India and China's latest output data confirms rapid economic growth andrelative global 'decoupling'
By John RossThe publication by both India and China of their latest industrial production data confirmsvery rapid economic growth in both countries. This is not only important in itself but isagainst the view put forward, for example, by Stephen Roach of Morgan Stanley, BillEmmott the former editor of
, and others, that the major Asian developingeconomies were incapable of economically 'decoupling' from the US.Taking first India'sdata, January's industrial production rose 16.7% year on year.Manufacturing output increased by by 17.9%. The output increase was heavily concentratedin the investment production sector - output of capital goods rose by 56.2%, intermediategoods by 21.3%, and consumer goods by 4.2%. The overall industrial output increaserepresented only a marginal slowing compared to therevisedyear on year increase of 17.6%in December - that figure was a revision upwards from the 16.8% initially announced.Overall the figures confirm extremely rapid Indian economic growth.For China, February's monthly figures cannot be used for meaningful year on yearcalculations as the long Chinese New Year holiday fell in February this year and in January in2009 - artificially distorting simple year on year comparisons. The appropriatemeasureis tocompare January and February 2010 with January and February 2009. Taking this China'sindustrial production was up 20.7% year on year. Light industrial production was up 14.5%and heavy industrial production up 23.7%. Particularly notable advances were in productionof transport equipment, up 43.7%, and telecommunications, computers and otherelectronic equipment - up 26.4%. The rapid increase of production is evident - this blog haspreviously analysed the successful shift of China into growth driven by expansion of domestic demandand this is confirmed by the continued trend of China'sfalling tradesurplus.In addition to the inherent importance of the growth data for both India and China thesefigures throw clear light on the issue of 'decoupling' - that is whether rapidly growing Asianeconomies would be able to continue to grow at a fast pace under conditions of recessionor economic slowdown in the US. The idea that 'decoupling' could take place was stronglyargued against, for example, by Stephen Roach of Morgan Stanley and Bill Emmott - formereditor of
and a long term analyst of the Asian economies.Stephen Roach in
The Next Asia
argued: 'The hopes and dreams of decoupling - an overlyoptimistic scenario that envisaged emerging market economies have the wherewithal tostand on their own in an otherwise weakening world - are in tatters.' (p66) This representeda continuation of his argument, presented a year earlier, that: ''Dreams of decouplingdanced in the air on this first official day of meeting at Davos [in January 2008].... I didn'toffer much support for this view... My case is relatively simple. Developing Asia - where thegrowth dynamic is the strongest and the hopes of resilience are the deepest - remains verymuch an externally dependent economy.' (p30)