Illustration: Soham Sen | ThePrint
Illustration: Soham Sen | ThePrint
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In 2014, India’s economy finally began growing faster than China’s, and stayed ahead for the next three years. In 2018, the forecast was that the ranking would stay unchanged till 2020. As things turned out, China soon pulled ahead, and then the gap grew. This year, its economy will see growth of an anticipated 2 per cent, while India experiences a sharp recession. Adjusting for relative changes in the rupee’s and yuan’s dollar values, the International Monetary Fund now says China’s economy grew by 146 per cent in the 2010-20 decade while India managed barely a third of that: 52 per cent.

Yet the Indian story wasn’t bad at all, since its growth outpaced every trillion-dollar economy other than China. Of the 13 other countries in that club, as many as seven saw their economies shrink in the course of the decade. America’s growth rate in 2010-20, at 39 per cent, was among the best of the rest. So India, despite misadventures, a slowdown and now a recession, has actually had a pretty good decade if one judges by plain economic growth. On the other hand, it is worth bearing in mind that some of the smaller economies have done much better. Bangladesh grew faster than China during the decade, while Vietnam nearly matched it.

What of the future? It was probably Marx who said that economies in capitalism see incremental growth punctuated by periodic crises. The reality just now is that, even as both India and the world struggle to re-build after the pandemic, they face slow-burn problems that could develop into full-blown crises. No one can foresee which volcano will erupt if inequality continues to grow as it has even nine years after the “Occupy Wall Street” campaign of protest by the “99 per cent”. Marx’s other prediction, of a crisis of under-consumption, begins to look plausible as workers get a smaller share of the pie, with fewer people working than before, at poorer salary levels in the midst of more uncertainty than before, while the top 1 per cent has it good. Could democracy provide answers? We should consider Donald Trump, supported as someone said by those with an excess of wealth and an excess of anger.


Also read: Ten ways Covid has changed the world economy forever


 

Nor can anyone foresee when climate change, which so far has not seriously intruded on the calculations of economic growth, will force itself on economists’ mindsets about what constitutes “growth”. The US president-elect, Joe Biden, has made inequality and climate change part of his core agenda. It is time India did too. That should translate into a long-delayed inclusion of “nature’s capital” in depreciation calculations — and affect the economics of (among other things) mining activity and paddy-growing by the protesting farmers of Punjab and Haryana. In turn rising inequalities may prompt more welfarism, perhaps even a minimum income guarantee that could become a fiscal trap from which escape becomes impossible. Both issues point to the need for a re-assessment of the approach to macro-economic policy, though it remains true that without growth as traditionally defined, all other goals will be more difficult to attain.

Finally, there is the evolving power dynamic in Asia. China’s economy is now 5.7 times India’s, compared to 3.5 times in 2010. It seems a matter of time before it becomes bigger than America’s. A richer China’s increasing expenditure on research and development, measured in dollars using purchasing power parity, is now close to that by the US. India spends a fraction of that, a smaller proportion in relation to its own GDP, and with less to show for the money spent. The results are evident in the growing Chinese challenge to the US on frontier technologies.

As for military power, China is about to launch its third aircraft carrier and plans six in all, two of them reportedly designated for the Indian Ocean where India will probably deploy a brace of much smaller carriers. It is hard to tell whether intensifying and broadening power rivalries will result in military conflict, as has happened with previous power-shifts, or simply the Finlandisation of much of Asia. Ten years from now, the world could look a very different place.

By Special Arrangement with Business Standard.


Also read: China’s economy set to overtake the US by 2028, says report


 

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5 COMMENTS

  1. The way India is coming out of this pandemic indicates that we have got it in us. The corporates have adapted to get a better EBITDA in the last quarter. So, all is not lost.
    To sustain our economy the changes have to come at macro levels rather than at micro levels. For a symphony to be harmonious all instruments need to be played from the same score sheet. Constantly being critical of the conductor also does not help.
    There exists a penchant for comparing the economies of China and India at the drop of a hat. It is true that in absolute terms the Chinese economy is far ahead than that of India. But this comparison is like comparing apples and oranges.
    The political dispensations play a big part in regulating the economy of a Nation. In a fledgling democracy like India with diverse cultures, religions, vast disparities in wealth it is very difficult to bring in reforms required at a pace with which we can catch up with the rest of the world. Local forces working at cross purposes with parochial agendas, have ensured that the music is always jarring. As somebody has commented, India is a laggard democracy. It is difficult for laggards to catch up.
    On the other hand, at least two generations of Chinese have undergone depravations which we Indians will never accept. The “Freedom” which is touted around in our country as a gospel probably has been the bane. Don’t get it wrong; we as a Nation have failed to keep pace with our responsibilities as a people. Every agitation in the name of democracy and freedom has been destructive, setting us back at every step. Our mainstream media has also failed to instill the feeling of responsibility in the people.
    These statistics on the economy will be just that, if we do not change our approach to include sacrifices and participation.

  2. India 1.6billions population will be the nuclear time bomb awaiting to ignite for the world in next 10yrs.

    Its explosive growing population is not a bonus but a threat, when 40% is illiterate, 50% very poorly educated unfit for skilled jobs, with Top2% fleeing to overseas never to return.

    Without min 8% GDP annual growth for next 20yrs, India can’t create 20mils new jobs every year for its new labours entering job market. Once jobless exceed a threshold, society will breakdown permanently into social unrest and starvation.

    Already 900mils Indians are surviving on gov subsidized agriculture with 7% unemployment rate. Excluding 70mils gov guaranteed 100days farm jobs, jobless rate will have hit over 17%.

    Unemployment rate had reached 44yrs high since 2018 in slow down growth, further worsened in 2020 when shutdown destroyed 100s millions jobs, seeing many million jobless migrants walking thousands km home. Some said jobless rate has reached 33%.

    Since 2015, many global & some India economists had questioned India BJP GDP data that inflate growth, fueled by high inflation. Its finance minister had repeatedly boasted in every press meeting of 11.5% growth.

    True enough, by 2018 India no longer able to conceal its fragile economy declined growth fueled by 5% inflation. 2019 see another weaker growth of 4.2% fueled by 6% inflation.

    2020 is a watershed year where India GDP plunged consecutively in 2 Qtr, a technical recession of 30%, even $500Bils(20% GDP) was borrowed to pump economy.

    While Modi insisted India GDP will achieve $5T by 2024, any one with basic maths ability knows its impossible. It will require at least 15~20% annual growth rate.

    With global economy badly hit by pandemic, India can’t export its jobless problem out. In fact, millions of India overseas workers losing their jobs are returning to India further aggravate the jobless problem. Diminished $80Bils p.a. remittances will cause even more hardship. Future look bleak for any India high growth to create 20mils new jobs annually.

    But this is only beginning of India nightmare. As the world started its Industrial4.0 with AI automation, its projected billion of manual jobs will become obsolete within 10yrs.

    Even farming will be fully autonomous operated, which already on trial link with 5G in China & EU. These will drive cost down with high output, directly threaten India 900mils farmers livelihood using manual farming.

    If India continue boycott RCEP and other trade block, its isolating itself further slow its growth potential. If it joins, its uncompetitive agriculture sector will be devastated. In both ways, a huge jobless crisis is foreseeable within next 5yrs. India is certainly not prepare for it.

  3. “We should consider Donald Trump, supported as someone said by those with an excess of wealth and an excess of anger.”

    Not sure what Ninan means by that. Trump’s support came from those bypassed by globalisation, the rural rust belt states, struggling to make a living.

    Even in this year’s presidential campaign, Biden was able to raise five to ten times more funds, thanks to the Democrat support base in rich states like California and New York.

  4. Once Marx is quoted, the article stops making sense. Only in India, those who call themselves liberal economists have Marx as their guru. The new farm laws seem to have converted so called liberal economists and pro market reformers into Marxists.

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