This is a report by the World bank (and a think tank) to study the impact of the growth of China and India on other countries in the World.
Provides a good insight into the China and India story:
(a) Sorry, China and India are not Giants. Though they house 38% of world population they account for 6.4% of World GDP (yes, purchasing power parity is not useful in evaluating your impact on other countries since size of trade and exchange rates are more important than price levels).
(b) Sorry, this will not change even after sustained growth in the next decade. India would grow from being 1.7% of World economy to 2.4% in 2020 (okay, 3.2% if you are optimistic). China would grow from 4.7% now to 7.9%.
(c) Sorry, India is not a dominant player in providing services to the world. India’s export of services is just 1.8% of global trade in services.
(d) Sorry, IT just accounts for 6% of India’s service revenue. Nope, it is a myth to believe growth in IT sector would transform Indian economy. It did not. It may not.
(e) Nope, energy economists don’t need to worry. India accounts for just 3.4% of global oil usage. In the next ten years any hike in oil price is more likely to come from supply side hitches than from increased demand for oil in India or China.
(f) Nope, US current account deficit is not due to China’s import barriers or an undervalued currency. US is just not saving enough.
(g) Nope, China and India are not competing head on for their products. The top 25 exports of China and India have only one product in common! (Yes sire, refined petroleum).
(h) Nope, Dhirubhai Ambani alone is not enough to reform our textiles industry. Our textile exports is $ 10 billion a year. Wal Mart alone buys $ 18 billion textiles from China. Did you know one major impediment is the delivery time from India to US? Yes, 24 days!
(In passing, the economists say that the movie industry in India is not known to produce world class movies; though one did come recently: “Bend it like Beckham”! Apologies Mani Ratnam, economists do not know as much about movies as about GDP!)
Have we handled our economy well? We made some mistakes in the way we managed our economy.
(a) We started with one major disadvantage. Inequality.
(b) Economic growth is rarely balanced. It often results in enhancing inequality.
(c) There are good inequalities (differences in income and wealth because some earned more than others) and bad inequalities (lack of access to education or credit to pursue an economic activity). Good inequalities are necessary to maintain incentive for growth. Bad inequalities prevent people from escaping poverty.
(d) We got our philosophies mixed up. Instead of attempting to eliminate bad inequalities by providing access to opportunities for the poor, we went after good inequalities by suppressing incentive for economic growth.
(e) We restrained firms from freely pursuing economic activity (by reserving several activities for the State or for small enterprises and by introducing a license raj that required government permission to start or expand a business).
(f) We prevented efficient allocation of resources (by protective trade policy that perpetuated advantage to existing players, by a directional tax policy, by state control of all funding and by restrictive labor laws).
(g) On the other hand, we did not provide access to education or market driven micro finance delivery to the poor to acquire human capital to escape poverty.
(h) End result: We did not grow enough; but the inequality went up. The poor did not benefit from economic growth at all.
(i) Since our political system depended on popular support, political administrations “blamed” a variety of targets (businessmen, upper caste, land holders, foreign hands) for the failure to eradicate poverty and used the resultant “popular anger” to consolidate their power base.
(j) Thank God we had a crisis in 1991. Debt service rose to 21% of receipts. Interest burden rose to 20% of expenditure. We ran out of spendable currency. No one was willing to lend.
(k) Prime Minister Narasimha Rao went beyond curing the immediate disease. Rao government cut back industries reserved for State; removed licensing requirements; devalued rupee; allowed current account convertibility; removed quotas and reduced tariffs; and lifted restrictions on foreign investment.
(l) Fortunately the reform process, despite vigorous debate, has developed sufficient consensus to stay on track in succeeding administrations.
(m) We have some more miles to go:
(1) We need to provide access to education and credit to facilitate people escape poverty. Spending money on rural infrastructure alone will not kill “bad inequality”. If this is not done, India would continue to be a miracle of “jobless growth” and political consensus for reform would evaporate diluting growth prospects. Equality is not just a nice thing to do; it is essential for going after growth.
(2) We need to get “government” out of “business” even more. Subsidies will have to reduce. Buredensome state enterprises cannot be funded by public expenditure. Bad loans in banks will have to reduce. Regulatory rigidity in labor market will have to reduce.
(3) We need to step up “governance”. We need to step up government effectiveness and bureaucracy quality.
(4) We need to manage our “balance sheet” well. We cannot be an economy whose liabilities are in “high cost equity” (FDI and portfolio investments) and whose assets are in “low yield reserves”. This asymmetry is expensive.
China has one advantage over us. An early start. China has built a strong manufacturing base with an eye on the global market (40% of its GDP is from exports vs 15% for us). However, in the end, China has one disadvantage. In China the State is determining who will pursue economic activity and who will not by its “hukou” system (license to live in special zones) and “TVE system” (town and village enterprise owned by local governments with limited authority to retain and reinvest super profits). This was useful in creating "private firms" in a socialist economy.However, this past success is going to be a burden for China in the future. A very large population, distinguished by party discretion, got left out in the growth process and resentment is bound to build up. Building political consensus to the reform process is going to be quite a challenge in China. This may hamper growth. To this extent China is in a "trapped transition".
India has a higher chance of sustaining and growing political consensus for reforms because it has the political institutional framework to let differing voices debate vigorously before building consensus. The pace is bound to be slow but the traction is firm.
It is nice to think that Leftist leaders Prakash Karat and Sitaram Yechury, with their wisdom and ability to disagree, play an important role in this long term competitive advantage for India over China!
20 May 2007
This is a report by the World bank (and a think tank) to study the impact of the growth of China and India on other countries in the World.
13 May 2007
This DVD issue is awesome.
Discovery Channel/BBC team use state of the art technology to take us through the various eco systems of our planet - polar ice caps, mountains, plains, rivers, caves and deserts. You get to see the regions from the space, from the sky, from a tree top, on land and on occasions from down under. Rare events (births, first moments, hunts, survivals) have been captured with great alacrity and patience and presented in one seamless flow.
Ever seen Niagara falls from various observation points? Right atop the horse shoe falls? On a "maid of the mist" boat tour taking you as close to the falls as possible? On the temporary wooden platform of "hurricane deck" where the secondary spray itself is powerful to knock you off and the huge mass of flowing water above your head "scares" you? On a "journey behind the falls" (on the Canadian side)?
Ever seen the Grand Canyon at sunset time from "Hopi point" with the Colorado appearing as a nice serene silver ribbon barely visible in the total landscape? Ever trekked down "Hermit's rest" to realize how rugged the terrain is? Ever took a "white water rapids" ride to experience the thunderous flow that the silver ribbon has become? Ever took a helicopter ride over the canyon to see Peak Brahma and Peak Vishnu in their inspiring splendour lording over the rocks?
Ever snorkelled in the Great barrier reefs in Australia? Ever did an underwater glass boat ride over the Arlington reefs (and get teased for it because your kids got to do the more adventurous 50 m scuba dive around the same time)?
Ever spent a day to reach Jungfraujoch (through the Eiger tunnel up the Eigher North wall) to see the picturesque view atop the mammoth Sphinx observatory deck? Ever saw the same stuff from a flight tour over the Swiss alps and realize that this huge observatory is a tiny toy in a massive blanket of snow?
Ever stood on an Alpine farm land with a parasail (and a tandem pilot, of course) attached to you and run at breakneck speed toward the edge of a cliff? Ever experienced the magic moment when your feet are off the ground and you are flying/floating/sailing/gliding with nothing between your feet and the lake town 2,000 m below? Ever moved from the embarrassing moment when you have self doubts (while your little girls and wife have taken off smoothly) to the moment when you are in air catching a thermal and getting a big uplift?
Every time you have an awesome moment like this in your life your respect for Planet Earth goes up. So does your fun in living in this ecosystem.
This exceptionally entertaining DVD series brings those magic moments of joy you experienced (and those you have not) right into your living room.
Grab one. Watch in a big screen TV. Enjoy.
Posted by T R Santhanakrishnan at 6:36 PM
In his book “Prisoner without a name and cell without a number” Jacobo Timerman says that oppressed population go through three stages during the course of oppression: anger, fear and apathy. For "anger and fear" Pakistan did not have to look beyond General Zia-ul-Haq. For apathy they did not have to look beyond Benazir Bhutto.
Benazir, in 1988, was Mannah coming down from heaven for Pakistan.
She was the first born of the elite aristocratic Bhutto family. (Charles Napier, famous for his “Peccavi – I have Sinned” pun writes that Bhutto landholding was so extensive that he would travel for hours in Sind and yet be in Bhutto land). She went to Radcliffe and later to Oxford. She was the first woman president of the Oxford Union.
Young Benazir, 23 when her father was murdered by Zia, was kept in prison by Zia for several years. Undaunted by all this, she provided leadership to PPP, her political party. When allowed to go out of Pakistan in 1984 she continued to run the party from her Barbican apartment in London.
In 1986 she decided to return courageously to Pakistan when Zia was ruling. People defied military rulers and gave her a welcome that remains unrivalled. She continued to whip up her agenda for bringing democracy back to Pakistan for the next two years.
1988 proved to be a turning point for Pakistan and Bhutto. Zia’s role for Pakistan to be a frontline state in the war against communism proved to be temporary. Zia’s role for Pakistan to be a frontline state in evangelizing Wahabi Islam proved to be permanent. Zia died in an air accident. Benazir Bhutto became the first woman PM of Pakistan when she was just 35 yrs.
Until this time her life is a story that inspires. After becoming PM hers is a story of lost opportunities.
She did not use her power base to enshrine democracy and was comfortable securing a position of power in existing autocratic frameworks. This allowed Ghulam Ishaq Khan (a civil servant who succeeded to become President) to dismiss her once and Farooq Laghari (an underling who got elected to be President due to Benazir’s support) to dismiss her again.
She did not ensure her husband was above suspicion. Pakistan government had detained her husband in prison for more than 6 years on 90 charges of corruption though it has not secured conviction in even one case . However, it is not easy to ignore the fact that Zardari, not rich at the time of marriage to Benazir, owns a 355 acre property south of London according to Wikipedia.
Benazir is a good writer though. Some interesting snippets:
The feelings of an educated young Muslim girl wearing a barkah for the first time are vividly described. The world was not the same through gauze. The build up of humidity inside the cloak was uncomfortable. Her relief when her father tells that she does not need to wear a barkah is immense. However, it was her father’s decision; not hers. Who is the liberal?
Benazir Bhutto rightly feels that the West does not care for freedom in frontier states as much as freedom at home:
(a) In 1958 US trained Pakistan Army in “immobilizing” a government through strikes. The operation was titled “Operation Wheeljam”. Why would US want to do that? Why would Pakistan army want to get trained in that?
(b) Margaret Thatcher, in a trip to Pakistan, praised Zia and declared Pakistan to be the “last bastion of freedom”. An example where a leader's wisdom has not kept pace with knowledge.
(c) Undersecretary of State James Buckley testified before US Congress that “elections were not in the best interest of the security of Pakistan”. Another example of paucity of wisdom.
Pakistan had a long term price to pay. After the Afghan war, Kalashnikovs were available, according to Benazir, for $ 40 in Karachi. One can rent by the hour too. Landowners and Industrialists began to employ private armies to protect themselves. By 1983, Pakistan had become the major supplier of heroin to the World with some support from the State. (Abdullah Bhatti, one of the two drug bosses, was arrested and sentenced by a military court. But Zia intervened and gave him a Presidential pardon, a power he never used for anyone else!). Narco terrorism was born.
The second major impact was on women. Zia introduced the Hudood ordinances whereby a woman charging a rape should prove it with four male witnesses; otherwise she would face adultery charges herself. Safia Bibi, a blind servant girl was raped by her employer and his son; and could not prove it – rape rarely being conducted in public. The two men went free and Safia was charged with adultery. Campaigns by outraged women saved Safia Bibi; but not other less fortunate women.
However, Benazir is not as eloquent about her times as PM as about her times as a prisoner. There is very little about her challenges as a PM: her failure to get a good constitution written, her failure in dealing with Presidents who never had public mandate, her failure in dealing with traditional power brokers in the army, in the ISI, her failure to rein in her husband; her initiatives for development of social and economic aspects of Pakistan and her failure in engaging with India. In the end, she got consumed by the very forces she tolerated as a prisoner and as a PM. Pakistan did not revolt when she moved out to Dubai.
The book is interesting when it deals with the anger and fear till 1988; and gets boring when it reaches the stage of Jacob Timerman’s “apathy” after 1988. Benazir too does not think the period is important and devotes 90% of the book for her first 35 years till she becomes PM and just 10% for the next 19 years as PM, Opposition leader and Leader-in-exile.
When it was first published in 1988, I liked the book. Today, am just bored.
Posted by T R Santhanakrishnan at 5:46 PM