This action might not be possible to undo. Are you sure you want to continue?
Both India and China rank among the front runners of global economy and are among the world's most diverse nations. Both the countries were among the most ancient civilizations and their economies are influenced by a number of social, political, economic and other factors. However, if we try to properly understand the various economic and market trends and features of the countries, we can make a comparison between Indian and Chinese economy. Going by the basic facts, the economy of China is more developed than that of India. While India is the 12th largest economy in terms of the exchange rates, China occupies the third position. Compared to the estimated $1.209 trillion GDP of India, China has an average GDP of around $7.8 trillion. In case of per capital GDP, India lags far behind China with just $1016 compared to $6,100 of the latter. To make a basic comparison of India and China Economy, we need to have an idea of the economic facts of the countries. Facts GDP GDP growth Per capital GDP Inflation Labor Force Unemployment India around $1.209 trillion 6.7% $1016 7.8 % 523.5 million 6.8 % China around $7.8 trillion 9.1% $6,100 -1.2 % 807.7 million 4.3 %
If we make the analysis of the India vs. China economy, we can see that there are a number of factors that has made China a better economy than India. First things first, India was under the colonial rule of the British for around 190 years. This draine d the country's resources to a great extent and led to huge economic loss. On the other hand, there was no such instance of colonization in China. As such, from the very beginning, the country enjoyed a planned economic model which made it stronger. Agriculture Agriculture is another factor of economic comparison of India and China. It forms a major economic sector in both the countries. However, the agricultural sector of China is more developed than that of India. Unlike India, where farmers still use the traditional and old methods of cultivation, the agricultural techniques used in China are very much developed. This leads to better quality and high yield of crops which can be exported. Liberalization of the market In spite of being a Socialist country, China started towards the liberalization of its market economy much before India. This strengthened the economy to a great extent. On the other hand, India was very slow in embracing globalization and open market economies. While India's liberalization policies started in the 1990s, China welcomed foreign direct investment
water management.and private investment in the mid 1980s. China has a much well developed infrastructure. China and India. China is still investing in huge amounts towards manpower development and strengthening of infrastructure. And as the global economy emerges from the Great Recession. Although India has become much developed than before. Though India still can't compete on top-line economic growth ² the World Bank projects India's gross domestic product (GDP) will increase 6. making India's fractured political system appear sluggish and chaotic. . Pundits around the world laud China's leadership for its well-devised economic policies during the crisis. China's fast-acting government implements new policies with blinding speed. India doesn't appear to be facing the same degree of potential dangers and downside risks as China. India once again seems to be playing second fiddle. communication. which means policymakers in New Delhi might have a much easier task in maintaining the economy's momentum than their Chinese counterparts. it is still plagued by problems such as poverty. contrasting sharply with the sagging infrastructure of New Delhi and Mumbai. lack of civic amenities and so on. says Jim Walker. In fact unlike India. "The way I see it is that the growth in India is much more sustainable" than the growth in China. All these aspects are well developed in China which has put a positive impact in its economy to make it one of the best in the world. an economist at Hong Kong±based research firm Asianomics. unemployment. India may finally have one up on its high-octane rival. This made a significant change in its economy and the GDP increased considerably.4% in 2009. The Chinese economy historically outpaces India's by just about every measure. however. China's Property Market Soars. China nearly always comes out on top. (Read "Amid Recovery. Beijing's shiny new airport and wide freeways are models of modern development. which were so effective in restarting economic growth that they helped lift the entire Asian region out of the downturn. y y y 324Share 3diggsdigg In the inevitable comparisons that economists and businesspeople make between Asia's two rising giants.") Now. Some of the important factors that have created a stark difference between the economies of the two countries are manpower and labor development. health care facilities and services. far short of the 8.7% that China announced in mid-January ± India's economy looks to be rebounding from the downturn in better shape than China's. Difference in infrastructure and other aspects of economic growth Compared to India. civic amenities and so on.
for example. Many economists expect the large surge in credit to lead to a growing number of nonperforming loans (NPLs). China implemented what Walker calls "the biggest stimulus program in global history. especially compared with Chinese lenders. isn't experiencing nearly the same degree of fallout from its recession-fighting methods. meanwhile. India's domestic economy provides greater cushion from external shocks than China's.8% in December from a year earlier ² the fastest increase in 18 months. holding up growth even as China's exports dropped 16% in 2009. UBS economist Wang Tao calculates that if 20% of all new lending in 2009 and 10% of the amount in 2010 goes bad over the next three to five years. managing director general of the Asian Development Bank in Manila. Most important. at about 6% of GDP per year. The amount of new loans made in 2009 nearly doubled from the year before to $1. Thus India was afforded more protection from the worst effects of the financial crisis in the West. By comparison. economists see continued strength in India's banks. More significantly." Policymakers in Beijing are clearly concerned. A January report by economic-research outfit Centennial Asia Advisors noted that based on available data. they have introduced a series of steps to cool down the housing market and restrict access to credit by. India's banks have remained quite conservative through the downturn." Nor do analysts harbor the same concerns that India's monetary policies are sending prices of Indian real estate to bubble levels. Though Wang notes that the total is small compared with the level of NPLs that Chinese banks carried in the past. she still calls the sum "staggering. China's two-year. According to government data. "there was no sign that domestic banks' nonperforming assets were deteriorating materially.India's edge is due to the different stimulus programs adopted by the two countries to support growth during the downturn. Goldman Sachs estimates that India's government stimulus will total $36 billion this fiscal year. reintroducing taxes on certain property transactions and raising the required level of cash that banks have to keep on hand in an effort to reduce new lending. China's exports represented 35% of GDP compared with only 24% for India in 2008. for example. offering tax breaks and increasing fiscal spending ± but the scale was smaller than in China. or roughly 8% of GDP. India maintained robust growth without Beijing's hefty stimulus in part because it is less exposed to the international economy." says Rajat Nag. The stimulus plan worked wonders. India managed to achieve its substantial growth without putting its banking sector at risk. In a November report. As a result. But now China is facing the consequences of its largesse.4 trillion ± representing almost 30% of GDP. though.") India. average real estate prices in Chinese cities jumped 7. though less stellar. Beijing most significantly counted on massive credit growth to spur the economy. the total amount of NPLs from China's stimulus program would reach $400 billion. Growth of credit. $585 billion package is roughly twice as large. was actually lower in 2009 than in 2008. The government used the same tools as every other to support growth when the financial crisis hit ± cutting interest rates. or only 3% of GDP. Fears are rising that Beijing's easymoney policies have fueled a potential property-price bubble. India's confident consumer didn't let the economy down. Passenger car sales in India in December . In fact.S. Since December. (Read "Foreign Luxury Cars: Picking Up Speed in India. while China's government needed to be much more active to replace lost exports to the U." On top of government outlays for new infrastructure and tax breaks. "India's growth. does have the reassuring factor that the [risks of] asset price bubbles are less. The credit boom has also sparked worries about the nation's banking system. Private domestic consumption accounts for 57% of GDP in India compared with only 35% in China.
2. has said that "slow and steady will win the race. economically sustainable growth rate. is false . Both have responded by monetary tightening. Such tightening affects inflation via its effect on demand and its interrelation with the supply side of the economy. or close to double digit. The government has to contend with a yawning budget deficit.jumped 40% from a year earlier. In particular it considers the relative efficiency of investment in China and India and the consequences of this for inflation and growth. Therefore. This remains the correct policy. balance of payments deficit makes it credible for India to aim at a double digit. The projections for India's growth at the latest Indian Prime Minister's Economic Advisory Council. and last year's weak monsoon rains will likely undercut agricultural production and soften rural consumer spending. and at present. China and India ± economic growth and the struggle against inflation India and China are engaged in separate but parallel struggles with inflation." says Asianomics' Walker. i. "What we see [in India] is a fundamental domestic demand story that doesn't stall in the time of a global downturn. China's policy makers should aim at increasing domestic demand only via increasing domestic consumption. This article.China is facing an overall problem of constraints on capacity which has inflationary consequences. and not also increasing domestic investment. India's domestic savings level combined with a policy of accepting a moderate. by increasing demand but not tackling capacity constraints. not far behind the 9% rate it predicts for China for each of those years. As China is suffering from inflationary capacity constraints the argument made by some commentators that in 2009. for example. of 7. when speaking about his country's more plodding pace of economic policymaking. (See pictures of India's "slumdog" entrepreneurs. But rapid growth is expected to continue.e.2% in the .) The Indian economy is not immune to risks.readers can turn to the article for the supporting evidence. The Chinese authorities in 2009 were therefore right to have expanded both domestic investment and domestic consumption. would increase inflationary pressures. 1.6% in 2010 and 8% in 2011.such a policy. As this article is somewhat more statistical than most on this blog it may be useful to summarise its conclusions . The World Bank forecasts India's economy will surge 7. Analysis of macro-economic parameters clearly confirms other forms of study that both the Chinese and Indian economies are up against or approaching inflationary capacity constraints. 3. therefore." The Great Recession appears to have proved him right. Indian Prime Minister Manmohan Singh. the analysis that China is facing an overall problem of 'overcapacity' is the reverse of the truth . analyses macroeconomic determinants of the supply side of China's and India's economies and its effect on inflation and their relative growth rates. up to 3% of GDP.
is almost exactly the same as China's and therefore. is however not sufficient to estimate how serious are overall inflationary capacity constraints. on the basis of the level of of investment achieved in 2009. However further acceleration.current fiscal year and over 8% in the next. coal and even in aluminium and steel which only a few months back seemed to be suffering from chronic overcapacity. unless there is a change in this. India raised bank reserve requirements on 29 January.it will always be possible to find these cases. Only overall consideration of the balance between demand and supply can determine whether deflationary overcapacity or inflationary lack of capacity is dominant. as it is in practice impossible to exactly match these in all sectors. India has ample strategic margin to contain inflation or that growth rates will exceed these projections. 4. appear even moderate compared to the macroeconomic potential . or both. would be likely to produce unsustainable capacity constraints and therefore the Chinese authorities are correct to have begun to rein in the rate of acceleration of the economy. There is not a statistical basis for the claim that India is able to make more efficient use of investment than China and therefore that India will be able to match China's growth rate with a lower level of investment. at the macro-economy. from the point of view of economic growth. Pointing to cases of either overcapacity or undercapacity. whether statistical or relying on anecdotes. "The capacity overhang has been quickly whittled down in major industrial sectors. To look clearly at the root of the issue of capacity constraints it is therefore necessary to look at the overall situation ± i. Examination of this for both China and . China. should be able to sustain the approximately 12% GDP growth which is likely in the early part of 2010 without seriously destabilising inflationary capacity constraints. while important. even when overall macro supply and demand are in balance. The more detailed analysis of these points follows. In regard to capacity constraints in China Geoff Dyer noted in the Financial Times: 'According to Yu Song and Helen Qiao at Goldman Sachs. They also see emerging bottlenecks in electricity." they wrote in a recent report.(1) But other more general inflationary pressures are due to capacity constraints in sectors in which additional investment can potentially tackle the problem in the medium or short term. The struggle with inflation in both China and India is complicated by short term inflationary pressures created by climatic effects which have contributed to capacity constraints in food supply.' Analysing the situation in particular industries. the most extreme example is in the auto sector. therefore does not resolve the issue . without an increase in the level of investment.indicating that either. their relative growth rates will continue to be determined by which country invests a higher proportion of GDP.e. There will always necessarily statistically be examples of 'overcapacity' and 'undercapacity' in an economy. *** On 12 February China's central bank raised banks' reserve requirements for the second time in a month. India's efficiency of the use of investment. 5. where extra shifts mean factories are running at above capacity.
China's use of investment is highly efficient in terms of international comparisons as is India's. This data shows the dramatic decrease in the percentage of GDP that had to be devoted to investment to generate economic growth in China after the economic reforms starting in 1978 and as a result of the economic opening up in India. by simply increasing their efficiency of investment. To demonstrate this. Efficiency of investment in China and India Taking a five year moving average.5 percent a year and its share of fixed investment in GDP was 31. to smooth out purely short term fluctuations. but indicative and relatively current.0 percent ± i. To overcome current domestic capacity constraints they would both have to raise the level of investment in their economies.(3) As neither China nor India during the latest five year period suffered intolerable macroeconomic imbalances it may be assumed that 3. contrary to myths presumably spread by those who have not examined the figures. the latest for which there is full data. China or India cannot increase capacity only via increased efficiency of investment The first point revealed by examining the macroeconomic constraints is that neither China nor India can significantly increase capacity.7 percent of GDP in fixed investment correlation with 1 percent GDP growth. To give detail.7 percent of GDP ± yielding a 3.7 percent of GDP in fixed investment for its economy to grow by 1 percent. China's GDP grew at an average annual 10. can be brought more fully up to date . and problem of timeliness of. China has had to utilize 3.8 percent. measure is to calculate the correlation of the level of investment with GDP growth ± i.7% of GDP devoted to investment to generate 1% GDP growth is consistent with sustainable macro-economic stability. Such analyses. Such analysis confirms the situation found by the total factor productivity studies and casts a clear light on the situation facing both China and India. to overcome inflationary supply side issues. Over the same period India's economy grew an average 8. and it invested an average of 40. ideally fully up to date studies on total factor productivity in the two economies would be used to evaluate investment efficiency.e.India reveals major implications for short term anti-inflationary policy and for long term determinants of growth. Figure 1 below shows the development of this ratio over a longer time frame. what percentage of GDP India and China have to invest to generate 1% GDP growth. total factor productivity studies a less statistically precise.yielding a less statistically precise result than total factor productivity studies but one that can be used as a policy tool. Studies of total factor productivity which have been carried out for China show clearly that.7 percent of GDP to grow by 1 percent.e. India also invested 3. in turn. However studies of total factor productivity on India are less frequent than those for China and such analyses by their very detailed nature are also in general not fully up to date. . Given the lack of.(2) India's efficiency in the use of investment in terms of generating growth is almost exactly the same as China's. in the five years to 2008.
simply by achieving efficiencies in capital use . greatly improved in both China and India and it deteriorated in the US . however.S.(4) Both China and India's efficiency of investment. To take an international comparison. at the end of the 1970s China. even before the onset of the 2008 recession pushed the figure higher. grow so rapidly both because they have very high investment rates and because that investment is now used very efficiently ± this interaction being multiplicative. is currently therefore more than twice that of the U. It is implausible that a significantly superior investment to GDP growth ratio can be achieved in either country ± although major efforts will be required to maintain what is already a highly efficient use of investment.7% of GDP level ± i. from the point of view of generating growth. India's and China's growth rates could therefore only be maintained or increased by maintaining or increasing the allocation of GDP to investment. or sustaining or raising their growth rates.In the case of both China and India the percentages of GDP that had to be devoted to investment fell from around 6% of GDP prior to their economic reforms to the present 3.e. increased by around 50%.However after this the efficiency of investment. India and the US each had to invest about 6% of GDP to generate 1% of GDP growth. Europe or Japan at present. For present purposes. had to invest 7.the US. from the point of view of generating GDP growth. from the viewpoint of GDP growth.8 percent of GDP to grow by 1 percent.both countries are already up against the boundary of what any country has achieved in a sustained way in this field since World War II.S. the significance of these figures is that China and India have little scope for increasing their capacity. The trends for the three countries are shown in Figure 1. the efficiency of investment. . China and India's economies.. in short. Figure 1 Historical examination shows both China and India have among the most efficient sustained uses of investment in generating growth in post-World War II history ± far better than the U.
While the Indian authorities stress that at present serious inflationary pressures are confined to food. Given the correlations above.8% year on year. nevertheless the economy is beginning to approach its overall capacity constraints. To maintain a target of a 9% a year growth rate. IMF International Financial Statistics data indicates that the proportion of India's economy devoted to fixed investment fell in the first and second quarters of 2009 . is already very high India's and China's growth rates could therefore only be maintained or increased by maintaining or increasing the allocation of GDP to investment.7% of GDP investment to 1% GDP growth ratio indicates a macroeconomic balance compatible with overall stability . India's Investment and GDP in 2009 Turning to estimating the implications of the above data for the present situation of capacity constraints in China and India no figures for the breakdown of GDP between investment and consumption are available for either country for the whole of 2009. but it is right up against the economy's investment constraints ± confirming the recent view expressed by Nobel prize winner Michael Spence that: 'it will be hard to get to 9% and stay there.including avoiding excessive inflation. for example.A further implication of this data is that as an approximate guide to the macroeconomic situation the 3.8% of GDP. clearly indicates that India's economy was moving up towards its capacity constraints by the end 2009. However for India data is available for the first half of that year and China has published data allowing indirect estimates to be made for the whole of 2009. For India fixed investment in 2008 was 34. Such a combination of accelerating GDP growth of around 8%. this would sustain a 9. India's economy was therefore probably already approaching the rate of growth that was the maximum that could be sustained by its level of investment .acceleration of economic growth was shown by the fact that industrial production in December. India's GDP growth was already 7. However if the actual growth rate for China or India is not supported by a level of investment sufficient to maintain the 3. India would have to invest 33. from the point of view of economic growth. In the 3rd quarter of 2009. These benchmark parameters therefore indicate that a 9% a year growth rate is just achievable for India at the highest levels of investment it has reached. As these ratios have not fluctuated greatly for twenty years they therefore give a rough but relatively robust guidance as to the level of investment required to support any given growth rate.7% of GDP to investment for each 1% GDP growth then macro-economic instability. for example. including inflationary capacity constraints. will occur. However the 2008 figure was the highest level of investment in GDP recorded. at least during the first half of 2009. was up 16. and a level of fixed investment which had fallen as a percentage of GDP. the latest available figure.3% of GDP ± a level achieved in only two years (2007 and 2008).9% and accelerating.no more recent data is given. .4% annual growth rate. As both China's and India's efficiency of use of investment.' Policies envisaged by the Indian government that would allow sustaining a higher rate of growth by inward investment to finance an increased investment level are considered below. and are not appearing in manufacturing.
using the correlation between GDP growth and investment given earlier.4% of GDP to be invested and 13% GDP growth would require 48.6 percent of GDP growth and domestic investment contributed 8.as the figures for the contribution of the share of different components to GDP growth that have been issued do not give a breakdown between fixed investment and accumulation of inventories and are in constant and not current price terms. to maintain the likely rate of expansion of China's economy at the beginning of 2010 . China is therefore clearly already approaching.7% GDP growth. such a figure for investment would be scarcely enough.5% growth rate would require fixed investment of 46. and a 13% GDP growth rate would require fixed investment of 48. would already require 39.6 percent in 2009 ± one of the highest increases in world history. The published data is not sufficient to make a detailed calculation of the proportion of China's economy devoted to fixed investment in 2009 . a 12. and that the consumer and investment price deflators did not diverge excessively.7% growth is almost certain in the first part of 2010. then they imply that consumption probably rose to around 49% of China's GDP and fixed investment to around 45%. to sustain a 12% growth rate would require investment of 44.China's investment and growth in 2009 In the case of China no data for the distribution of GDP between consumption and investment have been published for 2009 but an indirect calculation yielding ballpark figures can be carried out as figures for the contribution of different components of GDP growth in 2009 have been published.0 percent. China's year on year GDP growth in the 4th quarter of 2009 was 10.(5) While exact translation of these figures into current price terms cannot be made.7% year on year growth rate and is quite insufficient to sustain a 12% or 13% growth rate. as it came on stream. would be counter-inflationary as it would increase supply by removing capacity constraints and increasing productivity.to recapitulate the figures above.7% and accelerating strongly ± projections of 12-13% year on year growth in the early part of 2010 are not unrealistic. 10. on the basis of earlier data. A 12% GDP growth would require 44. The published data show that the shrinkage of China's trade surplus in 2009 meant declining net exports deducted 3.1% of GDP.6% of GDP to be invested to be consistent with macroeconomic stability.9 percent from GDP growth.3% of GDP.1% of GDP to be invested. The latest year for which measured data for the proportion of China's GDP devoted to investment are available is 2008 at 41. The two together mean China's domestic demand increased by 12.4% of GDP. China's domestic consumption contributed 4.which would already leave little margin for even a 10. and may soon . or insufficient. It is clear that the proportion of China's GDP devoted to fixed investment increased in 2009 but not by enough to maintain the very high levels of GDP growth that are likely to be reached given that acceleration beyond 10. However it is clear that. Such an increase in the level of fixed investment in China. However the published figures are adequate to give an overall grasp of trends.1% . if it is assumed that inventories remained constant as a proportion of GDP.
would thereby increase inflationary pressures. Regarding China. which increased both domestic investment and domestic demand. without increased domestic investment. The Chinese authorities were correct to have implemented a balanced development of consumption. 3.' Discussion with Indian authorities confirms that a policy instrument to achieve a higher level of investment. were the reverse of the truth. The macroeconomic examination of capacity constraints evidently clearly underlines the correctness of the Indian and Chinese authorities estimates that they face significant inflationary pressures. Increasing China's domestic demand only by increasing domestic consumption. without also increasing domestic investment. Both increased domestic investment and increased domestic consumption achieve the desirable goal of reducing China's exposure to fluctuations in international demand/reduce China's trade surplus. Ballpark figures . is clearly wrong and would significantly increase inflationary pressures. for the government to 'reallocate expenditure away from consumption towards investment. The dominant situation emerging in China's economy was capacity constraints and not overcapacity ± as the Goldman Sachs report noted earlier rightly outlined. The 2009 stimulus package. Conclusions What conclusions. the rates of GDP growth consistent with macroeconomic stability even after the increase in investment that occurred in 2009. However consumption.the proposal made by some economists that China should concentrate simply on increasing domestic consumption. India's most influential financial newspaper. by definition. 4. seen in the first half of 2009 is reversed. As such a deficit is necessarily equivalent to a net inflow of savings from abroad it would raise the total finance available for India's investment. investment and trade. does not add to supply whereas investment does ± thereby lessening capacity constraints. 2. other things being equal.exceed. as outlined for example in a European Chamber of Commerce in China report that was picked up in an editorial in the Financial Times. which increased domestic demand via both consumption and investment. compared to the previous year. to sustain a higher growth rate includes an acceptance of a moderate balance of payments deficit. The general consensus behind such a policy is indicated by the editorial call in the Economic Times. Claims made in 2009 that China faced a decisive problem of 'overcapacity'. would therefore fail to lessen domestic capacity constraints and. China's actual economic policy in 2009. In India Prime Minister Manmohan Singh has frequently stressed the investment level as the decisive determinant of growth and it is therefore almost certain that India's economic policy will be oriented to ensuring that the lowering of the investment level in GDP. therefore. flow from the situation in China and India noted above? 1. was therefore a superior policy to one of only increasing domestic consumption both from the point of view of the short term struggle with inflation and from long term growth. has left China better placed to confront inflationary pressures in 2010.
Given the extreme recessionary pressures at the beginning of 2009 it is unsurprising that such a growth rate was not achieved last year but it will be interesting to see if this approximates to the growth rate achieved at least in the first part of 2010. a level of inflation that was not containable . both India and China have sufficient macroeconomic room for manoeuvre to contain inflationary pressures while maintaining their high growth rates.7% of GDP ± although indirect calculation shows this is likely to have slightly fallen in 2008. from the point of view of economic growth.indicate that double digit economic growth should be achievable on this basis of India's domestic savings plus such a sustainable balance of payments deficit.although acceleration beyond that point would hence Chinese policy makers are clearly correct to be taking measures to rein back inflation and further economic . A consequence of the preceding point is that India will not be able in a sustained way to match or exceed China's levels of growth without matching or exceeding its level of investment. creating a domestic and international savings rate of 40.0% growth rate. 7. 7. Preliminary projections indicates that China's growth rate in likely to be relatively close to this figure ± which would confirm that the macroeconomic correlations indicated above continue to operate. this would theoretically support an 11. The final conclusion is evidently that. on the basis of the above data. Given India's likely inflow of foreign investment a 3% of GDP balance of payments deficit should be sustainable. Any inflationary threat appearing to seriously threaten the ability to contain inflation would seem to have to be one coming from the international arena. Even if China's growth rate in the first quarter of 2010 is around 12% this would not appear to seriously threaten. from the point of view of growth. IMF International Financial Statistics figures show that India's measured savings level was 37. then as long as India continues to invest a lower proportion of its GDP than China its growth rate will be lower. is almost exactly the same in India and China. There appears to be no statistical basis for the claim that India utilises its investment more efficiently than China. In 2007. India's attempt to achieve a double digit growth rate would appear to be realistic if it can regain its previous peak domestic savings level and supplement this by a containable balance of payments deficit. If the efficiency of the use of investment.7% peak domestic savings figure. or its level of investment in GDP decreases. on the basis of domestic pressures. the latest year for which full data is available. which are significantly below these which appear possible from this macroeconomic data. If a 3% of GDP balance of payments deficit is added to the 37. A 45% investment rate of the type that probably existed in 2009.2% in the current financial year and exceeding 8% in the next. China is able to finance all its investment on the basis of domestic savings. The statistical data shows that the efficiency of the use of investment. This indicates either that India has ample margin to control inflation or that the projections will turn out to be conservative and India's actual economic growth will be higher than these projections. In short. Interestingly the latest Indian Prime Minister's Economic Advisory Council projected growth rates. is essentially the same in China and India then the growth rate of GDP depends on the relative levels of investment in the two economies. Unless the efficiency of use of investment in China declines. would equate to a 12. 6. on the basis of the correlations previously given between investment and growth. based on the correlations of investment and GDP growth. 5.7% of GDP then.2% growth rate.
India.2% increase in domestic demand this blog had estimated using earlier data and very conservative assumptions. 5. In China severe winter weather helped increase vegetable prices by 16 percent in a single month in December. 3.5% but food supply constraints still exist. India is locked in a short term struggle with food price inflation but the present predictions for economic growth at the Prime Minister's Economic Advisory Council appear even rather modest compared to macroeconomic fundamentals and it would be unsurprising to see India attain a higher rate of growth in the next financial years than these projections. for example. Posted at 15:07 in China. Calculated from IMF International Financial Statistics. In India the worst monsoon since 1972 helped produce a 18.acceleration. China's annual consumer price index fell in January to 1. The fact that China's domestic demand increased in 2009 even more than such preliminary and conservative calculations of course confirms even more strongly the points made in the post 'China's dramatic surge in domestic demand' of the huge scale of China's increase in domestic demand in 2009. 2. Within the 1. Calculated from China Statistical Yearbook 2009.3% in January. India's benchmark wholesale price index was 8. 4. Calculated from IMF International Financial Statistics. In regard to short term food shortages only a limited amount can be done to lessen the effect of these domestic capacity constraints . China's producer price index rose by 4. India | Permalink .3 percent ± was for food. has been allowing duty free imports of certain items and releasing food from stocks.0% year on year increase in the main staple food prices in the week to 6 February.9 percent increase in the consumer price index in the year to December the highest rate of increase ± 5.6% in January. with India's chief statistician projecting that inflation could reach 10% by March. This is higher even than the 11. Notes 1.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.