India needs to boost investment to reach China's growth rate: HSBC report

[fsayed]

http://m.economictimes.com/news/eco...wth-rate-hsbc-report/articleshow/52696242.cms

India needs to boost investment to reach China's growth rate: HSBC report
By ET Bureau | 11 Jun, 2016, 01:04 hrs IST
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India may struggle to achieve the kind of growth that China attained during its boom years, but that doesn’t mean investors can ignore India, said an HSBC report.
KOLKATA: India may struggle to achieve the kind of growth that China attained during its boom years, but that doesn't mean investors can ignore India, said an HSBC report, adding that given that demography is in India's favour, it will account for the same world share as China did in 2005.

India's economy grew at a stronger-than-expected 7.9% in the March quarter, making it the fastest growing major economy. But India's investment has always been lower than that of China's, putting barriers to double digit growth.

HSBC said that India will have to boost its investment rate by 10% or so of gross domestic product (GDP) to achieve China's growth rate seen in the past decade. "A tall order, though mind you, not impossible," HSBC economist Frederic Neumann said in the report, adding that it looks tough for India to pick up steam and match China's boom-time growth rates in the coming years.

He ranks India as the obvious candidate for pushing global growth since the West is not bouncing back to its lost glory anytime soon. "After all, it's the only other country with over a billion people and its economy, according to official data, has increased a tad faster than China's of late," the economist asserted.

However, India's economy isn't currently large enough to make up for China's slowdown. India is expected to equal China's 4.9% share of world GDP, achieved in 2005, by the middle of next decade, and if the country grows faster, the date can be advanced. For instance, if India continues to grow at around 7%, it would have the same global punch as China did about a decade ago only in 2029. Faster growth, of course, would bring the date forward.

"Still, don't count the country out just yet: assuming things keep ticking as long as they have, by the middle of the next decade, India's economy will account for the same world share as China did in 2005, the year when the mainland really started to make itself felt globally," he said.

 

[fsayed]

@nair @proud_indian @Roybot @jbgt90 @Sergi @Water Car Engineer @dadeechi @kurup @Rain Man @kaykay @Abingdonboy @SR-91 @nang2 @Stephen Cohen @anant_s

@jbgt90 @ranjeet @4GTejasBVR @The_Showstopper @guest11 @ranjeet

@GURU DUTT

Very positive report required ur opinions

 

[GURU DUTT]

isnt HSBC already quitted its indian operations so is that "sour grapes"

anyway we are nowhere close to China as China had built its economy on manufacturing capbility while owrs is still a service provider type of economy which NaMo is trying from last two years to make a manufacturing economy and for that its trying to get as much FDI and skills associated as possible

and it still might take a full decade if not more to reach where China is today and by then China will be on next level ... in short owr main effort is to raise owr economy and living standards than competeting with China which most people fail to understand on this forum

 

[anant_s]

Growth with sustainability is the key here. I'm expecting 9% growth rate post GST acceptance and with DFC operationalization, another 1%. But the challenge would remain how we tackle inflation and manage deficit. Agriculture sector still needs massive investment and reforms. Continued reforms are a long road and hopefully we will have successive governments who walk it patiently.

 

[My-Analogous]

http://m.economictimes.com/news/eco...wth-rate-hsbc-report/articleshow/52696242.cms

India needs to boost investment to reach China's growth rate: HSBC report
By ET Bureau | 11 Jun, 2016, 01:04 hrs IST
Whatsapp
Facebook
Twitter
gplus
email
message
aPlus

India may struggle to achieve the kind of growth that China attained during its boom years, but that doesn’t mean investors can ignore India, said an HSBC report.
KOLKATA: India may struggle to achieve the kind of growth that China attained during its boom years, but that doesn't mean investors can ignore India, said an HSBC report, adding that given that demography is in India's favour, it will account for the same world share as China did in 2005.

India's economy grew at a stronger-than-expected 7.9% in the March quarter, making it the fastest growing major economy. But India's investment has always been lower than that of China's, putting barriers to double digit growth.

HSBC said that India will have to boost its investment rate by 10% or so of gross domestic product (GDP) to achieve China's growth rate seen in the past decade. "A tall order, though mind you, not impossible," HSBC economist Frederic Neumann said in the report, adding that it looks tough for India to pick up steam and match China's boom-time growth rates in the coming years.

He ranks India as the obvious candidate for pushing global growth since the West is not bouncing back to its lost glory anytime soon. "After all, it's the only other country with over a billion people and its economy, according to official data, has increased a tad faster than China's of late," the economist asserted.

However, India's economy isn't currently large enough to make up for China's slowdown. India is expected to equal China's 4.9% share of world GDP, achieved in 2005, by the middle of next decade, and if the country grows faster, the date can be advanced. For instance, if India continues to grow at around 7%, it would have the same global punch as China did about a decade ago only in 2029. Faster growth, of course, would bring the date forward.

"Still, don't count the country out just yet: assuming things keep ticking as long as they have, by the middle of the next decade, India's economy will account for the same world share as China did in 2005, the year when the mainland really started to make itself felt globally," he said.

I have a question (it is not trolling)

India export down 12.4% percent in 2015 (http://www.tradingeconomics.com/india/exports)
India unemployment jumps from 3.4% in 2014 to 8.3 in 2016 (http://economictimes.indiatimes.com...9-62-bse-index-shows/articleshow/51726860.cms)

So how you guys calculating GDP? please elaborate

 

[Kal Muah]

I have a question (it is not trolling)

India export down 12.4% percent in 2015 (http://www.tradingeconomics.com/india/exports)
India unemployment jumps from 3.4% in 2014 to 8.3 in 2016 (http://economictimes.indiatimes.com...9-62-bse-index-shows/articleshow/51726860.cms)

So how you guys calculating GDP? please elaborate

You might want to read this.
3 Methods (in principle, they all give the same result)

a) Production Method
b) Income Method
c) Expenditure Method

I will discuss only the Production method which is most widely used and globally accepted method and is important for our discussion.

1. Production Method- Sum total of all things 'produced'.

Expressed in Two ways-

i) GDP at Factor Prices

ii) GDP at Market Prices

Under Production method, the various economic activities of a given region, ie the various industries in the region are subdivided or classified into different sectors and the sum total of all the production or Gross Value Added in all these sectors are added together.

Gross Value Added= gross value of output (value of the total sales of goods and services)– value of intermediate consumption.

The sum of the gross value added in the various economic activities is known as "GDP at factor cost".
To which, adding indirect tax minus subsidies gives the "GDP at producer prices".

GDP at factor cost+ Indirect taxes- (subsidies given)= "GDP at producer or market prices".

Please note that two more variables i) Indirect taxes and ii) Subsidies are bought into the picture when GDP is expressed in market prices.

Taxes attached to the commercial transactions are known as indirect taxes. These are included within the MRP of a particular product. That is, if a consumer pays 100 for a commodity in a market, the owner may receive only 86, the remaining 14 will go to the government in the form of indirect taxes (VAT).

The term factor cost or basic price is used in the national accounts to refer to the prices of products as received by the producers in the industry (By collecting data on gross sales and inventories from the records of companies and adding them together).
Market prices are the prices as paid by the final consumers for the same commodities.
This difference arises between the two, because the price paid by consumers for many goods and services is not the same as the sales revenue received by the producer owing to the taxes and the production costs to the producer is also different owing to the government subsidies, which they receive for production.

What did the statisticians at The Central Statistics Office (CSO) did different this year?

1. Changed the GDP figures from GDP at Factor Cost to GDP at Market Prices.

2. Changed the Base Year of calculation of GDP from 2004-05 to 2011-12.

3. The coverage is also greater with manufacturing now including previously under-represented sectors supplemented with data from the government’s corporate database in arriving at the figures.

Why this 'Kolaveri' ?

The CSO says the new method is more in line with global practices and gives a better picture of economic activity and is now at par with international standards and equivalent to the GDP computation practices adopted globally making the figures comparable internationally.

What happened as the result of the change?

1. The growth of the Indian economy is projected to accelerate to 7.4% in the current fiscal compared with 6.9% last year.

2. At this level it is estimated to be on par with China, currently the fastest growing economy in the world.

3. It is the first time that the economy is projected to be bigger than $2 trillion (Rs.126.5 trillion ); India’s GDP is estimated to be $2.1 trillion in 2014-15.


Why the tantrum?

• With the latest growth number of 7.4%, however, India is tied with China as the fastest growing major economy.
• Even as the numbers indicate economic activity has picked up steadily from the depths of the 2012-13 downturn, from 5.1 percent then to 7.4 percent (expected) this year, the revival is not reflecting in other data points (trade data, auto sales,), tax collections, credit growth or general business on-ground activity.
• The disconnect between the revised GDP numbers and the general economic indicators of the growth. Stressed corporate balance sheets are hindering a recovery in private capital spending, rising bad banking assets are making banks wary of lending to companies.
• Corporations are burdened with debt and banks are reluctant to lend. In general, there is a subdued commercial activity in contrast to the whooping figures of GDP.
• Economists are particularly surprised at the higher sectoral numbers for the manufacturing and financial sector reported by the new series because this is not reflected in data on factory output and bank credit.
• State Bank of India chief economist Soumya Kanti Ghosh said the latest set of GDP data has raised more questions than answers. “Nothing on the ground suggests the economy is growing at 7.4% rate. The number is fine if one goes by the internationally agreed standard, but one is unable to match especially the manufacturing data with the corporate sales numbers,” he said.- New GDP measure puts India’s economy at $2.1 trillion.
• The number also doesn’t mean much in terms of per capita income and India will remain a lower middle-income economy. Its economy will have to grow by at least four times and its population remain at the same level for it to become an upper middle-income economy.

 

[My-Analogous]

You might want to read this.
3 Methods (in principle, they all give the same result)

a) Production Method
b) Income Method
c) Expenditure Method

I will discuss only the Production method which is most widely used and globally accepted method and is important for our discussion.

1. Production Method- Sum total of all things 'produced'.

Expressed in Two ways-

i) GDP at Factor Prices

ii) GDP at Market Prices

Under Production method, the various economic activities of a given region, ie the various industries in the region are subdivided or classified into different sectors and the sum total of all the production or Gross Value Added in all these sectors are added together.

Gross Value Added= gross value of output (value of the total sales of goods and services)– value of intermediate consumption.

The sum of the gross value added in the various economic activities is known as "GDP at factor cost".
To which, adding indirect tax minus subsidies gives the "GDP at producer prices".

GDP at factor cost+ Indirect taxes- (subsidies given)= "GDP at producer or market prices".

Please note that two more variables i) Indirect taxes and ii) Subsidies are bought into the picture when GDP is expressed in market prices.

Taxes attached to the commercial transactions are known as indirect taxes. These are included within the MRP of a particular product. That is, if a consumer pays 100 for a commodity in a market, the owner may receive only 86, the remaining 14 will go to the government in the form of indirect taxes (VAT).

The term factor cost or basic price is used in the national accounts to refer to the prices of products as received by the producers in the industry (By collecting data on gross sales and inventories from the records of companies and adding them together).
Market prices are the prices as paid by the final consumers for the same commodities.
This difference arises between the two, because the price paid by consumers for many goods and services is not the same as the sales revenue received by the producer owing to the taxes and the production costs to the producer is also different owing to the government subsidies, which they receive for production.

What did the statisticians at The Central Statistics Office (CSO) did different this year?

1. Changed the GDP figures from GDP at Factor Cost to GDP at Market Prices.

2. Changed the Base Year of calculation of GDP from 2004-05 to 2011-12.

3. The coverage is also greater with manufacturing now including previously under-represented sectors supplemented with data from the government’s corporate database in arriving at the figures.

Why this 'Kolaveri' ?

The CSO says the new method is more in line with global practices and gives a better picture of economic activity and is now at par with international standards and equivalent to the GDP computation practices adopted globally making the figures comparable internationally.

What happened as the result of the change?

1. The growth of the Indian economy is projected to accelerate to 7.4% in the current fiscal compared with 6.9% last year.

2. At this level it is estimated to be on par with China, currently the fastest growing economy in the world.

3. It is the first time that the economy is projected to be bigger than $2 trillion (Rs.126.5 trillion ); India’s GDP is estimated to be $2.1 trillion in 2014-15.


Why the tantrum?

• With the latest growth number of 7.4%, however, India is tied with China as the fastest growing major economy.
• Even as the numbers indicate economic activity has picked up steadily from the depths of the 2012-13 downturn, from 5.1 percent then to 7.4 percent (expected) this year, the revival is not reflecting in other data points (trade data, auto sales,), tax collections, credit growth or general business on-ground activity.
• The disconnect between the revised GDP numbers and the general economic indicators of the growth. Stressed corporate balance sheets are hindering a recovery in private capital spending, rising bad banking assets are making banks wary of lending to companies.
• Corporations are burdened with debt and banks are reluctant to lend. In general, there is a subdued commercial activity in contrast to the whooping figures of GDP.
• Economists are particularly surprised at the higher sectoral numbers for the manufacturing and financial sector reported by the new series because this is not reflected in data on factory output and bank credit.
• State Bank of India chief economist Soumya Kanti Ghosh said the latest set of GDP data has raised more questions than answers. “Nothing on the ground suggests the economy is growing at 7.4% rate. The number is fine if one goes by the internationally agreed standard, but one is unable to match especially the manufacturing data with the corporate sales numbers,” he said.- New GDP measure puts India’s economy at $2.1 trillion.
• The number also doesn’t mean much in terms of per capita income and India will remain a lower middle-income economy. Its economy will have to grow by at least four times and its population remain at the same level for it to become an upper middle-income economy.

But if unemployment increase and export decrease -12.4, how it is not effecting gdp?

 

[Kal Muah]

But if unemployment increase and export decrease -12.4, how it is not effecting gdp?

Have you read it? I told you GDP calculation can be done in any of the three ways. Secondly, Indian economy is not export driven, so export falls effect very less in the overall growth. Also, India included IT in the GDP calculation, unemployment may be down in manufacturing sectors, but IT sector is still thriving and mass recruiting grads

 

[SBUS-CXK]

isnt HSBC already quitted its indian operations so is that "sour grapes"

anyway we are nowhere close to China as China had built its economy on manufacturing capbility while owrs is still a service provider type of economy which NaMo is trying from last two years to make a manufacturing economy and for that its trying to get as much FDI and skills associated as possible

and it still might take a full decade if not more to reach where China is today and by then China will be on next level ... in short owr main effort is to raise owr economy and living standards than competeting with China which most people fail to understand on this forum

Welcome to investment, even less. I don't care... Streams flow into the river, the river flow into the sea... China's per capita GDP has reached $8100. Within 10 years, everything will change... We will also learn India, claiming to be "superpower"

 

[GURU DUTT]

Welcome to investment, even less. I don't care... Streams flow into the river, the river flow into the sea... China's per capita GDP has reached $8100. Within 10 years, everything will change... We will also learn India, claiming to be "superpower"

well good luck & congrats to China and i already admire china very very much

but the bottom line is we dont want to be a "super power" we just want to at the level where no one can bully us and owr interests world domination is not owr goal ... remmeber india never attacked a nation in its history

 

[Nepon]

India is above China's growth rate , but India doesn't have the growth rate that China HAD 20 years ago

 

[SBUS-CXK]

Have you read it? I told you GDP calculation can be done in any of the three ways. Secondly, Indian economy is not export driven, so export falls effect very less in the overall growth. Also, India included IT in the GDP calculation, unemployment may be down in manufacturing sectors, but IT sector is still thriving and mass recruiting grads

Perhaps because the cause of the Chinese information controls... I don't know in which country because "IT" and services into the ranks of developed countries. Do you know?

This is I just saw the news, the Chinese ZPMC hoisting the British queen Elizabeth carrier of active phased array radar.

well good luck & congrats to China and i already admire china very very much

but the bottom line is we dont want to be a "super power" we just want to at the level where no one can bully us and owr interests world domination is not owr goal ... remmeber india never attacked a nation in its history

OK, if Sikkim also exist, he will be happy.

 

[Kal Muah]

Perhaps because the cause of the Chinese information controls... I don't know in which country because "IT" and services into the ranks of developed countries. Do you know?


This is I just saw the news, the Chinese ZPMC hoisting the British queen Elizabeth carrier of active phased array radar.


OK, if Sikkim also exist, he will be happy.

I can understand you are not comfortable with English, but its really difficult to understand, what exactly are you trying to say? sorry.

 

[AndrewJin]

Once thing I think it's very crucial to India is inclusive growth.
Mind that life expectancy and infant mortality rate witnessed fastest achievement in China before 1980s.

 

[dray]

I have a question (it is not trolling)

India export down 12.4% percent in 2015 (http://www.tradingeconomics.com/india/exports)
India unemployment jumps from 3.4% in 2014 to 8.3 in 2016 (http://economictimes.indiatimes.com...9-62-bse-index-shows/articleshow/51726860.cms)

So how you guys calculating GDP? please elaborate

But if unemployment increase and export decrease -12.4, how it is not effecting gdp?

Recently our central bank chief Raghuram Rajan did an interview on NDTV, he has explained everything in detail, just google for the video link. Some of the points in short were the fact that decline in export in terms of value was due to depreciation of rupee, but our businesses are not affected as the cost has also come down due to lower inflation. Do check the full video though, he is one of the most eminent bankers in the world.