India (China) fact of the day

by on September 11, 2015 at 1:16 am in Current Affairs, Economics | Permalink

In nominal terms — the most appropriate measure when judging an economy’s global impact — India’s output is one-fifth that of China’s. India makes up a mere 2.5 per cent of global GDP against a hefty 13.5 per cent for China. If China grew at 5 per cent annually, it would add an Indian-sized economy to its already hefty output in less than four years. Saying India can match this is like saying a mouse can pull a tractor.

That is from the excellent David Pilling at the FT.

1 E. Harding September 11, 2015 at 1:27 am

Is Russia’s economy close to the size of that of Germany, or smaller than that of Italy? I think the former. So I think PPP matters more. Nominal currency units matter much more when comparing the ability of people to buy imports or financial assets.

2 E. Harding September 11, 2015 at 1:29 am

“If China grew at 5 per cent annually”

-Or, like Japan in the 1990s, if it’s currency appreciated very rapidly…

3 skeptic September 11, 2015 at 1:37 am

Clearly, India needs more Muslim immigrants in order to stimulate their economy. What are they thinking, to exclude these young, vibrant, male Muslim Arabs from coming in?

4 carlospln September 11, 2015 at 2:13 am

India has > 170M Muslims, approximately 10% of the global total.

5 Nathan W September 11, 2015 at 6:02 am

India has a very high population growth rate already.

6 Ankur September 11, 2015 at 6:11 am

Not Arabs so far (well since the 18th century), but lots of Bangladeshis coming in

https://en.wikipedia.org/wiki/Bangladeshis_in_India

7 Mak September 11, 2015 at 1:55 am

I predict China’s household consumption growth rate will significantly outpace India’s overall rate of growth over the next decade. On an overall basis, it’s a toss up for me, and really depends on how hard they push forward the reforms (the harder they push, the lower the rate of investment growth and with it overall GDP growth).

8 Saturos September 11, 2015 at 2:11 am

He’s missing the part where China isn’t going to grow at 5% annually.

9 eerie September 11, 2015 at 4:55 am

Indian GDP (in nominal terms) hasn’t expanded since 2011. The currency depreciates annually in an amount equal to GDP growth. In ten years, the Indian economy will still only be 3% of the global economy.

10 carlospln September 11, 2015 at 5:59 am

If you’ve visited India & China, you can’t help but be struck by the differences.

Whereas the Han Chinese committed to lifting all boats in China, echoes of the caste system, & India’s history as a subcontinent of 12 countries, mitigate against any unity in values & commitment to modernise the country.

Its why you walk down N. Main Rd. in Koregaon Park in Pune, Maharashtra [an affluent district] & there’s no footpath for pedestrians to walk on – so its broken field running with an eye on the rickshaws.

The eye watering bureaucracy & levels of corruption don’t help development of infrastructure, either.

India will never catch up [to CHI] – not in my lifetime.

11 Axa September 11, 2015 at 6:49 am

Everyone is entitled to have an opinion. The only issue here is that the finance minister communicated an opinion that fits better the Propaganda Minister or Demagogue Nationalist Party leader. Too much politics for a finance minister.

12 rayward September 11, 2015 at 6:50 am

The reports of China’s death have been greatly exaggerated. Choose your enemies carefully because they will define you. My observation is that Americans don’t choose their enemies carefully (China), or their friends (Saudi Arabia). I suppose it’s because we don’t have natural enemies, or friends. Unlike, say, India, Great Britain, or Israel. Thus we pick enemies and friends carelessly, casually. The same way we pick our presidents. In the upcoming presidential election, it seems we will pick our president according to his or her enemies. The list of enemies is long: Iran, Mexico, Russia, Syria, China, France, everybody (Trump trumps them all in the enemies department). As for China, I find it fascinating. In many ways it’s a laboratory, especially in economics. China does it different. With a few exceptions, readers of this blog have already concluded that China does it wrong. For those readers, the idea that we might learn something from China is as preposterous as the idea that we might learn something from France.

13 Thiago Ribeiro September 11, 2015 at 7:27 am

Who is Britain natural enemy nowadays?

14 Lord Action September 11, 2015 at 10:33 am

Germany or Russia, right?

But that’ll probably be a while coming.

15 Thiago Ribeiro September 11, 2015 at 11:09 am

Germany? I don’t think so. Why not France? And Russia will probably America and 2/3 of Europe’s before being Britain’s problem ( except the Russians in London I guess.)

16 collin September 11, 2015 at 1:29 pm

What makes you think the US and China are enemies? Most of it is a little political mudslinging on both sides and not much else.

Anyway, with the Iran nuclear deal, Obama has a passive aggressive friendship to the House Of Saud.

17 Ronald Brak September 11, 2015 at 8:38 am

Another amazing statistic is that it was only 10 years ago that China was where India is now in term of nominal GDP per capita. So if India experiences the same rate of growth as China did in only a decade they will be around where China is now.

18 Axa September 11, 2015 at 8:45 am

I think your missed the 1 that makes the difference between 1740.1 and 740.1 😉

http://data.worldbank.org/indicator/NY.GDP.PCAP.CD?page=1

19 Ronald Brak September 11, 2015 at 9:32 am

Looking at the World Bank table you linked to, it shows China’s per captia GDP in 2005 as being $1,740. And their figure for India’s GDP per capita in 2014 is $1,630. So India’s per capita GDP is very close to where China’s was 10 years ago.

20 HBD September 14, 2015 at 1:07 pm

Are you aware the concept of Time Value of Money?

21 Noumenon72 September 11, 2015 at 10:18 am

India to China ratio: 1/5
Mouse to tractor ratio: 1 oz/6500 lbs = 1/104000
That’s a bit of a bad analogy then. I wouldn’t bet against something that weighed 1/5 of a tractor (1300 lbs) being unable to pull that tractor.

22 derek September 11, 2015 at 10:21 am

The collapse of the Soviet Union was where communism died; the Chinese leadership, maybe feeling the noose around their neck responded by opening up their economy with pretty amazing results.

India is where socialism and bureaucracy dies. We will see what nations that feel that same noose around their neck respond as China did.

23 John L. September 11, 2015 at 10:34 am

Really? India has been “socialist” since 1948 and was much more so in the past. Why would the nations feel the noose now? And the Chinese started opening much before most people notice something wrong (more than usual) with the Soviet Union.

24 Nathan W September 11, 2015 at 11:29 pm

China had already made major moves away from communism years before the collapse of the USSR. Namely, the household responsibility system (1984) and allowing/encouraging communes to specialize in areas of industrial activity for the purpose of export (village and township enterprise).

25 sectarian September 11, 2015 at 3:35 pm

Some good points on the frustrating pace of reform, yet, some rebuttal points at: http://www.forbes.com/sites/edfuller/2015/09/10/india-asias-next-economic-dynamo/

* ” The World Bank predicts India has the potential to be the world’s 3rd largest economy within the next 10 years and to be one of the world’s largest by mid-century. GDP is expected to grow between 7.5% and 8.3% in the coming year.”

* ” The International Monetary Fund estimates the Indian economy will grow 7.5% in 2015, outpacing China’s growth for the first time since 1999.”

* “India is the world’s 4th largest IT start-up hub with more than 3,100 tech startups in the past year alone. It ranks second in worldwide food production. Its auto industry churns outs 22 million cars a year, making it one of the world’s largest auto manufacturers. It boasts a $600 billion retail market and is one of the world’s fastest growing e-commerce markets. And earlier this year, under his ‘Make in India’ policy, Modi helped persuade Korea’s giant Samsung and Europe’s Airbus to open new factories in his country.”

* “According to Ernst & Young, India’s middle class, about 50 million strong, or 5% of the population, will reach 200 million five years from now. They predict that India’s middle class growth will accelerate quickly, reaching 475 million by 2030 and will be adding more people than China to the global middle class just 12 years from now.”

* “more than half of the population is under 25 years of age.”

On balance, while rapid progress is by no means assured, the positives in the direction appear to outweigh the negatives.

26 carlospln September 11, 2015 at 3:42 pm

BS

India’s tech industry employs ~ 500,000 people-in a country of 1.25B?

The World Bank, IMF and Ernst & Young as forecasters?

“On balance, while rapid progress is by no means assured…”

You can say that again.

27 Habermas September 11, 2015 at 4:08 pm

Don’t like those forecasts, how about these: http://www.wsj.com/articles/investors-see-india-as-strongest-of-the-weak-1441827121 India won’t stay laying around to be kicked forever.

28 Kris September 11, 2015 at 4:19 pm

Absolute numbers can be deceptive. The tech industry workers make enough in disposable income to provide livelihoods to a lot more people in the local economy, not to mention increase the standard of living of their close family members (family dependency being very high in India as compared to developed countries.)

29 carlospln September 11, 2015 at 8:45 pm

Taking calls for Dell & IBM Global Svcs?

Somehow I don’t think that’s sufficient.

Come back to me when rural India has been electrified, and there’s potable water & sanitation.

30 Dmitri Helios September 11, 2015 at 8:55 pm

Can anyone copy that FT article and paste it here in the comments section? I don’t want to pay for a subscription.

31 Chip September 12, 2015 at 12:34 am

The rise of the Indian expat in Singapore has been phenomenal in the last decade. They head the largest banks and companies, and drive much of the startup activity. Whether it’s their ease with the English language and familiarity with cultural diversity back home – along with a string education ethic – they have a much higher profile in the Singapore economy than the mainland Chinese, even though there are many more of the latter because Singapore maintains a strict ethnic ratio of about 75% Chinese, 15% Malay and 10% Indian.

I wonder if the government has discussed loosening this requirement in light of the benefits brought by Indian migrants.

32 pgbh September 12, 2015 at 10:58 am

Why is nominal output “the most appropriate measure when judging an economy’s global impact”? I don’t understand this at all.

33 HBD September 13, 2015 at 3:30 pm

China’s average IQ is about 105, whereas India’s about 82. That pretty much tells all. From long term perspective China vs India is about USA vs Mexico or Nigeria. End of the story.

34 Ronald Brak September 13, 2015 at 9:51 pm

An average IQ of 82 would put India where the United States was around 1960. The sixties did not turn out to be a bad decade for US development with GDP growth averaging 7%. That’s around what Indian GDP growth averages now.

35 HBD September 14, 2015 at 12:05 pm

Even if it were true that “An average IQ of 82 would put India where the United States was around 1960” (which is a false statement btw), it’s absolutely meaningless here.

It is because IQ has been all about relative in the sense “when the US avg IQ was 82 around 1960”, Indian then must have had average IQ of 64!

Furthermore, it’s as ridiculous to argue that way as to claim that “Somalia is an economic miracle considering South Korea was starving around 1960”.

36 Ronald Brak September 15, 2015 at 1:26 am

HDB, could you explain what you mean when you say that an average IQ of 82 would put India where the United States was around 1960. Is 82 too high or too low for the US in 1960?

37 Ronald Brak September 15, 2015 at 1:27 am

Sorry, that was a bit garbled. Could you explain what you mean, HDB, when you say that an average IQ of 82 would put India where the United States was around 1960 is a false statement? Is 82 too high or too low for the US in 1960?

38 HBD September 15, 2015 at 10:05 am

IQ is designed as a relative concept. The absolute meaning of IQ, a number with comparisum, is meaningless.

More than 100 years abundant research on IQ shows that worldwide IQ differences among races have been very consisent, across time.

Avg IQ of the UK is set as 100 as the default benchmark. IQ of all the rest countries are set in comparisum to the UK. So from there you have China avg IQ = 105, India avg IQ=82, US average IQ=100 (slightly lower than 100 in reality due to recent mass immigrations). It is so today and it was so in the 2000, 1990s, 1980s, 1970s, 1960s, 1950s, 1940s, 1930s, 1920s, 1910, 1900s…and so on. The absolute numbers may have all increased a bit due to overall better average nutrition levels across time, yet the the IQ ratio differences among races have been largely the same.

Generally speaking, US avg IQ in 1960 was comparative to the UK at a time – mostly White Anglo-saxons and their Euroepan cousins. So if US, as you claimed, “had avg IQ of 82 around 1960s”, then so did the UK. In comparisum, India’s IQ was as low as 64.

Back to standard IQ today: UK=100, US=100, Europe=100, East Asia (China, Japan, Korea) =105, South Asia (India, Pakistan, etc)=82.

Therefore, it would be ridiculous to compare India’s IQ today with US’s IQ in 1960, even assuming what you claimed (that “US IQ=82 in 1960″) were true. Claiming such is just like claiming ” you, Ronald Brak , are as rich as George Washington” because you certainly earn more than $100 per month today whereas G Washington earned about the same amount 200 years ago.

Clear enough?

39 Ronald Brak September 15, 2015 at 10:44 am

So, HBD, if you gave an IQ test from today, or say 2014, and gave it to Americans in 1960, what would you expect the average result to be around?

40 HBD September 15, 2015 at 12:23 pm

Individuals avg IQ increase a bit over time due to better nutrition and health levels over time.

But ehe DIFFERENCE among avg IQs of major races are the similar.

So you can’t compare American avg IQ TODAY to Indian avg IQ of entirely ANOTHER ERA, since it is meaningless.

41 Ronald Brak September 15, 2015 at 12:48 pm

The information I quickly look up indicated that if given today’s IQ test, Americans in 1960 would score around an 82. Does that agree with your information, HBD?

42 HBD September 15, 2015 at 5:04 pm

Dunno which is your secret “source”(errr…NSA BS department based on the dark side of the Moon?), but is that too deep for me to ask you to quickly look up your all mighty “source” and find out what Indians in 1960 would score if given today’s IQ test, since, if you have ever read my above replies where I had repeated several times that, an IQ number only becomes meaningful whenever compared to others. I know I know, logically the answer should be about “64”, in relation to American’s so-called “82”. Though it won’t shock me if it goes much lower 64, considering a considerable number of Indians in 1960 probably didn’t know how to count up to 64 anyway, in any language… Again, thank you Jose and goodbye.

43 Ronald Brak September 15, 2015 at 8:13 pm

Well, one article I looked at on the Flynn Effect, the name given to the rise in IQ over time is here:

http://ourworldindata.org/data/education-knowledge/intelligence/

As you can see there is a considerable difference between the US in the past and the US today, and there has been a sigfificant improvement globally.

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