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28 March 2014
" Can Indian Tiger trample the Chinese Dragon? " The India v/s China Story
" Can Indian Tiger trample the
Chinese Dragon? " The India v/s China Story
In an article posted on my blog few weeks back on the topic "Made in China- A Threat for India?" , I was trying to analyze how we
can compete with China. But today, I want to get into an interesting topic.
Ever wonder who will win the economic competition between India & China?
End of the day who will survive the recession? I am sure, there is no dispute
that India & China are emerging as the World's two Economic Super Powers.
The conventional wisdom suggests that China will soon rule the world, because
of its world leading population and massive economic growth over the last two
But let me bring a new twist to the' India-China, who's better 'story. I was reading
a report published byCapgeminiConsulting Service, which says,' Made in India'could be the next big economic story in the world.
The report says that in the next 3-5 years, India, while retaining its IT hold,
could challenge China as the world's manufacturing hub.
Adding on to this, according to theEconomic Times, some economists
believe that India will overcome China as the fastest growing economy in 2009.
If India achieves a bettergrowth ratethan China even for one quarter, the
message will go across to the world andhelp Indiain attracting more foreign capital.
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 be just an inflated one. Its true that, the economic slowdown has hit
both India & China but i think 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 dependable
than that of China.
We have strong reasons why the Indian
economy will be the most successful one when it comes to riding out the current
economic storm. Are you surprised with such a statement when all we get is
hysterically bad news about economy from media's? Don't be. I have somefacts and figurespublished inBusiness & Economyto support my views.
REASONS FOR TIGER'S SMILE !
FDI :China comfortably
gets more than $ 150 billion in foreign direct investments every year. As a
percentage of GDP, it will be between 7% to 10%. On the other side, Indian FDI
has crossed $ 20 billion buthas neverexceeded even 1.5% of GDP. Now, we all know thatforeign investmentswill dry up. But since our GDP growth has been driven by domestic
investment,we will be the least adversely
EXPORTS :There arehorror storiesfloating around of how hundreds ofthousands of jobs are being lost
because exports are slowing down and declining. I read, half amillion jobs were lost in the last quarter of 2008 because of
contrasting exports. But on the other side,Chinese governmentadmit that, 20 millionjobs were lost in the same period and nowyou know where India stands compared to other nations. Also remember,
exports from India is only around 15% of GDP, one of the lowest among major
economies in the world.
CONSUMPTION :China's consumption accounts for just about 35% of GDP while it
constitutes about 65% of GDP in India. When bad times come, consumption might
stagnate in India while investment is bound to fall suddenly in China. No
wonder, the Indian GDP growth rate will be around 7% in 2008-09 while it might
crash from 13% to 6% in China. Slow & steady is often better!
INTEREST RATES :If every crisis is an opportunity, here is the mother of all
opportunities. A few years ago, when major economies of the world had started
cutting interest rates because of recession worries, ourRBIkept hiking them to fight inflation.
After the meltdown, there has been a move to cut interest rates. But the fact
of the matter is that no other major economy of the world has interest rates as
high as India's. That means, there is enough scope to reduce it drastically which
puts us in a better position compared to other nations.
HEALTHY BANKS :This is arguably the biggest advantage that Indian economy enjoys in
these turbulent times. Nobody knows for sure the position of Chinese Banks when
it comes to bad debts ; but things have started rottening for them post
recession. But our banking system is literally in the pink of health for sure.
INDIA INC : Many economists now acknowledge that India holds
the advantage compared to China because of two reasons. Most successful Indian
companies are private. More importantly, they have used capital far more
productively and efficiently than Chinese counterparts. Chinese companies
purely rely on Government incentives for growth. Also remember, most of our
companies are sitting on billions of dollars of reserves!