Political & Economical Forum: The Logic of Brown India

or should I say the lack thereof.

http://www.businessweek.com/globalbiz/blog/eyeonasia/archives/2009/02/will_india_pass.html

Will India Pass China as Best Growing Economy?

Posted by: Bruce Einhorn on February 10

Talk about a tarnished prize. According to this Economic Times story (the ET is a content partner of BusinessWeek), India may soon pass China to become the fastest-growing major economy. India may pip export-dependent China, the ET writes, and emerge as the fastest growing nation among all large economies. To which we should all respond: Big deal. If India does pass China, the change will be largely a reflection of how seriously the global crisis is hammering the Chinese economy not any sign of Indian strength. Indeed, consider the other ET story that is running along with the India-China one on BusinessWeeks Asia Channel today: GDP Growth in India Falls to 7.1% And that 7.1% number is misleading. As the ET reporter points out, this is almost 2 percentage points below previous fiscals growth of 9% despite two rounds of fiscal stimulus packages announced by the center.

Not a pretty picture. But according to the ET, the Indian government has become hyper-active to achieve at least a 6.5% growth in Q4 to register a win over China. Why? Heres the ETs explanation, presumably representing the view of Indian bureaucrats: If India achieves a better growth rate than China even for one quarter, the message will go across to the world and help India in wooing foreign capital, waiting to chase growth stories. Really? All it will take is one quarter of anemic growth in India beating slightly-more-anemic growth in China for investors to forgive India all its infrastructure problems? The bureaucrats in New Delhi need to get out more.

Meanwhile, back on Planet Earth, the Chinese government is planning on spending almost $600 billion in stimulus spending, versus just a few billion in India. And investors in Shanghai have pushed up shares 24% so far this year, compared to a flat market in Mumbai. China certainly has a ton of trouble ahead as it tries to rebuild its economy, but now is certainly not the time for anybody in India to start celebrating.

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India to Pass China as Fastest-Growing Major Economy
The Indian government hopes to woo foreign capital by outpacing China's weakening GDP growth

By Shantanu Sharma
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* GDP Growth in India Falls to 7.1%

All it the brighter side of the current downturn. India may pip export-dependent China in the last quarter of FY09 and emerge as the Fastest growing nation among all large economies.

As China's GDP growth rate dropped to 6.8% during the October-December quarter and is expected to go down further, the Indian government has become hyper-active to achieve at least a 6.5% growth in Q4 to register a win over China.

If India achieves a better growth rate than China even for one quarter, the message will go across to the world and help India in wooing foreign capital, waiting to chase growth stories. Already, government officials in India have been highlighting reports of a few investment analysts who doubted China's official GDP numbers and claimed that it could just be in the positive territory in the last quarter.

A secretary in the government of India confirmed to SundayET that India has a brighter chance of overtaking China in the last quarter of FY09, or Q1 in case of China which follows the calendar year.

"China is heavily dependent on exports and the way things are unfolding China's GDP for January-March quarter would be quite low. We have so far achieved 7.9% and 7.6% growth in the first two quarters, according to the provisional numbers. Though our Q3 number, to be announced by month end, is expected to be less than the comparable number in China (6.8% in Oct-Dec, 08), the softening of interest rates will stimulate demand and ensure a faster growth rate than China in Q4," he said.

Though the Chinese economy grew at 9% during 2008, down from the revised 13% growth rate in 2007, the last quarter number (6.8%) has made the Indian authorities hopeful that India might be able to pip China in GDP growth. As China's export constitutes 37% of its economy against 13% in the case of India, the recession in the developed world will make China suffer the most.

PM's economic advisory council (EAC) member Satish C Jha said he won't be surprised if India grew faster than China. "The situation in China is worse than us. Exports are drastically coming down and China is hit hard. Our economy is driven more by domestic demand and our rural economy is much more resilient than that of China. If our stimulus packages are implemented properly, I won't be surprised if India pips China in GDP growth," Mr. Jha said.

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