Tuesday, 20 January 2015

The tortoise may overtake the hare

Sometime in 2015, or more likely 2016, or maybe 2017, India will overtake China as the fastest growing large economy in the world.  It could potentially be a historic moment, for India and the world. The opportunity is India's to grasp, or equally likely, drop.

China's economy is slowing. Its GDP growth for 2014 (announced in an incredible 19 days after the year end) was 7.4 %. For the first time in 30 years, its GDP growth is below its own target of 7.5%. China's statistics are to be taken with a pinch of salt. Apart from the gargantuan task of measuring GDP for such a large country and number of people, its numbers are also, let us say, "approved" by the Communist Party. It was very likely that in the heady days, for a long period, China actually under reported its GDP. Growth was at such a frenetic pace that the Party was doing all it can to dampen the numbers. Now, its quite likely that the announced 7.4% is probably a tad overreported.  China's is a huge economy. Growing at that breakneck speed is no longer possible. The economy is slowing. Make no mistake; the growth rate , for its size, is still stunning, but the inevitable slowdown is starting. China is starting to slowly transform into a more mature economy.

Enter India. Its financial year ends in March and for 2014-15 and for the first three quarters it grew by 5.3%. That is still a full 2% below China's. But the trajectory is upwards. The World Bank last week estimated that India's growth rate would overtake China's in 2017. Goldamn Sachs estimates that it will happen in 2016. The IMF has just announced that it expects that to happen in 2015 itself. It is estimating India will grow by 6.5% and China by 6.3 %. We shall see.

Maybe, just maybe,  India's time in the sun is about to come. It has a strong government which is betting on development as the plank for reelection. It has a young and large work force. It is a slow elephant prone to many stumbles and disappointments in the past and could flatter to deceive again. But something tells me that this time India may actually do well. If there is a sustained period for say 10 years, when India is the fastest growing large economy, it will have profound consequences both for the country and for the world. 

For Indians, it may be the chance, finally, to start winning on "Garibi Hatao" (eliminate poverty).  For the world, somebody must take China's place in leading global growth. India is the natural, and preferred choice. Geopolitically, a rising India will also contribute to a multipolar world and manage the "risks" of the China ascendancy. Just as China's rise from the 1990s transformed the world, the same could happen all over again with India.

Wishful thinking ?? Maybe. But for reasons this blogger cannot explain, this time, it looks different. Its India's turn to "win the World Cup". It's cricketing fortunes may be on the wane but its economic fortunes couldn't be better.  The first step will be on February 28th when the first real budget of the BJP government is presented. If its a cracker, then that might be the start of India's ascent.

It may be the best time to be an Indian.


Sriram Khé said...

Uh, hello, it has always been a great time to be an Indian.
Well ... I dont' know ... I think I have more of a Tamil identity than an Indian one--"Indian" has always felt artificial when, for instance, I couldn't see how and why a Naga and I were in the same country with the tremendous differences in the culture and history and ... but, that is not the point of your post ... so, on to that then ;)

A simple logic says that no country can forever have 10% economic growth rates ... slowing down is inevitable. And as a country begins to slow down, another one takes that place--as a rapidly growing economy. The baton was passed from Japan to S. Korea/Singapore to China ... and all the while India continued along with its "Hindu rate of growth." As the inevitable slowing in China happens, will India grab that baton?

You have acknowledged in your post that this is not the first time that India was expected to pick up that baton. You seem confident though that this is the time. I hope so too. But, there is always that possibility that India, like Argentina, will continue to attract suitors and then disappoint ... so, well, good luck to you--including those out there in Nagaland. Some day, I hope I will be there in Nagaland and Meghalaya ... maybe by then those will be rich places, if you are right ;)

Asha said...

WoW! Your blog looks different. Simple and classy!!

I have been reading your posts on my reader and as always they are news to me.

May your wish on India come true!

Ramesh said...

Ouch ! Can't disagree more on the Naga, Tamil bit. In any case , wait for a couple of weeks and watch this place closely for some stuff on this.

Please don't bracket India with Argentina. I shall admit that Argentinian lassies are way way prettier than Rajalakshmi, but there the comparison should end !

Ramesh said...

Thanks Asha. Delighted to have you here again.

Shachi said...

I very much hope what you are saying is true.

I'm curious about the budget....and the rupee getting stronger too!

Ramesh said...


Rupee getting stronger is a temporary aberration - it will go back down.

Vincy said...

This is real good news and a heart warming one. and as we all can see there a lot of visible changes happening, even if it is small, after the change in Government, there are reforms made and am sure that is contributing to the indian economic upturn. Let us hope that India will not disappoint this time and as you said let us wait and watch the budget that is going to be put up by the new government. crossing my fingers in hope for India to do well like the billion plus others :-)

Sandhya Sriram said...

I dont know if we should call this post tortoise overtakes hare or white elephant looks to overtake the dragon. I have always felt that what we "indians" from Naga to Tamland lack and thats which makes that little bit of difference to receive the baton or drop it, is discpline. it just runs through the DNA of this nation. something as simple, if you are waiting to take right at the signal, isnt is just common sense to stay on the right and not block the free left guy. I do agree that the government is showing a visible attitude to make a change and hopefully, one of the biggest problems of the country - Ramarathinam Menace would get curtailed, but a nation is nothing but a culmination of people, and every nation that has made history (barring of course the Big Daddy land who have become a super power sheerly by the wealth of its resources), have had a displined set of people behind it and thats where i really would take this with a pinch of salt.

But i eagerly await the budget too and more eagerly await your comments on the budget

Anonymous said...

We really do hope that India does not drop the baton this time around..... with a progressive govt at the helm the thinking is that baton will be held high... but and that is the problem there is a but!!!!

Ramesh said...

Yes, there is a sense of purpose and urgency in the government. But that alone is not enough. There needs to be a congruence of many factors - policy initiatives, optimism, foreign interest, internal support, etc etc. I somehow feel more than one factor is falling in place and hence my optimism.

Ramesh said...

Oh I could write a whole post in response to your comment. Of course, the lack of discipline is a major issue in India. Indeed a broader degradation of values is something I moan about. But that is not unique to India. Almost every culture, when it is subject to sufficient pressure (of numbers, or poverty, or whatever) succumbs to this. In many Western countries, looting follows the slightest breakdown of law and order - another manifestation of indiscipline. It is in that context that I admire greatly Japanese culture. They may have their own faults, but when confronted with a crisis, almost no culture reacts as nobly as theirs.

Ramesh said...

Yes, there is a but .... :(

But the "but" exists in every situation, I submit, if you pardon the pun. China in the 1980s was full of buts. They tottered and shook with 2 years of growth, 2 years of disaster, etc etc. Then came Tiananmen. There were millions of buts. That they then succeeded is to their eternal credit. India could do likewise too. If it does, it will present a wonderful alternative to the Chinese doctrine that economic advancement , in a large diverse nation, can come only with authoritarianism.

So but .... yes, but hopeful too :)

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