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Monday, February 2, 2015
India should not rejoice for China's economic declivity
Indians, mainly who are knowledgeable and understand the trend of
GDP growth are rejoicing for IMF’s prediction of growth both in India and
China. The latest data as per the IMF’s prediction indicates that India is in
the growth path and will touch a figure of 6.5% in 2016 against China’s growth
of 6.3% in the same period.Some others
in India are more enthusiastic to reckon to the figure of the World Bank, whose
estimate is that India will grow by 7% in 2017 against China’s 6.9%.Though these figures are estimated projection,
of course, on the basis of facts and figures and even though the same get
translated into reality, we should not rejoice.China is the second
largest developing economy in the world now and only the USA can beat them in
all their political and economical activities.Considering their industrial growth, per capita consumption of steel,
huge capacity of producing hydel power and its strength of mammoth populace, it
is a little foolish thinking that India will them and meet their growth pattern
economically. At lease it will be not possible in the near future.
India will definitely take a minimum two to three decades to compare
with them. To afresh, China
had a significant track record of growth at 14% in the 2000s.How IMF and the World Bank are professing
China’s downward growth to touch the same at 7% is something willy-nilly
professing of economic experts.May be,
they are focusing their estimation on the basis of the idle and unrealistic
huge investment, which China has invested in infrastructure and real estate sectors to
boost up the economy, particularly after the recession period of 2008-2009 and
the same has not accrued any tangible benefits for them.
Today’s scenario in China is somewhat comparable in the days when India
was under the ruling of the UPA government.But in the past, China’s
efficiency was well acclaimed as they used to invest 4 dollars per one output,
whereas today, their investment is nearly 40% to 45% of GDP to get 8% of
growth.So, this ratio is completely desultory,
if we look into the past scenario of China’s efficiency.
But if you analyze in details, their slowdown is more due to
political reasons and consequences thereof, not just the economic ones. It is a
known fact that the countries whose monetary power is not so strong will always
show alackluster performance in
productivity and institutional development as compared to the developed
countries, say the USA and UK. Now, if you undertake even a modest reformatory measure
that can bring in a significant yield in productive output and if you are in a
position to prototype the author's invention accurately, you can treble your
growth sometimes down the line.Following these conceptual practices, China has defeated USA in exports
because of its high level of production output at a low level of wages and
other incidental expenses to increase the production. Though China’s wages rose, but its productivity rose
faster because it was able to manage the technological expectation and
requirement as sought by the western countries, particularly the USA.
In this way, India has also managed to grow significantly in the
recent past, though per capita income of India has not grown considerably,
particularly for the huge middle class population. As per the World Bank’s
estimation, the same has fallen in the middle income group, which is USD 1045
per capita baring a few in the high
income group, which is about USD 13000 per capita after rounding off. If you
compare this figure with China, you will find China’s middle income group was
at USD 6800 in 2013 and now, of course, it is sharply getting declined.
It is a very common phenomenon when any country grows fast and
becomes richer as in the case of China, the slowest in the economy is bound to
come.The countries, whichare predominantly rich like the USA will
always have an edge of state of the art
technologies and more importantly, will have vast resources to improvise the
said technologies and to upgrade continually to get better economical growth.
This technological up gradation spree of the developed countries have
significant benefit against China and India because they don’t have the vast
resources to maintain the status quo of the rising growth.Now, as China grew leaps and bounds in the
2000s, its low wage units started searching for the other less developed
countries as compared to them and they shifted their base to Vietnam and
Indonesia for their survival. As a matter of fact, the low wage units were never
able to develop enough innovative skills to sustain their existence in the
market driven economy and remain trapped in the cycle of the declivity and
finally, take the shelter of other countries The one of the main reasons of
China’s declivity is the one as stated above.
From the experience of South Korea’s rising economy, they were one
of the poor countries in the world sixty to seventy years back. Under the
dictatorial rule of their leaders, they grew only feebly. But today, they have touched a high level of
income status with respect to per capita income. No sooner they have changed
their outlook and believed in democracy, they could develop their economic
growth considerably.Another example of a
growth oriented country is Singapore, who is the financial muscle power of
Asia. Many have their own notional feelings and political reservation for their
self proclaimed democratic pattern of governance. But one must remember that they
too have a very strong law and a system of fair election process.
Indians should not rejoice to observe the declivity of China. We
have a fair enough system of democracy and election procedures. But we have a
lousy civil rights record. The administrative machineries pertaining to law and
justice refuse to even lodge a simple complaint unless there is a pressure from
the top. The court cases are pending years together. The common public is
denied the justice. The poor stratum of the society is becoming poorer even
after the BJP government comes into power at the centre. Under these circumstances,
why are we rejoicing for China’s poor GDP?
Only democracy and economic reforms are not that sufficient unless
we create a strong civil institution to monitor our rights of living decently.
China’s decline growth could be because of
all the said factors and they need to have a correction on their social and
civil rights and then they will again grow leaps and bounds. So to catch them
growth wise for us, will be an arduous task. In fact, we should not rejoice at
all for their temporary declined economy.