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Indian economy poses major challenges: Chinese think tank

Discussion in 'World Economy' started by lca-fan, May 11, 2017.

  1. lca-fan

    lca-fan Major SENIOR MEMBER

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    Indian economy poses major challenges: Chinese think tank

    India's competitive economy may pose a challenge to China which may become an "unfortunate bystander" watching India succeed if it didn't develop a more effective growth strategy, a Chinese think-tank has warned.
    By: IANS | Published: May 11, 2017 12:25 PM


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    India’s competitive economy may pose a challenge to China which may become an “unfortunate bystander” watching India succeed if it didn’t develop a more effective growth strategy, a Chinese think-tank has warned. (Image: Reuters)

    India’s competitive economy may pose a challenge to China which may become an “unfortunate bystander” watching India succeed if it didn’t develop a more effective growth strategy, a Chinese think-tank has warned. The Beijing-based think tank Anbound also said that India could well become the next China because of low labour cost, young population and other factors. It pointed out that not enough studies were conducted on India and Beijing “cannot wait until India grows into an apparently promising competitor before discussing how to deal with the situation. “While Indian GDP may lag far behind (than that of China), the country remains a potential emerging market that has high attractiveness for global capital,” said the report, carried by the state-run Global Times on Thursday.

    “Just as what happened with China in the past, the changes taking place in India may also point to a great potential for development. “In our opinion, if India intentionally creates a competitive situation in front of global investors, it will pose a challenge for China. “Moreover, there are growing signs that India is succeeding in attracting more and more investment, which China should take (note of) seriously. “As such, China should develop a more effective growth strategy for the new era or it may become an unfortunate bystander watching India’s success.

    “The country’s vast domestic market, low labour costs and skilled labour market are its most attractive features. As China’s demographic dividend diminishes, India, with half of its population below the age of 25, is poised to take advantage.” An increasing number of Chinese companies had invested in India in recent years, covering such sectors as hardware, software and marketing. “It is noteworthy that Chinese companies’ investment in India has shifted from simply marketing to research and development (R&D),” it said. It cited the case of Chinese telecom company Huawei Technologies, which invested $170 million to open an R&D facility in Bengaluru, and has announced plans to join Prime Minister Narendra Modi’s “Make in India” campaign. “In other words, India may turn itself into China 2.0, and let global investors decide whether to invest in China or India.

    “In our opinion, if India intentionally creates a competitive situation in front of global investors, it will pose a challenge for China. “China needs to ponder and study the rise of the Indian economy carefully. “With a young population, it is entirely possible for the emerging market economy to become China 2.0 to gain the attention of world capital.”

    http://www.financialexpress.com/eco...s-major-challenges-chinese-think-tank/663476/

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  2. Lion of Rajputana

    Lion of Rajputana Captain FULL MEMBER

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    Been saying this for ages now. China's growth was more rapid and left the world overawed for a while, but India's growth is more sustainable and authentic.
     
    Last edited: May 11, 2017
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  3. Butter Chicken

    Butter Chicken Lieutenant FULL MEMBER

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    China can either join hands with India, an alliance that will be the strongest the world will ever see(in 10-15 years) or it can continue to pour money into the Pakistani pit knowing fully well there will be no return on investment and will earn them bad name in the world's largest market(in 10-15 years)
     
  4. lca-fan

    lca-fan Major SENIOR MEMBER

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    From here to $20 trillion: India’s economic growth strategy
    The NITI Aayog action plan to boost agriculture as well as job creation in modern activities fits well with what has happened over the past few decades

    Niranjan Rajadhyaksha

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    The Economic Survey as well as the new NITI Aayog action plan could be read as a vote of confidence in the Asian development strategy. Photo: Pradeep Gaur/Mint
    The NITI Aayog has put out an action plan for the next three years. The document has been severely criticized for being a laundry list of government policies. A strategy document is to follow. It should ideally have come before the action plan—to provide a strategic backdrop for individual policies listed out in the three-year action plan. The sequencing is a bit odd.

    There are some elements of strategic thinking that can be gleaned from the action plan itself. The NITI Aayog, in its discussion on transforming Indian agriculture, has dealt at length with the challenge of increasing farm productivity. It has later backed a traditional Asian strategy of creating quality jobs through the expansion of the organized industrial sectors as well as a shift within it towards more labour-intensive goods and services.

    Exports have been given a central role in the transformation plan. The export market is far bigger than the domestic market. The need to compete in competitive global markets creates incentives for higher productivity. Large firms also support an ecosystem of smaller firms that provide intermediate goods through supply chains.

    The implicit NITI Aayog strategy should be seen against international development experience over the past six decades. In a new paper published in January, economists Xinshen Diao, Margaret McMillan and Dani Rodrik have empirically examined the drivers of economic transformation across the world. They have decomposed growth into two categories. The first driver of economic growth is labour productivity changes within a sector. The second driver is the change in labour productivity as people move from the traditional to modern sectors. Latin American growth is better explained by higher productivity within sectors. African growth is driven by structural change as labour is reallocated.

    The odd thing in this growth decomposition is that both drivers do not kick in. Latin American growth has been accompanied by weak structural change as people have moved from high-productivity work to low-productivity work. African growth has been accompanied by deterioration in productivity growth in the individual sectors of the economy. This is paradoxical, since the Asian growth experience was based on both drivers—and powered by export growth. Productivity within sectors went up even as there was a structural shift of labour from farm to factory.



    Diao, McMillan and Rodrik note that the Indian growth experience has been closer to what happened in Asia rather than the record in Latin America or Africa. The NITI Aayog strategy of boosting farm productivity on the one hand and creating new jobs in modern activities on the other fits well with what has happened in the past few decades. Interestingly, the Economic Survey written this year by Arvind Subramanian also notes that India has begun to resemble Asia in terms of its fiscal balances, high savings rate and trade openness.

    The Indian development strategy is clearly influenced by the work of the West Indian economist W. Arthur Lewis, who won the Nobel Prize in 1979 for his description of the development process. Lewis drew an important distinction between the traditional and modern sectors of an economy. Productivity is higher in the latter. Economic growth thus depends on how rapidly resources, and especially labour, move from the traditional to the modern sectors of an economy.

    The NITI Aayog needs to make some of these issues clear in its promised strategy document. It also needs to grapple with the undeniable fact that India has not been able to pull off a Lewisian transition. In his landmark 1992 budget speech, Manmohan Singh had clearly said that the policy goal over the long term was “to evolve a pattern of production which is labour intensive and generates larger employment opportunities in productive higher income jobs….” Twenty five years later, the NITI Aayog action plan seems to be informed by the same reasoning.

    The Economic Survey as well as the new NITI Aayog action plan could be read as a vote of confidence in the Asian development strategy—and a counter to the quixotic ideas about using the millions of tiny enterprises in the informal sector to drive economic transformation.

    But there are challenges as well. The ability to create jobs in modern enterprises will be tested by the increasing use of automation in factories and offices. The ability to push exports will depend on whether the global system remains open in the face of growing protectionist sentiment in the developed world. These two challenges—weak job creation as well as export pessimism—have cast a long shadow on Indian development strategy at least from the days of the second Five-Year Plan.

    The past 25 years have seen the Indian economy grow more than eightfold in dollar terms between 1992 and 2017, according to data from the International Monetary Fund. A $293 billion economy is now a $2.4 trillion one. Average incomes have also gone up by a factor of six over the same period—from $318 to $1,850. The big question is if, assuming the same momentum, the next 25 years will end with a $20 trillion economy where the average Indian citizen earns $7,100.

    What is the strategy to get there—or even beyond?
    http://www.livemint.com/Opinion/rVW...trillion-Indias-economic-growth-strategy.html
     
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  5. lca-fan

    lca-fan Major SENIOR MEMBER

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    It's time to take economic competition from India seriously: China think tank
    The report is an unusual contrast, arguing that the Narendra Modi government has been successful in raising India's profile among global investors.

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    Ananth Krishnan | Posted by Samiya Latief
    Beijing, May 11, 2017 | UPDATED 09:08 IST
    Narendra Modi government had been successful in raising India's profile among global investors - and even succeeding in bringing in Chinese companies - which could pose a long-term challenge to China, according to the think-tank.

    "Generally speaking, India does have the conditions to copy China's economic growth model thanks to its vast size and market, low labour costs and large population, which are all similar to China's conditions. In fact, it added, "global investors are currently undecided. Moreover, there are growing signs that India is succeeding in attracting more and more investment, which China should take seriously."

    "The country's vast domestic market, low labour costs and skilled labour market are its most attractive features. As China's demographic dividend diminishes, India, with half of its population below the age of 25, is poised to take advantage," the report said.

    CHINESE COMPANIES INVESTING IN INDIA

    It also pointed to "an increasing number of Chinese companies" investing in the Indian market, from smartphone firms Vivo, Oppo and Xiaomi, for whom India is emerging as the most important market after China, as well as Chinese technology companies that had been successful in introducing products in the Indian market, from UC Browser to SHAREit.

    The report said, "It is noteworthy that Chinese companies' investment in India has shifted from simply marketing to research and development (R&D). For instance, Chinese telecom company Huawei Technologies Co invested $170 million to open an R&D facility in Bengaluru, and announced its plan to join Prime Minister Narendra Modi's 'Make in India' campaign."

    INDIA A POTENTIAL CONSUMER GROUP

    It drew a parallel with China's own growth story, suggesting that "the changes that are taking place in India may also point to great potential for development." "With a large population of young people, which is not only the labour force but also a potential consumer group, India has the possibility of seeing explosive economic growth in the future. Therefore, we must pay close attention to the development of this unfamiliar neighbour. One of our researchersraised a question: If India decided to copy China, what impact would it have and what should China do? By copying China, India may also develop an internet economy and boost its infrastructure construction, along with investment-driven growth. In other words, India may turn itself into China 2.0, and let global investors decide whether to invest in China or India."

    It bemoaned the fact that few Chinese think-tanks or experts were taking India seriously enough. "It should be pointed out that China has not conducted enough studies on India," the think-tank said. "From the perspective of think tanks, China cannot wait until India grows into an apparently promising competitor before discussing how to deal with the situation. As such, China should develop a more effective growth strategy for the new era or it may become an unfortunate bystander watching India's success. China needs to ponder and study the rise of the Indian economy carefully. With a young population, it is entirely possible for the emerging market economy to become China 2.0 to gain the attention of world capital."

    http://indiatoday.intoday.in/story/china-india-economic-competition-modi-make-in-india/1/950912.html
     
  6. randomradio

    randomradio Mod Staff Member MODERATOR

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    The big question is if, assuming the same momentum, the next 25 years will end with a $20 trillion economy where the average Indian citizen earns $7,100.

    Dumb statement. At $7100 per capita, the population should be 2.8 billion.

    In fact, the per capita should be about $13000 by then.
     
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  7. Agent_47

    Agent_47 Admin - Blog Staff Member MODERATOR

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    Last NITI Aayog report was sane. They predicted $7.25 trillion by 2030 at 8% growth. Smaller than what China is now.
     
  8. randomradio

    randomradio Mod Staff Member MODERATOR

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    It's actually pretty much the same. After 15 years, it will be 7.25T. After 25 years, it will be 20T. These figures consider inflation but not currency fluctuation because you can't really predict that.

    So the above figures are at today's exchange rates. Which means, it can increase or reduce depending on the exchange rate of the time.

    For example, if INR goes back to 45 to USD, then the figure of 7.25 would become 10.6. And 20 would become 26.
     
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  9. Naagraj

    Naagraj 2nd Lieutant FULL MEMBER

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    Just another feel good article for indian from chinees. Nothing special.
     
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  10. A_poster

    A_poster Captain FULL MEMBER

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    Probably trying to balance all the bullshit global times is printing.
     
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  11. Butter Chicken

    Butter Chicken Lieutenant FULL MEMBER

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    It is not feel good article.I get the feeling that CCP is divided on supporting India or Pakistan.Chinese are good businessmen and wants to make the better economic choice.
    Also,due to 1 child policy,China will face a huge crash in the future.Their 1.4 billion population is expected to reduce to 800 million by the end of the century.Imagine what havoc that will create in China.
    Meanwhile India's population will peak around 1.7 billion in b/w 2055-2060.Population growth is key to economic growth.
     
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  12. SrNair

    SrNair Captain FULL MEMBER

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    And terrorist infestation .5000 of them fighting in Syria.
     
  13. SrNair

    SrNair Captain FULL MEMBER

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    Chinese growth was clearly on steroid .At 2007 they even experienced a 14.2% GDP growth ( rate manipulation is a concern) .
    We cant grow at that level at the current scenario but a 10% is easily possible .
    Until a few month ago our exchange rate was 67 Rs now it is hovering around 64 RS and will change if it again appreciate .
     
  14. SrNair

    SrNair Captain FULL MEMBER

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    There are other ways .Because you have a US with 30 crore people with around 20 trillion$ economy in there .
     
  15. SrNair

    SrNair Captain FULL MEMBER

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    They should be worried about it because export driven economy has a lots of disadvantage when it compares to a consumption driven economy
     

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