Chinindia is a thing of past. Now it’s only China!!

Chindia is a word that refers to China and India together in general and their economies in particular. The credit of coining the now popular term goes to Jairam Ramesh, a politician affiliated with Indian National Congress Party and now a cabinet minister. China and India are geographically proximate, are both regarded as growing countries and are both among the fastest growing major economies in the world. Together, they contain about one-third of the world's population. They have been named as countries with the highest potential for growth in the next 50 years in a Goldman Sachs BRIC report.

I have been analyzing Chinindia’s growth for a long time now (to be specific almost 18 months now). It is an extremely politically and emotionally (for Indians) sensitive yet very critical topic for all Indians. Some of our readers (ultra nationalist) may call me a traitor or “hired by Chinese” after reading the title of this article or entire article; however, the fact remains that China will enter a league of its own while India will still have a long way to counter or even compete with China! I have presented an analysis of facts and figures to support my point in this article. These are just my view and readers’ comments and feedback will be highly appreciated.

Some Facts about China and India

Graphical comparison of FDI and Growth Rate of China and India

 This graph illustrates how India has grown between 2001 and 2006. We can see it was a steady climb in trade while there was a phenomenal increase in Foreign Direct Investments (FDIs).  FDI touched $32 Billion in the financial year of 2008-2009. For India GDP per capita hasn’t improved due to the huge population.

 This graph illustrates how China has grown between 2001 and 2006. We can see it was a steady increase in trade as well as Foreign Direct Investments (FDIs).  FDI touched $75 Billion in 2006 and $90 Billion in the financial year of 2008-2009. China, like India, has a huge population that severely hurts its GDP per capita (GDP / Population).

Role of China in Global Economic Crisis
Politically China is an extremely powerful country with immense leverage across the world especially in our neighbourhood. They have gradually developed strategic, economic and political ties with countries in Latin America, Middle East, Europe and Asia. They have signed long-term contracts with countries like Iran, Brazil and Venezuela to ensure its energy security for the next 50-60 years. It has developed its infrastructure with extreme passion and maniacal enthusiasm. It adds over 70 Giga Watt of power supply every year while India “plans” to add that much in 5 years (Historically India is able to achieve only 30-40% of its planned capacity).

China has become one of the biggest and most important players to solve the current global financial crisis. The entire world from US to Europe to Asia is looking up to China to play a very complex, active and disciplined role. It has moved to the league of World Donors while India still remains a big receiver of funds from World Bank and Asian Development Bank. China has been growing at a rate of over 10% for the last 2-3 decades. It has become a manufacturing powerhouse and economic behemoth. U.S. Treasury Secretary Timothy Geithner recently stated that the United States and China must change strategies for boosting growth as U.S. consumer demand wanes, and he offered strong backing for a bigger Chinese role in setting global economic policy.  He said and I quote here- 'China is already too important to the global economy not to have a full seat at the international table,' He also offered U.S. backing for a higher-profile role for China in running global institutions including the IMF. With two trillion U.S. dollars worth of foreign exchange reserves in hand, China is under the spotlight of the international community, which has high expectations regarding how much contribution China could make towards helping the world weather the current situation. These statements and reflect the growing clout and might of China in the world.

The gap between China and India has become evident in the current global financial crisis. China has become a major global player, second only to the US, while India is barely on the radar screen.  India still accounts for one-third of world’ poor and has highest absolute number of poor people, infant deaths, maternal deaths in childbirth, and highest child malnutrition in the world. Politically we don’t have edge over any country – even small countries like Nepal and Bangladesh does not “respect” or “fear” India. India is not able to control the Maoist insurgency for almost 3-4 decades; there is 60 year old problem of Kashmir with Pakistan that has clubbed us with them for no good reason.

India has seen a growth rate of 8-9% only in the last 4-5 years and even that has come down to less than 7% now. India is still an active recipient of loans from leading institutions and developed countries such as US and Japan. China has offered to supply $40 billion, against $100 billion from Japan and possibly the US. India does not figure in this giver’s list — it would rather be a receiver. Acute corruption, bureaucracy delays and political apathy are causing severe problems for India. These problems and inefficiencies cost India over 2% of GDP every year. India lacks the political will, aggression and determination to move ahead and stress itself

What next for India
My idea is not to denigrate my beloved country, India, in front of China, but to do a reality check. I believe one who does not realize the severity and importance of the path one has chosen to walk, he or she is bound to fall soon. It does not mean that India will lose out its ground in the world. India is still the second fastest growing economy and would continue to play significant role in the coming decades. We Indians are over 100 crore in strength and a very big domestic market. Our economy is not export oriented and hence primarily led by domestic consumption. This is a big advantage of India over China which is an export oriented economy. We also have a much better and stable banking and financial services industry. Chinese NPA (Non-Performing Assets) are at all time high and needs to be addressed quickly. We do not face such problems out here; but we have our own set of problems – mostly historical and inherent (may I say so!!)

We Indians are less aggressive and lack ambition. We are happy with whatever we have and also with what we do not have! No power, water, job – Chalta hai. India needs to think beyond her doors and work hard to spread her “influence” across the globe. To accelerate the growth and presence India needs to:
1. Reduce and reform the appalling bureaucracy that is causing huge delays in sanctioning projects, license and almost everything that go though their tables.
2. Accelerate the reform processes to facilitate investments, resources acquisition and speed up infrastructure projects.
3. Strengthen its political leadership who can think about future and act now. It is extremely important for India to create leverage in its neighbourhood, EU and America. We still suffer a lot due to lack of natural resources and technologies. Compared to Chinese we are not at all aggressive in acquiring oil resources in oil rich nations. Only great thing to happen in the last 10 years was signing of Indo-US Nuclear Treaty. We need to have similar treaties for other resources and political issues with all leading nations.

I hope and am sure that the new government will realize these hard facts and does some serious ground work. Let us give our best and compete with all the big boys of world economy and make a room for ourselves.

( by : india money research team)