. Also, I may add, I completed eight years of economics and trolls can't take economics. I haven't heard an economics statement from you yet.

http://en.wikipedia.org/wiki/Hong_Kong

[Chang]

Arthur,

China's GDP NEVER includes Hong Kong's, Macau's or Taiwain's GDP, it's a well-known fact.. Please, my friend...

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

Notice the (mainland only) mark?

And: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29
Read the footnotes 1 and 2

And I agree with you, you never can tell what the REAL GDP of China is. One thing is that a big chunk of Chinese business is done by CASH, and if you ever have done shopping in China, a lot of stores have TWO prices for you, one is the regular one if you want a receipt, the other one is a lower price if you dont'want a receipt thus the stores dont need to pay taxes, it's a win-win for the stores and the costumer...

So, each year, provincial officials give an estimate of the GDP's for each province, then the central goverment add all those numbers together and do another round of estimation... None of those numbers are close to the truth.. One year, every province's GDP growth is above 10%, but China's official GDP growth is given at 9% by the central goverment. It's well known that provincial officials tend to give a higher number and the central goverment tends to give a lower number than the true GDP growth..

My economy professor in my college was an advisor for then prime minister Zhu Rongji, he said the GDP growths in early 80's were actually around 15-20%.. but he said there is no way to tell the exact number. But we can always get an idea of the size of the economy by the electricity consumption and so on... those numbers are very accurate..

Personally I like India a lot, I have a lot of friends and professors from India, I wish her all the best. And it's really not India OR China, if I have to pick one country to be the Next superpower, I would like to see India taking that role.

[Arthur Eckart]

Chang, thanks for the info. There's quite a disparity between China's GDP and PPP (GDP), i.e. $1.6 trillion or $8.8 trillion, excluding Hong Kong. You stated "China's GDP NEVER includes Hong Kong's, Macau's or Taiwain's GDP, it's a well-known fact.." I know Taiwan is another country. So, that shouldn't be included. However, I thought Britain gave Hong Kong back to China. If that's true, I'm sure there are some measurements with Hong Kong included. Anyway, my general field is economics, not history.

[Chang]

You can never understand China's economy without basic understandings of Chinese history.

Let me try my best to explain why even Chinese central goverment doesnt count HongKong's or Macau's GDP into the GDP total of China.

As you said, Taiwan is another "country". But the Chinese goverment never thinks that way. The goverment always claims Taiwan a province, but the goverment also knows that it would be ridiculous to count Taiwan's GDP in. So by leaving HongKong's or Macau's GDP out of the total GDP, it symbolizes that Taiwan, HongKong and Macau all have the same status, i.e. parts of China, but independent economy entities.

Also, HongKong has her own currency, her own banking system like an independent state. That's Deng Xiaoping's (I hope this name is familiar to you) "One country, two system" frame.. which works all right so far. HongKong people don't pay any taxes to the central goverment (amazing, right?)

As for the huge disparity between GDP and PPP, let me just say that the RMB (chinese currency) is highly under-valued... Some friends of mine have lived in California and Beijing (China's capital city) for several years, and his feeling is that the purchasing power for $100,000 income in CA is roughly the same as $30,000 income in Beijing if you dont buy a car. I encourage you to have a trip to China NOW... Then you will understand why the FDI is going to China like crazy...

[Arthur Eckart]

Chang, China's currency is undervalued, because China is relatively weaker than its major trading partners (e.g. to maintain "acceptable" levels of employment). The weaker currency spurs export growth. Consequently, to keep the balance of payments balanced, China has current account surpluses and capital account deficits. So, Chinese capital (FDI) is flowing to its major trading partners, which keeps China's currency weak to maintain export-led growth. However, the U.S. economy can expand with huge negative net exports, which implies the U.S. economy is much stronger than China's economy. You don't need to know Chinese history to understand a growth at any cost policy is a poor economic policy. The economic policies of many developing countries have created imbalances in the global economy. The imbalances will narrow through recessions in those developing countries.

[a]

Chang, nice comment! I am also from China. I have to say that my parents are less rich than your parents, :), but overall, the typical middle class chinese people I know and met are doing really well. I have been in US for 13 years and every time I went back for a visit (which is almost once a year), I was suprised in a delighted way.

And I also agree with you that if among China and India only one country can be super power. I prefer India. As a Chinese, I don't wish my country to be super power. I wish my country to be peaceful with good quality of life for the people, and if possible, helping other countries get better.

AE seems to be determined to twist the US debt burden and losing market share in the world market into "Strength". Great. Stay dreaming and please don't rush to wake up.

[Arthur Eckart]

Consumers are rational, which explains the huge debt levels and low saving rate of Americans. China is selling (or perhaps more accurately dumping) its goods to foreigners, in many instances below cost. So, foreigners buy lots of Chinese goods. China has to buy lots of U.S. Treasury Bonds to keep the U.S. dollar relatively stronger than the Chinese Yuan. Consequently, interest rates are low in the U.S. So, Americans can also build and buy better and larger houses, and buy other products even more cheaply. Moreover, it's good economic policy for countries to shed obsolete jobs. So, resources can freed-up and shifted into new industries that contribute more value to society and create higher paying jobs. Americans have benefited greatly from China's poor economic policies. Of course, if China stops buying or starts selling its massive holdings of foreign assets, then the Yuan will appreciate, which will lead to lower exports and output, i.e. China will fall into recession. China is in a lose/lose situation, because it has generally adopted the wrong economic policies, and it's playing the global economy from an increasingly weakening position.

[Chang]

China's POOR economic policies?

You can say whatever you want.. but for average Joes and Janes in China, they are buying bigger apartments, better electronics and all chinese made cars. China is the no.2 car market now and just 10 years ago, only the absolute elites owned private cars. Go do a research on the wireless communication market in China, tell me it's not one of the biggest in the world.. The demostic market is so big, it grows so fast that 10 years from now, your "theory" will be totally obsolete.

And may I say, you still have this "cold-war" mentality, how old are you? China is rising, so is India, deal with it.

[Arthur Eckart]

Chang, I wouldn't call what's actually happening only a "theory." You're not disproving my statements that China's economy is expanding too quickly. Japan also lost all the major trade wars to some of its major trading partners. I would appreciate economic arguments rather than unwarranted insults.

[chinaman]

india willbe number 1 in the world..because indian women are the hottest on this planet....trust me ..because i had make love to one of them!!!!!!!!

[Santosh Shah]

This Arthur Eckart arsehole refuses to give up. HK, Macau and Taiwan are not part of China in economic data. This is so obvious that only a troll pretending to be an economic expert would not know this and challenge others for "evidence." What are f'ing farce. Your general field is not economics, troll. Because even an undergraduate economics major who has taken a course in international economics knows that Chinese data doesn't include HK, Macau and Taiwan. It has nothing to do with politics nor history. They are separate economic entities. Period. Investment from Hong Kong into mainland China are considered Foreign Direct Investments (FDI).

And no, Arthur Eckart, I haven't changed my name, troll. I am Indian living in the US. And you are an economics-illiterate troll.

[Arthur Eckart]

Santosh, all you give are baseless comments, that constantly contradict the truth, and never state anything about economics. You're either very defensive about either your looks or competence (it looks like both). Obviously, you have a lot to fear.

[Soumam]

Arthur, I feel you should wake up to realities. You are an economics student (if I am to believe you) yet you sound so childish.

And you were telling China is "dumping" goods into US. Please look up where ever you want for the actual meaning of "dumping". selling goods at a low cost does not mean "dumping", if you understand what I mean. And if indeed China was dumping then the US government is just sitting there to enjoy the show. I mean they won't do anything.

Also I find you repeatedly keep talking about "theories". But my foolish friend you don't realize all "theories" are formed after studying the market or the global scenario. Have you heard of "theories" being made and then the market behaving accoding to those theories? You are discarding the rise of developing nations on some "theories". But don't you think so that in the future more new theories will come forward that will dismiss the existing one.

Also I think there is no fun in comparing economies for a race to the finish. Every country has charted a growth path for them. It doesn't matter whether India wins or China wins. I am a Indian. I am not interested in this race. I am more interested to see the billions of people across the globe in every country being lifted out of poverty using the tools of modern development. I think that should be the greater aim of all economist. Ecomomics is not a "you win I lose game". It is a "win all game"