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Author Topic:   Will India steal China's thunder?(economic development)
venusdeindia
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posted April 12, 2008 05:36 AM           Edit/Delete Message   Reply w/Quote
Will India steal China's thunder?(economic development)
From: The International Economy | Date: 3/22/2006
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For most of the last decade, global strategists have fixated on China's potential to become a global economic powerhouse. What are the chances that while China continues to grow, India turns out to be the major new powerhouse in the global economy? After all, India enjoys

* an educated class far larger than that of China;

* a huge English-speaking middle class population;

* a relatively predictable legal system;

* the likely potential for fewer demographic problems than China; and

* a globally strategic location allowing it to become potentially an important strategic partner with Europe and the United States in defusing pressure in the Middle East.

Towards the end of the 19th century, the talk in official London circles was that at least one of two emerging economies would likely become a dominant industrialized power. The two were the United States and Argentina. Indeed, a large body of opinion was betting on Argentina. Today, no one denies that China in the 21st century will assume a notable role in the world economy. But has India been given short shrift? Will it turn out that India steals China's thunder? Or will all the problems that have hindered India in the past, including slow infrastructure spending, continue?

http://www.encyclopedia.com/doc/1G1-146175403.html

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venusdeindia
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posted April 12, 2008 05:38 AM           Edit/Delete Message   Reply w/Quote
BARTON M. BIGGS

Managing Partner, Traxis Partners

India will steal China's thunder. In addition to all the reasons cited in the introduction, there are two other immense advantages that India possesses. The first is its democratic political system, and the second is the mature and transparent state of its financial markets. Without these two crucial ingredients of a great nation, China's social stability will always be questionable and its capital allocation process will be flawed. Neither will be smoothly or quickly implanted by China's Communist leadership.

India has been a democracy for decades, and a big, sloppy, inefficient one at that, plagued by weak, often transient coalition governments. Its fabulous growth trajectory has been achieved in spite of, not because of, government. In the early stages of an emerging country's development, a "benevolent" dictator and a strong central government has always been the formula we as investors look for. A young, rapidly growing economy needs to make tough choices expeditiously. It's difficult for a government that serves at the whim of the people to impose pain and demand sacrifices.

India has had for years functioning and transparent securities markets and an uncensored business press. Capital markets are a crucial part of the resource allocation system as is the dissemination of real news and true information. China has neither although it is now trying to remedy this problem. It will not be easy to nurture this fragile flower in the midst of a command political system and a command economy.

China now risks the backlash from fifteen years of singularly successful economic reforms. Although growth has been spectacular, it has created acute income inequality. Now increased household financial burdens for education, health, and housing have produced a fierce debate on the benefits of pro-market reforms. In terms of domestic tranquility and a stable society, the contrast between India and China is striking. China will eventually make the transition to a fair, capitalist, democratic society and the odds are that it will be painful and costly for the Chinese people, for its growth rate, and for foreign investors.

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venusdeindia
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posted April 12, 2008 05:39 AM           Edit/Delete Message   Reply w/Quote
JAMES SCHLESINGER

Former Secretary, U.S. Defense and Energy Departments, and former Director, Central Intelligence Agency

History is not predetermined. In a world of uncertainty and unpredictable change, almost anything can happen. Chinese growth could be stalled by internal unrest, or stopped by war or even loss of unfettered access to the American market. Such things are possible, but unlikely.

India has the advantages cited. Yet it had a later start than China, particularly in manufacturing. Its demographic burden is excessive population growth. As a democracy, it is obliged to yield in turn to various interest groups. Tensions with Pakistan--or even with its internal Muslim population--could readily grow. No more than with China can one be assured of smooth sailing.

India likely will do quite well. Yes, bedazzled by China, the commentators have to some extent given India short shrift. Nonetheless, it is most unlikely that India will steal China's thunder. However, it will emulate China and share some of its thunder.

India will steal the spotlight


STEVE FORBES

President and Chief Executive Officer of Forbes and Editor-in-Chief of Forbes magazine

Yes, India will steal China's thunder, though it is not inevitable. India does indeed have advantages, such as an English-based legal system and a large English-speaking middle-class population. India is also not plagued by a problem with which China is about to suffer: a huge shortage of brides. China's one-child policy led to a widespread infanticide of female babies.

But India must deal with its own internal problems more aggressively than it has to date. Bureaucracies on both the national and state levels make the United States look swift and streamlined. Infrastructure in India is abysmally poor, as is the education system. While the country is creating an impressive pool of entrepreneurial, scientific, and mathematical talent, India still doesn't teach the basics of reading to hundreds of millions of young people. Actual illiteracy stands at more than 40 percent. Regulations in India still make it extremely difficult to set up a legal business, and its labor laws are rigid, in the style of Western Europe.

But what leaves one feeling optimistic is the fact that India is a democracy and that as its middle class grows so will pressures for pro-growth reform.

GEORGE HOGUET

Global Investment Strategist, State Street Global Advisors

India will not steal China's thunder. Twenty years from now both China and India will have made substantial progress in reducing poverty, but it is unlikely that India will catch up with China, given China's head start and private sector dynamism.

China's per-capita income on a purchasing power parity basis is already twice India's, and the math of compound growth rates is inescapable. The Chinese economy has a savings and investment rate roughly double India's, attracts annually more than ten times the foreign direct investment, and is twice as open as India's. China has made greater progress in human development, its fiscal situation is superior, and it is better positioned to withstand global shocks. India suffers from the legacy of inward-looking policies.

An orderly transition to more representative government in China is not certain, but China has generally viewed itself as a nation with a central authority, whereas historically India was a collection of princely states. Both countries provide attractive investment opportunities. Given differences in corporate governance, institutional development and capital efficiency, the Indian stock market may generate better long term returns. But China will remain the more dominant economy.


GARY CLYDE HUFBAUER

Reginald Jones Senior Fellow, Institute for International Economics

India has become the fashion of the day: a great prime minister, consistent GDP growth of 7 percent plus, a world-beating information technology sector, a booming stock market--all crowned by U.S. acceptance of India in the nuclear weapons club. Meanwhile China continues to resist RMB appreciation, doesn't rein in North Korea, punches well below its weight in the WTO Doha Round, and runs its stock exchanges like shady casinos.

But competition between India and China over the next thirty years will largely be decided by which country can urbanize the fastest and the best. China is now 39 percent urbanized, India only 28 percent. Twenty years ago the urbanization figures were China 22 percent, India 25 percent. (By comparison, the United States and Japan are both about 80 percent urban today.) Indian cities are strangled by a ponderous legal system that practically guarantees dreadful infrastructure and sprawling slums. Every year China builds multiple new cities that accommodate a million or more rural migrants. Moreover, while India offers charming urban living for the rich, Chinese cities are far more livable for the middle and lower classes. My guess is that China will have an easier time learning democracy and English than India will have learning how to build cities.

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Mannu
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posted April 12, 2008 02:13 PM     Click Here to See the Profile for Mannu     Edit/Delete Message   Reply w/Quote
Americas head is too much buried in to China's ass.

India and China must continue a policy of peace and exchange. I heard China visited India to inquire about its efficient judicial system. Well in my mind Indias system sucks. But the framework is there to improve.

India must continue to look in to Europe and Australia and even Russia as alternative markets. Its many IT eggs should not be placed only in one basket(US). Thats risky for them with the current bad economy here.


I also want a powerful military Russia to counter balance America. India and Russia should conduct many research in space exploration. Other wise America will behave like the spoilt kid on the block.

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