Friday, December 16, 2005


Every morning when you open your newspaper and dig deep inside it, I am sure you will find atleast one article on the economies of India and/or China, their comparision, GDP growth rate figures, etc in there. One may wonder what is all this fuss about.

India and China are firstly big countries geographically; India is the worlds seventh largest country and China slightly bigger than it. Secondly India and China together have about three billion (3000 million) people in it. Then consider that the US has just a population around 300 million.

The standard of living in the US has reached a saturation point. People get payed well enough for working in McDonalds and other innumerable fast food chains found in abundance here, or working on other odd jobs. Hence people are satisfied with their lifestyle here and in general, people are not intresting in studying. (It is so ironical, that if you are lucky enough, in some Universities for studying for your masters you get payed for your research work, which is more than what a friend of yours must be making back home, toiling in some software firm.)

The existing population here has all the basic amenities in terms of consumer goods. Also the growth rate of the population here is very less. So in turn, there is very less demand for new goods here and hence small growth rates for companies here.

Now consider that, the people in developing countries have lower standard of living, so a person in India will be willing to do a job at half the amount of his counterpart in US or Europe. Also in this process when people get richer, new demand is created constantly, due to the vast population, mentioned earlier. This is thus a unique chicken and egg phenomenon.

Companies will hence logically shift their manufacturing to developing countries since, due to lower wages their manufacturing costs will be less, and also due to constantly increasing demand for goods and services here. Thus Chindia is the driver of growth for companies worldwide. The growing optimism is not a chimerical thing, when you consider the recent CIA report which says that, by 2030 Chinese economy will be comparable to the present US economy, and by 2050 the world will be tri-polar with China and US as the world leaders with India behind them.

Ratan Tata, recently said that doing business in India has never been so exciting and he wished that he was younger. But all this mushy talk does come with a rider. He in the recent India Empowered series in the India Express said that, the greatest mistake that could be made would be for us to become complacent and to allow our economic momentum to slow down. Our infrastructure is pathetic and something needs to be done about it very soon. The outgoing chief of Daimler Chrisler in India said very recently that, ‘‘India is struggling and it becomes obvious in Pune. If the government and the civic bodies don’t do anything, then India shining and optimism will come to a close" , while refering to the literally crushing infrastructure, in Pune. The story is same in Bangalore, Mumbai, Chennai, aint it?

I shall end this essay by quoting Thomas Friedman, who said that China is doing really well in the present but they see a bump in the road in the future, where as India is stuggling a bit presently but see a smooth road in the future. Only time will tell if what they see in the future is a mirage or real.


The Bhandari's said...

Well said

taandav said...

dude . good to see old faces again man . thanks for the comment .

duke said...

thanks for dropping by.

duke said...

if you observe closely, the beeping sound and the ecg tracing don't exactly coincide. they are two different files which i uploaded them separately. :)