Wednesday, October 06, 2010

India to putpace China .. Grim day scenario ..

India to soon outpace China - Economist ..

With the right person at the helm of affairs in India and the right
time where global companies are looking to invest, India is very
fortunate with its democratic credentials and a young population to be
at the right place at the right time..

http://timesofindia.indiatimes.com/business/india-business/India-will-soon-start-to-outpace-China-Economist/articleshow/6689962.cms

I have come out with a broad scenario comparing the three top
economies of the world. SCENARIO ANALYSIS  ..

India presently has  a GDP of $1.2  trillion, China $4.0 trillion and
US, $14 trillion ( WITH A $13 TRILLION NATIONAL DEBT, THE HIGHEST BY
FAR AMONG ALL COUNTRIES OF THE WORLD AND INCREASING AT THE RATE OF $ 2
 BILLION EVERY DAY. living beyond its means..). Ordinarily this would
result in pauperism but if US continues to attract talent and
intellectual coolies from India, who migrate in droves, the scenario
would not be that grim.

Consider a scenario where India grows at a very modest  annual rate of
15 %, China at 5 % and US contracts at a rate of 5%. ( due to the
double recession and loss of competitiveness and lack of innovative
spirit )

After 20 years, the scenario will be like this ( GRIM DAY SCENARIO ..)

India would be a $19.6 trillion economy, China would be a $10.6
trillion economy and US a $5 trillion economy.
ie. India would be twice as big as China and China would be twice as big as US.

If US were to shrink at only 3 % every year, after twenty the scenario
would not be that grim, it would be more or less like India now, but
with GDP of $ 7.5 trillion.

The misery of shrinkage would be much more than the luxury of growth
as evinced by the utiles theory in decision making.

All other nations including Japan, Europe and Russia have been
excluded as they would be insignificant players in the world market
then or the undeveloped or under developed nations of the world..

This is not an utopian scenario, but the demographic and democratic
dividends of India would reap much bigger and better rewards.

ge..

6 comments:

  1. This comment has been removed by the author.

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  2. Americans are generally quite tolerant of their political leaders, but if the current trend continues, there may be a decisive shift in the political leadership, if not in the current election cycle, at least within the next two. That is how things have been historically with the US. So, while I do not necessarily know that drastic change is afoot, it may not be as dire as you predict. Sure, there will be a lot of pain, a lot of Americans will actually come to terms with reality as experienced in poorer nations, etc. It is still too early to write off the country. And in the meanwhile, if the citizens manage to throw out the rampant freemarket capitalists who do not believe in regulating, things may change around.

    rajan ..

    ReplyDelete
  3. “I will sell this flour for Rs.10, then I will buy a goat, the goat will give me milk and lambs, I will sell the milk and lamb and make a lot of money and will marry a beautiful girl… btw, the guy next door will die from lightning strike and his barn will burn down! That is the way the cookie crumbles!”

    This is also called nu journalism!

    Anyways, here are the two articles that the author might be referring to, from economist
    http://www.economist.com/node/17147648?story_id=17147648
    http://www.economist.com/node/17145035

    Regards
    Salim

    ReplyDelete
  4. I accept and agree that it is not that easy and quite often painful, to accept reality especially when one's loyalties have shifted over the years ..

    It is part of life .

    After all, it may be better not to live in a fool's paradise ..

    ge..

    ReplyDelete
  5. [Ah.. Goodieeee goodie… ! (rubs hands together in anticipation, imitating Obelix seeing a wild boar, or a Roman!!]

    Apparently a thinly veiled fable could only create rather oblique references to one’s “loyalties”. Like any Nair, I have to defend me here. (So, I go get my Konan, and bamboo spear!)

    First, as I have stated many times earlier in this forum, I DO NOT have loyalties to any country. I did not have anything like that even when I was in India/ Obviously being to other countries have only made my national ambivalence stronger. It is very likely, judging from the way things are shaping up, that countries will only become more and more economically and culturally dependent on each other than being separate. The rapid formation and growth of huge transnational social groups is a very telling symptom. So, I really do think it is much better to be loyal to the whole humanity than restrictive groups based on race and historical coincidences.

    Now, for a point by point examination of your scenario.

    1. The debt to GDP ratio of America is a sure sign of its demise: This is what you are (I think) proposing in the first paragraph. Here is a problem in this though. The public portion of the debt is largely held by non-us citizens and other governments, China being the largest (25%), but India is also in the fray (2%). So, the world economy will suffer quite a blow if US become unable to service its debts. On the other hand, there really is no direct relationship between the debt to GDP ratio and a countries prospects. For e.g, you will notice that this was over 94% in 1950s, which along with the next few decades became the most productive and prosperous years of American economy in the 20th century. So, this conjecture does not hold water. This is the flour.

    2. Consider India grows by 15% annually for the next 20 years- Yes, let’s consider that. Next 20 years are going to be pretty challenging for the human kind. Whether you like it or not, climate change is a reality and it is going to affect more people than we like to admit. Flooding of the vast low lying areas of the coast (sea rise and snow melt), large scale disturbances to agriculture from changing weather patterns and fluctuations in rain fall etc. I am definitely not a pessimist, and acknowledge there are ways to overcome this. But, that way is definitely not the fast pace growth of industry and “economy” as we have done in the last century. So, if India has to achieve sustainable economy (not sustainable growth, because in a planet with limited resources, no growth is sustainable over periods of time) it has to concentrate on equitable distribution of wealth, decentralization of production and novel, extremely cost effective ways of (like the $35 PC or $100 carbon neutral home). (The goat)

    3. US economy will contract 5% per annum for the next 20 years: This is a quite wild scenario. Even with a double dip recession, I couldn’t find any forecasts that would even come close. On the other hand, such fast contraction would cause ripple effects in the rest of world economy that would hinder growth globally. I am, in no way arguing that it is impossible for US to become a minor economy (at this time in history, it is quite plausible if followed by some more ridiculous policies like starting a war with Iran or dismantling department of education – yep, there are more than a few tea baggers who wants that!) So, this is the lightning strike.


    Now, it is very unbecoming of you to shake the finger of nationalism and pseudo patriotism at anyone who does not agree to your view point.

    Btw, how many of you know the story of the Nayarichi who said all she wanted was the rest of the world to disappear except herself, a velan (coconut climber), and a Thattan?

    Regards
    Salim
    (All references are from various Wikipedia articles, many Krugman’s writings, speech by Sharon Angle, crying fits of Glen Beck, Asterix, and the rest of the world wide web)

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