Wednesday, 2 September 2015

China is far far ahead of India:

India economy growing faster than its neighboring china? Really?

Over three decades china has recorded double digit economic growth since 1979 , recently its economy has slowed down because of global cues and logged 6.8% growth this year ,on the other hand India was growing at 3 to 5% a year for nearly four decades ,india’s economy has got push only in late 1990’s after opening up of economy ,but the best growth achieved was in the period of 2004- 2008 ,when averaged it was 9%  , Global economy went into slow down due to many reasons which many of us know . There has been some revival now, growth touching 7.3% in 2014 – 2015.

The real twist of the tale comes here,

Why the India’s growth looked higher than china’s?

The reason for this is new method of estimating gross domestic product (GDP) which was adopted in February, GDP is estimated at market value or market prices taking in to account gross value addition in goods & services as well as indirect taxes which was replaced with factor cost method which was used earlier i.e, prior to February and also the base year is shifted from 2004-05 to 2011- 12, this looked india’s growth rate looked by 2.2% higher by china.. This move has been taken as per global norms. And latters economy has slowed down in recent years which is obvious to say the India’s growth looked higher

Let’s compare the GDP numbers of both the countries in absolute terms:

India’s GDP is only 1.87 Trillion $ in 2014, in contrast, china’s GDP is 9.24 trillion $ in 2014
So, as per above numbers even if India achieved 10 % growth it would grow at 18-20 billion $ in a year in absolute terms ,and china even at 6.5 % growth would grow at  60 – 70 billion $ .

Though India has achieved higher growth rate compared to its peer, it still has long way
When it comes to peers income numbers PCI for India stood at 1500$ while of china which is 6800$

Moreover Indian economy is purely dependent on monsoon, Year by year the numbers of monsoon are falling and china is export driven economy and as the consumption is the largest and main component of GDP in which India facing a rural distress. And some concerns like GST, interest rates, Politics playing a key role in shaping the economy, 

it’s too early to say Indian economy will grow faster than china...

Written By

-Sainath Gupta

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