The Chinese Have Joined In, Now What About India?

After the US and Europe, the Chinese have also got into the act now. The act of rescuing their domestic economy and in the process stalling the global slowdown. According to the International Herald Tribune (IHT), China has announced a stimulus package to the tune of US$ 586 bn spread over the next two years. That's nearly 15% of the dragon nation’s GDP.

China will take certain monetary and fiscal measures like its western counterparts. However, the main focus will be on public spending. It will carry out infrastructure and social welfare projects such as railroads, subways, airports and rebuilding earthquake hit areas.

The move is not surprising as the Chinese economy, which registered growth in excess of 10% for 5 years, is feared to slow down to below 6% in the fourth quarter this fiscal. However, the timing of the announcement is noteworthy. It comes days before the Chinese President travels to the US for the G-20 meet. Since India will be part of the meeting as well, it will be interesting to see if New Delhi makes any announcements soon.

It may be noted that the Indian commerce minister has said that the country will spend a little under US$ 5 bn on infrastructure projects like power and roads in the next 6 months. We wonder if that's enough!

Comments

[Pravin K:]

Well I dont know about a stimulus package. But why must we follow the Chinese into the hellhole. I mean India can do this on its own - look at the loan waiver package and the 6th pay commission. Isnt this Stimulii enough! Lets not kid ourselves, India wont have a stimulus package of any size. As for Kamal Nath - he needs to just resign - just a talking head with no self-respect.

India needs to spend atleast half of what China has spent on building its infrastructure....now if only India could get a saviour to do this. Dont expect anything from this Government.

2008 Nov 10 08:46 AM

[LCACM:]

During a crisis the Chinese government has the advantage that it has the necessary funds to invest in building it's infrastructure. As India has a democratic form of Government, it has used all it's available funds to purchase votes. India always boasts of having a democratic form of Government. This means that the elected representatives have to spend most of their time and energy in getting re-elected, and do not have time to think of development. So economic development in India will always be far less than what it is in China.

2008 Nov 10 11:17 AM

[Diabolo:]

It would be tough for the Indian Government to announce such a stimulus or anywhere near that. The Indian economy is run different to the Chinese, put it down to democracy or anything else. However, I'm more convinced about the long term prospects of the Indian economy vs China. China has not faced any opposition to its policies, thanks to its communist regime, and hence has been more efficient in delivering on those. Wheras in India, any new ideas are debated, shared - entrepreneurialism is encouraged. China is developing robots while India is developing a knowledge-based economy that will be able to outperform in the long run.

China's economy is one which has been on steroids, and its performance cannot continue along the same lines. Once all countries realise the trade deficit vis-a-vis China, and root it down to their unfair currency manipulation, they may resort to protectionist measures. China will then be left with thousands of buildings that will turn into ruins.

The consumer sector, which is the driver of growth in developed countries is greater in India than China. I reckon China may find itself in the state Japan finds itself now, with over-reliance on exports, and the inability of consumers to drive growth. How much the government pumps in, it will not have any effect. China's lost decade is now starting and will be extremely painful.

2008 Nov 10 12:39 PM