By Richard Yetsenga
February 7, 2023 17:00 JST
Delhi-Meerut Expressway
Richard Yetsenga is chief economist and head of research at ANZ Banking Group in Sydney.
India surpassed the U.K. as the world's fifth-largest economy last year and is expected to surpass China as the most populous country in 2023. The subcontinental giant will also host this year's Group of 20 summit.
For some, these observations demonstrate that India is emerging as an economy of genuine scale. For others, they camouflage the country's struggle to get the basics right.
The reality is more nuanced.
It is clear that India has been rising for some time. Its share of world gross domestic product has more than tripled since 1992. That year, the GDP of the U.S. was 18 times larger than India's. Today the multiple is down to seven.
India's GDP growth eclipsed China's in 2021 and 2022 and is likely to do so again in both 2023 and 2024. In fact, relative demographic trends suggest that future years when China's growth exceeds India's are likely to be the exception rather than the norm.
While former chief government economic adviser Arvind Subramanian said in a recent co-authored article, "There is no inevitability ... from the decline of China to the rise of India," that is only partly true.
China is still a very large economy recording reasonable GDP growth, even if slower than the past. But as the end of China's economic exceptionalism has become clearer, the search for alternatives has accelerated, as the data makes clear.
Portfolio capital outflows from China were more than four times larger than from India last year. Foreign companies' net payments for direct investment into China fell to the lowest level since 2016, while FDI into India remained strong during the pandemic.
The value of cross-border merger and acquisition deals declined last year in almost all Asia-Pacific countries from a year before except in India where transactions reached a record level.
Then consider the World Bank's Doing Business survey. China did not rank higher than 80th place in the survey until 2017 when its GDP per capita was $8,800. In 2018, India was already within the top 80 with a GDP per capita of only $2,000. In the World Bank's most recent survey, the two nations were only six places apart.
The pandemic added a sharp decline in birthrate to China's already stark demographic challenges. The country's working-age population peaked in 2014. In India, the pandemic has done little structural demographic damage. If anything, the reverse has occurred.
The COVID-19 era shifted global working patterns in ways India is uniquely placed to capture through its scale, technology capacity and English-speaking capability.
The pandemic also exacerbated geopolitical fault lines, leaving India's nonalignment less cemented. India is in something of a geopolitical sweet spot, courted by the Quad, China and others.
After a decade without signing a trade agreement with any large economy, India signed new pacts with the United Arab Emirates and Australia in 2022, and one with the U.K. is likely in the first half of 2023.
The COVID period also saw India begin improvements to its physical infrastructure to narrow the gap with what the International Monetary Fund labeled "world-class public digital infrastructure."
The shift in India's cities is stark. Infrastructure now represents 23% of total spending at the state government level, the highest in a decade.
Central government spending on infrastructure is at an all-time high of 19%. Last week's new national budget doubled down on the capital investment agenda by including a one-third increase in planned spending, bringing the allocation up to 4% of GDP.
A bridge construction site in Kolkata in 2022: The shift in India's cities is stark. © Reuters
The new budget is marked by an improvement in the overall quality of spending. The record capital investment allocation will have a high multiplier effect on growth and bolster private investment.
For India, progress on clearing nonperforming loans during the pandemic is likely to improve the provision of credit to the economy. Nonperforming loans as a share of total bank loans peaked at 11.2% in 2017, a worrying level, but have since declined to 5%, with further declines likely.
Hindsight is a wonderful forecaster. China's performance over the last two decades is now treated as transparently predictable, when it was anything but at the time.
I recall thumbing through Joe Studwell's book, "The China Dream: The Quest for the Last Great Untapped Market on Earth," two decades ago and wondering how seriously to take it. Many expected China to be the world's largest economy by now, yet it is not clear that will happen anytime soon. Others have spent plenty of time predicting China's collapse.
There also seems to be implied criticism of India's development because it is charting its own path.
But economic development has no standard recipe. The rise of the Asian Tigers -- Hong Kong, Singapore, Taiwan and South Korea -- was unique. China's rise has been unique.
So, too, will be India's. Textbooks have to be rewritten after each such rise and likely will be again as India's progresses.
No doubt India has an unenviable to-do list. But would we not expect an economy with a GDP per capita of $2,500, to have plenty to do?
At this stage of development, the list should be long. Mark Mobius's classic, "Mobius On Emerging Markets," reminds us that emerging economies are the epitome of the risk-reward trade off. One does not exist without the other.
The to-dos are what give the upside.
@Skull and Bones @Raj-Hindustani @VkdIndian @Hellfire2006 @Paitoo @datafreak @Varunastra @SeaMermaid @INDIAPOSITIVE @koolzberg @MirageBlue
@kmc_chacko @Sam6536
asia.nikkei.com
February 7, 2023 17:00 JST
Delhi-Meerut Expressway
Richard Yetsenga is chief economist and head of research at ANZ Banking Group in Sydney.
India surpassed the U.K. as the world's fifth-largest economy last year and is expected to surpass China as the most populous country in 2023. The subcontinental giant will also host this year's Group of 20 summit.
For some, these observations demonstrate that India is emerging as an economy of genuine scale. For others, they camouflage the country's struggle to get the basics right.
The reality is more nuanced.
It is clear that India has been rising for some time. Its share of world gross domestic product has more than tripled since 1992. That year, the GDP of the U.S. was 18 times larger than India's. Today the multiple is down to seven.
India's GDP growth eclipsed China's in 2021 and 2022 and is likely to do so again in both 2023 and 2024. In fact, relative demographic trends suggest that future years when China's growth exceeds India's are likely to be the exception rather than the norm.
While former chief government economic adviser Arvind Subramanian said in a recent co-authored article, "There is no inevitability ... from the decline of China to the rise of India," that is only partly true.
China is still a very large economy recording reasonable GDP growth, even if slower than the past. But as the end of China's economic exceptionalism has become clearer, the search for alternatives has accelerated, as the data makes clear.
Portfolio capital outflows from China were more than four times larger than from India last year. Foreign companies' net payments for direct investment into China fell to the lowest level since 2016, while FDI into India remained strong during the pandemic.
The value of cross-border merger and acquisition deals declined last year in almost all Asia-Pacific countries from a year before except in India where transactions reached a record level.
Then consider the World Bank's Doing Business survey. China did not rank higher than 80th place in the survey until 2017 when its GDP per capita was $8,800. In 2018, India was already within the top 80 with a GDP per capita of only $2,000. In the World Bank's most recent survey, the two nations were only six places apart.
The pandemic added a sharp decline in birthrate to China's already stark demographic challenges. The country's working-age population peaked in 2014. In India, the pandemic has done little structural demographic damage. If anything, the reverse has occurred.
The COVID-19 era shifted global working patterns in ways India is uniquely placed to capture through its scale, technology capacity and English-speaking capability.
The pandemic also exacerbated geopolitical fault lines, leaving India's nonalignment less cemented. India is in something of a geopolitical sweet spot, courted by the Quad, China and others.
After a decade without signing a trade agreement with any large economy, India signed new pacts with the United Arab Emirates and Australia in 2022, and one with the U.K. is likely in the first half of 2023.
The COVID period also saw India begin improvements to its physical infrastructure to narrow the gap with what the International Monetary Fund labeled "world-class public digital infrastructure."
The shift in India's cities is stark. Infrastructure now represents 23% of total spending at the state government level, the highest in a decade.
Central government spending on infrastructure is at an all-time high of 19%. Last week's new national budget doubled down on the capital investment agenda by including a one-third increase in planned spending, bringing the allocation up to 4% of GDP.
A bridge construction site in Kolkata in 2022: The shift in India's cities is stark. © Reuters
The new budget is marked by an improvement in the overall quality of spending. The record capital investment allocation will have a high multiplier effect on growth and bolster private investment.
For India, progress on clearing nonperforming loans during the pandemic is likely to improve the provision of credit to the economy. Nonperforming loans as a share of total bank loans peaked at 11.2% in 2017, a worrying level, but have since declined to 5%, with further declines likely.
Hindsight is a wonderful forecaster. China's performance over the last two decades is now treated as transparently predictable, when it was anything but at the time.
I recall thumbing through Joe Studwell's book, "The China Dream: The Quest for the Last Great Untapped Market on Earth," two decades ago and wondering how seriously to take it. Many expected China to be the world's largest economy by now, yet it is not clear that will happen anytime soon. Others have spent plenty of time predicting China's collapse.
There also seems to be implied criticism of India's development because it is charting its own path.
But economic development has no standard recipe. The rise of the Asian Tigers -- Hong Kong, Singapore, Taiwan and South Korea -- was unique. China's rise has been unique.
So, too, will be India's. Textbooks have to be rewritten after each such rise and likely will be again as India's progresses.
No doubt India has an unenviable to-do list. But would we not expect an economy with a GDP per capita of $2,500, to have plenty to do?
At this stage of development, the list should be long. Mark Mobius's classic, "Mobius On Emerging Markets," reminds us that emerging economies are the epitome of the risk-reward trade off. One does not exist without the other.
The to-dos are what give the upside.
@Skull and Bones @Raj-Hindustani @VkdIndian @Hellfire2006 @Paitoo @datafreak @Varunastra @SeaMermaid @INDIAPOSITIVE @koolzberg @MirageBlue
@kmc_chacko @Sam6536
India's rise is beyond doubt
Investors should welcome country's extensive to-do list
asia.nikkei.com
He is a Maths graduate and his work in UP speaks for itself. I believe you are the one who wants 9th fail Tejashwi Yadav or Mayawati or good for nothing Rahul Gandhis and Kejriwals to become PM
