Posted by: Bruce Einhorn on February 10, 2009
Talk about a tarnished prize. According to this Economic Times story (the ET is a content partner of BusinessWeek), India may soon pass China to become the fastest-growing major economy. “India may pip export-dependent China,” the ET writes, “and emerge as the fastest growing nation among all large economies.” To which we should all respond: Big deal. If India does pass China, the change will be largely a reflection of how seriously the global crisis is hammering the Chinese economy – not any sign of Indian strength. Indeed, consider the other ET story that is running along with the India-China one on BusinessWeek’s Asia Channel today: “GDP Growth in India Falls to 7.1%” And that 7.1% number is misleading. As the ET reporter points out, “this is almost 2 percentage points below previous fiscal’s growth of 9% despite two rounds of fiscal stimulus packages announced by the center.”
Not a pretty picture. But according to the ET, the Indian government “has become hyper-active to achieve at least a 6.5% growth in Q4 to register a win over China.” Why? Here’s the ET’s explanation, presumably representing the view of Indian bureaucrats: “If India achieves a better growth rate than China even for one quarter, the message will go across to the world and help India in wooing foreign capital, waiting to chase growth stories.” Really? All it will take is one quarter of anemic growth in India beating slightly-more-anemic growth in China for investors to forgive India all its infrastructure problems? The bureaucrats in New Delhi need to get out more.
Meanwhile, back on Planet Earth, the Chinese government is planning on spending almost $600 billion in stimulus spending, versus just a few billion in India. And investors in Shanghai have pushed up shares 24% so far this year, compared to a flat market in Mumbai. China certainly has a ton of trouble ahead as it tries to rebuild its economy, but now is certainly not the time for anybody in India to start celebrating.