BusinessWeek just published a massive issue dedicated exclusively to India and China (via SAJA). I’m talkin’ huge.
… most economists figure China and India possess the fundamentals to keep growing in the 7%-to-8% range for decades. Barring cataclysm, within three decades India should have vaulted over Germany as the world’s third-biggest economy. By mid-century, China should have overtaken the U.S. as No. 1. By then, China and India could account for half of global output. Indeed, the troika of China, India, and the U.S. — the only industrialized nation with significant population growth — by most projections will dwarf every other economy…
The closest parallel to their emergence is the saga of 19th-century America, a huge continental economy with a young, driven workforce that grabbed the lead in agriculture, apparel, and the high technologies of the era, such as steam engines, the telegraph, and electric lights. But in a way, even America’s rise falls short in comparison to what’s happening now. Never has the world seen the simultaneous, sustained takeoffs of two nations that together account for one-third of the planet’s population. [Link]
India and China accounted for more than 50% of world gross domestic product in the 18th century and to my mind, there is no doubt this will be repeated. [Link]
Their sudsing machine is on hype cycle high:
Google… principal scientist Krishna Bharat is setting up a Bangalore lab complete with colorful furniture, exercise balls, and a Yamaha organ — like Google’s Mountain View (Calif.) headquarters — to work on core search-engine technology… “I find Bangalore to be one of the most exciting places in the world,” says Dan Scheinman, Cisco Systems Inc.’s senior vice-president for corporate development. “It is Silicon Valley in 1999.” [Link]
Today’s reality is more sobering:
Today, China and India account for a mere 6% of global gross domestic product — half that of Japan. [Link]
If India ever gets its infrastructure under control, the implications for science and engineering are remarkable, although it obviously isn’t a pure manpower game:
… the balance of power in many technologies will likely move from West to East. An obvious reason is that China and India graduate a combined half a million engineers and scientists a year, vs. 60,000 in the U.S. In life sciences, projects the McKinsey Global Institute, the total number of young researchers in both nations will rise by 35%, to 1.6 million by 2008. The U.S. supply will drop by 11%, to 760,000. [Link]
India, efficient?
India, by contrast, has had to develop with scarcity. It gets scant foreign investment, and has no room to waste fuel and materials like China. India also has Western legal institutions, a modern stock market, and private banks and corporations. As a result, it is far more capital-efficient… Indian corporations have achieved higher returns on equity and invested capital in the past five years in industries from autos to food products. The average Indian company posted a 16.7% return on capital in 2004, vs. 12.8% in China. [Link]
The usual yadda yadda about how China’s political model gives it an early lead over India, but it will falter unless it’s reformed:
“I believe India has a better model than China, and over time will surpass it in growth…” China has yet to prove it can go beyond forced-march industrialization. China directs massive investment into public works and factories, a wildly successful formula for rapid growth and job creation. But considering its massive manufacturing output, China is surprisingly weak in innovation… It’s not for lack of genius. Microsoft Corp.’s (MSFT ) 180-engineer R&D lab in Beijing, for example, is one of the world’s most productive sources of innovation in computer graphics and language simulation. [Link]
Sadly, the Fortune 500 mirrors U.S. policy towards dictatorial regimes. It’s about government, government, government:
Ironically, Indian democracy is viewed as a hindrance vis-a-vis the stability of China’s authoritarian regime on its liberalizing market and docile unions. [Link]What holds India back are bureaucratic red tape, rigid labor laws, and its inability to build infrastructure fast enough. [Link]
Some disturbing cultural trends (the Fair and Lovely ad is so wrong, I can’t even begin to enumerate why):
Now [Sania] Mirza is something of a youth icon, with many Indian teens coveting–and copying–her nerdy black-rimmed glasses and nose ring. [Link]Unilever… played on that sentiment with a recent controversial — but successful — ad for its Fair and Lovely line of beauty products. A daughter came home and found that her parents had no sugar for coffee because they couldn’t afford it. She became an airline hostess after using the Fair and Lovely products to make her beautiful. She then visited her parents and took them to a first-class restaurant. [Link]
Marry Matthew Perry? Kill me now.
“The relationship with the husband used to be one of awe,” Singhania says. “Now, women want a partner and a relationship of equals. They want to marry a man like Greg of Dharma and Greg or Chandler of Friends.” [Link]
Of course, it wouldn’t be BusinessWeek without a reassuring ode to the invisible hand, incorporating tropical fruit. It’s economic mangoroticism!
BAIF workers found their way into the pathless mountains on motorcycles, carrying seed and fertilizer with them. They helped the farmers plant saplings and fruit grafts on the hillsides. They taught them to level the small patches of land and harvest rainwater by building small stone dams at the front edge of each patch. In the first year, 90% of the mango and other trees planted survived…Today, villagers like Mahale are local role models. Mahale owns the largest house in the village of Kharonda: an eight-room structure with brick walls and a red-tiled roof. Inside, the house boasts electricity, running water drawn by motor from the local well, satellite TV, a sofa set, and a large bed in the master bedroom. Last month, Mahale bought himself a motorcycle… Their income is now nearly $4,000 a year, the fruit of the 20 mango trees, 40 cashew trees, and a stand of eucalyptus, plus the 6,000 mango-sapling grafts they sell annually. [Link]
Previous post here.
i think a critical issue that is these profiles ignore the intranational variance. going 200 miles from hong kong due northwest and you go from 1st world to 3rd world, with shenzhen in the 2nd world in between. and we all know about brownland….
—Marry Matthew Perry? Kill me now. why?
Yes, but so would going 200 miles from Atlanta into rural georgia or going 200 miles from dallas into rural texas (well maybe second world). Is this bad or something inevitable in a large country. As long as movement of people, capital etc. is not restricted should be OK.
Cuz no one likes a wuss. Also, my butt is way better.
Crap, it is a huge issue. Counting the “online extras,” there are 49 articles! That’s virtually an entire Thomas Friedman book.
They put a little counterweight to all the hype at the end of the issue, here: “India’s Untold Story”.
It has sentences like this one:
Progress, shmogress.
Off topic: If you haven’t been spammed yet, please signup for a petition online to issue a stamp on Diwali.
Diwali Petition
And it seems to have roughly the same intellectual content as any Friedman book.
Where is the 2nd world?? I have always wondered. First world is western Europe and Japan. And Third world is rest of the world right?? So where is 2nd world (yes, there is an attempt at sarcasm here)
Seriously, I thought the whole 1st world sencond world thing came from the cold war era. Those who were with the west were 1st world, those with Soviets were second and the rest were 3rd. But now the meaning of 3rd world as 3rd class people and 3rd class country.
these profiles ignore the intranational variance. going 200 miles from hong kong due northwest and you go from 1st world to 3rd world, with shenzhen in the 2nd world in between.
True, but that cuts both ways. Millions of people there are already living in a first world state. From the investor perspective, the notable fact is that the 1st world is there at all. There are lots of other places where there isn’t a first world for hundreds or thousands of miles.
Plus, coastal China is developed. It’s at the first world level today. It makes an immediate impression. If you’ve seen Shanghai or Beijing recently…jeeeezus christ…that country is going to be a force to be reckoned with when every city looks like that.
I mean, it’s one thing to think “oh yeah, they’ve got a lot of people”…it’s another when you realize they have 13 metro areas with more than 2 million people. For comparison, we only have 3: NY, LA, Chicago…
http://www.citypopulation.de/USA.html http://www.citypopulation.de/China.html
Anyway, I’m not saying anything you don’t know, but my recent tour of the place really brought home a lot of the hype. India isn’t even close to where China is right now, and in terms of infrastructure — as opposed to pockets of excellence — I don’t know if they ever will be.
On the other hand:
It has sentences like this one: Indian government census statistics show the number of those living on less than $1 a day has dropped from 26% of the population in 1999 to an estimated 20% today. Progress, shmogress.
Hey, that’s nothing to sniff at. 6% drop in absolute poverty in 5 years? That’s a torrid pace of development by any standard.
Yes, I was correct as per Wikiperdia’s definition of Third World”
Its not any country that one has a poor opinion about.
They call Pakistan also a Third world country but it was allied with US through out the cold war.
So basically calling any country that is not as rich as the west “Third world country” is like calling that country a “f$$king sh%thole” or something similar.
Didn’t China have 74,000 violent protests in the last year? (http://keywords.oxus.net/archives/2005/08/11/74000-protests/trackback) even if we got to hear of just a couple. Funny how the glint of $$ makes people glib about authoritarianism’s great “benefits,” despite some passing nod to squishy sentiments about how democracy is good (maybe they mean democracy is not for the average Chinese).
Cuz no one likes a wuss. Also, my butt is way better.
Yes. wannabe machos are the definetly better 😉
Yawn Cue the cynical China is way ahead of India posts, and nothing will ever become of India. Thanks guys. Thanks for helping to dissuade foreign investors from putting more money into the country and making your prophecy self-fulfilling. Maybe we should just go back to begging for aid like Africa instead hyping some stuff, and getting some money into the country, because of course, there isn’t an ounce of truth to any of the stories which say that India is progressing. In fact, you’re right. We must be regressing. I’ll just try and ignore the fact that each year brings more companies to our shores, and more people making money. I’ll jsut sit in my little room, and cook up another one. I’m sorry we’re all not running around buying photo ipods in our beemers yet for the progress to be visible. Oh wait, if we were running around with our photo ipods and our beamers, we’d probably be reprimanded for imitating Whitey. Never mind. It’s ok. You can nay-say all you want. The country will progress with or without you. Now don’t sit and regret it that you weren’t there at the beginning of the growth curve when the real money was to be made.
TTG, or should I say Data,
Seriously, have someone check your snark detector gland, it’s gone missing. Your literalism organ is in the finest of health, though.
When someone says, ‘he let the cat out of the bag,’ do you say ‘where? where?’
I think the slummy state of Indian cities caused by years of misguided rent control, land laws and general neglect, probably dissuades more potential foreign investors than a few negative postings on the web.
China is ahead of India, which is not to say that India is doomed.
But it will be difficult to progress at a time when the Indian politicians and Press seem to have this crazy idea that IT will somehow magically provide jobs for everyone; a dillusional claim considering the majority of the people in India don’t even speak any english.
Even communist states like west bengal have jumped on to the IT bandwagon, presumably thinking its somehow less bourgeois than more physically exhaustive means of earning a living. This specially ironic when you consider that the focus on IT acutally increases the divide between the haves and the have nots.
The real solution is to loosen up the labour laws, and laws regarding foriegn ownership in order to create manufacturing jobs so that low skill workers can find some half-decent assembly line type jobs and can afford to send their kids to private school. (<- essential in order to learn marketable skills like english)
Don’t get me wrong I think India’s progress since the early nineties has been remarkable, but I think it’s also remarkable that a country where the cost of labour as cheap as India, can have consistant trade deficits year after year.(meanwhile China is running record trade surpluses)
The real solution is to loosen up the labour laws, and laws regarding foreign ownership in order to create manufacturing jobs so that low skill workers can find some half-decent assembly line type jobs and can afford to send their kids to private school.
I tend to agree with the above analysis. However free market labor laws will result in some exploitation of the workers. I will support such laws only if the Government of India is willing to create a cushion for the fired workers. For example laws which permit easy hire and fire obviously are an attractive proposition for the foreign investors but might result in undue hardships for the poor workers. This also exposes the workers to abuse from unscrupulous local factory owners. On the plus side, more employer friendly laws will create more jobs and better the lives of more people.
China may be ahead of India, but India has definately a huge potential (mainly due to the inherently enterprising nature of the people)
I agree with “free epoch” about the insistance on IT for everything is not wise, IT industry at the most is only accessible to 20% of the population. (I guess trickle down economics doesnt work,…..anywhere 🙂 )
A more business friendly government will get India on the right track. The proof of this is in Gujarat. Since the government usually is business freindly, it has very high economic activity and people are prosperous.
just my 2 paise