India Economy Grew at Torrid Pace Last Quarter

[liberalpragmatist]

By ANAND GIRIDHARADAS
Published: September 29, 2006

MUMBAI, India, Sept. 29 — The Indian economy grew at an unexpectedly torrid 8.9 percent annual pace in the second quarter of 2006, propelled by a sharp turnaround in its once-listless manufacturing sector, the government reported today.

India is now growing faster than most other economies in the world, and is close to rivaling China, whose emergence as a manufacturing center has left India racing to catch up.

Now, with the government working to ease regulatory burdens for business and to upgrade the country’s patchy infrastructure, Indian factories are roaring ahead. Manufacturing output was 11.3 higher in the second quarter of 2006 than in the same period in 2005, exceeding even the performance of India’s services sector, including its booming software and call-center businesses.

The effervescent economy and the bubbling confidence it inspires are obvious to any visitor to, say, an Indian new-car dealership or Louis Vuitton boutique or airline ticket office.

http://www.nytimes.com/2006/09/29/business/worldbusiness/30rupeecnd.html?hp&ex=1159588800&en=66938d7c88a3e722&ei=5094&partner=homepage

[Captain Hilts]

1. It helps that they speak good English as well. nt

[goddess40]

3. I love the " I'm Bob from Oklahoma" calls

I feel sorry for these guys because I know their getting crap for wages and terrible living conditions

[liberalpragmatist]

4. Hm... not so much

I have cousins in India who have worked there.

Trust me, it's not a life I would want to lead - there hours are ridiculous and the work is mind-numbingly dull.

But the truth is that given purchasing power, the pay they make is considerable, allowing many of them to afford apartments, internet, small cars, etc. They're paid about 1/5 of the US wages, but in the Indian economy it winds up being considerable. There's a reason there's so much competition WITHIN India for these jobs, among college graduates.

I can understand American attitudes to outsourcing; and don't get me wrong, I would HATE the lifestyle. But worker's protections in India, while hardly enlightened, are far better than in, say, China.

[ozone_man]

5. Now if they can keep from overpopulating the world.

India's population will surpass China's in 20 years. They have not dealt with this problem yet. So, I think we can say goodbye to the Bengal tiger in the next two decades. Can't really blame them, because we eradicated the mountain lion and wolf in my region.

But if India and China start consuming as many resources as the U.S., the world is screwed. I hope that their improved economy brings improved education and with that lower birth rates. The sooner we can raise the world standard of living (through sustainable economies) and education levels, the sooner we can get over the need to "be fruitful and multiply".

So outsourcing is recognized as the corporate exploitation that it is, and that U.S. jobs are lost, wages depressed, but on the hopeful side, maybe we will help improve the overall world standard of living. On the (other) downside, the economic model we are exporting is that of U.S. consumption, which is devasting for the world's environment, and which could double or triple the devastation if China and India continue on the same path.

For example, the U.S. population is 5% of the world's population, yet it consumes 25% of the resources, so if the other 95% of the world's population uses the same economic model and have an equivalent prosperity level, then the world's resource consumption level is increased to (20*25% - 75%)= 425% or a 17 fold increase in consumption, if my math is right. Just illustrating why our consumption and economic model has to change before the world learn's it.

[liberalpragmatist]

6. On the contrary

India's population growth rate has declined from 2.2% to 1.7% over the past 20 years, (in fact, it's 1.4% in 2006 and the CIA) forcing estimates downward; it will surpass China, but estimates of India having 2 billion people in 100 years have been revised downward by about 1/2 billion. And in most of India's Southern States (and to a lesser extent, their Western states), birth rates are close to replacement levels. They could still do much better, but there is improvement there.

http://commentisfree.guardian.co.uk/gurcharan_das/2006/06/freeing_india_for_take_off.html

After three post-independence decades of meagre progress, the country's economy grew at 6% a year from 1980 to 2002 and at 7.5% a year from 2002 to 2006 - making it one of the world's best-performing economies for a quarter century. In the past two decades, the size of the middle class has quadrupled (to almost 250 million people), and 1% of the country's poor have crossed the poverty line every year. At the same time, population growth has slowed from the historic rate of 2.2% a year to 1.7% today - meaning that growth has brought large per capita income gains, from $1,178 to $3,051 (in terms of purchasing-power parity) since 1980.

<snip>

The second thing is that India's path is unique, and this is a bit scary because it is not following any of the proven success models. Rather than adopting the classic Asian strategy - exporting labour-intensive, low-priced manufactured goods to the west - India has relied on its domestic market more than exports, consumption more than investment, services more than industry, and high-tech more than low-skilled manufacturing. India's share of consumption in GDP is 64% compared to 44% for China. It has meant that the Indian economy has been mostly insulated from global downturns, showing a degree of stability that is as impressive as the rate of its expansion. The consumption-driven model is also more people-friendly than other development strategies. As a result, inequality has increased much less in India than in other developing nations. (Its Gini index - a measure of income inequality on a scale of zero to 100 - is 33, compared to 41 for the United States, 45 for China, and 59 for Brazil.) Moreover, 30 to 40% of GDP growth is due to rising productivity - a true sign of an economy's health and progress - rather than to increases in the amount of capital or labour.

The model is not without its problems. India's high growth has not been accompanied by a labour-intensive industrial revolution that could transform the lives of the tens of millions of Indians still trapped in rural poverty. Indians watch mesmerized as China seems to create an endless flow of low-end manufacturing jobs by exporting goods such as toys and clothes and as their better-educated compatriots succeed in exporting knowledge services to the rest of the world. Observing these two phenomena, many wonder if India is going to skip the industrial revolution altogether, jumping straight from an agricultural economy to a service economy. Not surprisingly, the question frightens many. The rest of the world evolved from agriculture to industry to services. India appears to have a weak middle step. Services now account for more than half of India's GDP, 22% is from agriculture, and industry's share is only 27% (versus 46% in China). And within industry, it is high tech/high skill manufacturing that is India's particular strength. The failure to achieve a broad industrial transformation stems, in large part, from bad policies of the past. The situation in the past five years, however, has improved and industry is gaining, and if this continues, perhaps, after a decade, the distinction between China as the "world's workshop" and India as the world's "back office" will slowly fade as India's manufacturing and China's services catch up.

Trust me, I realize India has LOTS of problems - incredible pollution, lack of clean water, and while education and health care are improving, they're improving too slowly for millions. But the point is the trend lines are generally positive.

OTOH, in regards to the Bengal Tiger, it is well and truly fucked.

[ozone_man]

7. Population density and consumption model

spell doom for India. It is great that the prosperity level is increasing and distribution is better than many countries, but the population density is staggeringly high, population grwoth rate is still high, and protected land is incredibly low. Hence the end of nature in India, especially for the tiger. Also, realize that this prosperity is on the coat tails of U.S. multinationals and their consumption model. We need a completely different model if we're going to survive and/or nature is going to survive.

U.S.
pop. density 80/sq. mi.
pop. increase rate 0.6%
protected land 23%

India
pop. density 884
pop. increase rate 1.7%
protected land 5%

China
pop. density 355
pop. increase rate 0.6%
protected land 15%

So, you see that China would seem to fair much better with less than half the population density and three times the protected land than India. Another intesting statistic is the pop. increase rate for developed and undeveloped countries.

developed 0.1%
undeveloped 1.5%
undeveloped (excluding China) 1.8%

So 1.7% for India is about average for undeveloped countries, excluding China, which drags the undeveloped country population rate down. The U.S. pop. increase is due to immigration, including a brain drain on Indians. My take is that Indian doctors and engineers should help their country achieve an educated and sustainable economy, not base itself on U.S. consumption, because it is clear that the U.S. and the world needs a different model. Otherwise, it will be a lot more than the Bengal tiger disappearing.

http://www.prb.org/pdf06/06WorldDataSheet.pdf

[liberalpragmatist]

11. India's population density is lower than much of Western Europe

And lower than South Korea, Japan, and Taiwan.

Granted, India faces MANY problems those countries don't face; the big problem in India is overpopulated CITIES, which are very small but packed.

Still, with the downward trend in the population growth rate, there's no reason India's density will curse it.

As for what's driving the economic growth? Keep in mind a HUGE portion of the Indian market is domestic and that the biggest Indian companies are - Indian.

Again, I'm not denying that India needs some serious reforms and needs to at some point redevelop a social safety net. And though I'm not accusing you of this, it annoys me that so many DU'ers first reaction to news of economic growth in developing countries is a self-serving attitude that "they're taking our jobs!" Economic growth isn't a zero-sum game, with one country's benefit being someone else's loss.

[ozone_man]

13. Europe is in negative population growth.

pop millions| pop growth | pop dens | protected land
732 | -0.1% | 82/sq.mi. | 9%

pop millions| pop growth | pop dens | protected land
1,122 | 1.7% | 884/sq.mi. | 5%

While Europe is declining in population, India is growing at the rate of 191,000/year. In other words in four years, another Europe equivalent population is produced. India's population rate (1.7%) is average for undeveloped countries of the world (excluding China).

But it's also the alarmingly small amount of protected land (5%) that dooms nature in India. It's probably a good thing that the population is concentrated in cities. Once it spreads, poof, there goes nature.

The important thing is to realize that we are sucking the rest of the world into our consumption model. If they all bevome U.S. level consumers, we're done for. So, it's our responsiblity to start the change away from the model that requires continual growth and expansion toward one that is sustainable for the world, not just 5% of the world's population.

So at one level, it's promising that India's economy is improving and highly domestic, but it's still fueled by exported U.S. service sector jobs from multinationals like IBM, Intel, Union Carbide, Coca Cola, etc. If we don't want them to become over a billion U.S. level consumers, we'd better think fast about the directions that we're going in, global warming, the end of nature as we know it.

[The2ndWheel]

14. Hahahahahahahaha

"So, it's our responsiblity to start the change away from the model that requires continual growth and expansion toward one that is sustainable for the world"

Oh my god that has no chance of ever happening voluntarily. At least on a mass society level. We(as in humans) haven't done that in thousands of years. We're not starting now. We will only do everything possible to keep expanding. It is either endless growth, or bust. There will be no other conclusions to this story. As we spin around the sun, more people not only want, but expect, more. There's no control of the situation. It will be either expansion or contraction. There will be no middle ground. We're far beyond the point of having the ability to take responsibility.

[ozone_man]

20. Realist.

Let's hope for an alternative to this reality, but Im afraid you may be right. Changing our style of living will probably happen when we are forced into it by huge declines in environmental quality, quality of life. Not looking good for the next few generations.

[liberalpragmatist]

17. Actually, I'm not disputing what you're saying about consumption

You're right that the U.S. consumption model is unsustainable in the long-term and certainly regarding the environment, there are major problems.

I'm merely saying that overall there are reasons to be optimistic; Indian population growth IS slowing, there is a nascent environmentalist movement, and growth is being driven mostly by the domestic market and less by foreign investment.

But truth be told, I don't think there's really a lot of disagreement between us - we're merely emphasizing two sides of the same coin.

[ozone_man]

19. You should have checked my math.

I slipped a few digits. In a hurry to get out the door to experience our colorful autumn. :)

[Ghost Dog]

8. Notwithstanding, perhaps you understand

that the USA must begin (to be followed by everyone else) to consume less, to cause less environmental damage.

China's self-imposed population control, under Mao, was draconian. But essential. The richly chaotic torrent of Indian life, and that of many 'developing' countries, while so cruelly beautiful, must be tamed.

Much more, hopefully human, democratic in the most genuine sense, at least humane, self-control is even more necessary the world over.

And, maybe the fattest pigs should be the first to start to provide a good example?

[ozone_man]

9. The fattest pigs should set the example

by slimming down. The U.S. model for consumption sucks the entire world into it. Unless we want to see a 17 fold increase in world resource consumption, we'd better do something about that model.

[auburnblu]

21. You better not be saying

That you expect John and Teresa to only have three houses and lower themselves to flying first class and give up the private jet life. If so you are crazy. I guess Arnold gave up his 100 SUVs, but you better not be suggesting that JFK live a scaled back life. What next, expect Al Gore to have a house that's only 2500 square feet? Screw that.

[auburnblu]

22. Quit calling Teresa a pig

That fifth house is very important. And nothing beats going to a conference on the environment quite like flying in a private jet.

[gulfcoastliberal]

15. Love when they say "goooo Huskers!" with that accent! LOL

After I tell them I know they're calling from Bombay.

[goddess40]

2. on the backs of slave labor

not really a triumph, execept for the off-shore wealthy

[area51]

10. "India Economy Grew at Torrid Pace Last Quarter"

Well of course -- they've got our jobs given to them by traitorous republinazis. :eyes:

[liberalpragmatist]

12. Oh come on

Economic growth isn't a zero-sum game. Most jobs in India being created are being driven by the DOMESTIC market. I'm not a fan of outsourcing US tech jobs either, but India's adding jobs doesn't mean that the U.S. is losing. I don't see why so many DU'ers - despite admitted problems with many aspects of corporate free trade - seem to have a very nativist point of view that only the U.S. should enjoy job growth or prosperity.

[HughBeaumont]

23. Um, who thinks that way?

I'm all for every country to have growth. Problems are, it more often than not comes at the price of the American middle class and as a result enriches the ruling classes of both countries while the middle classes and poor of both countries remain just above broke . . . or one bad break away from the streets.

[joefree1]

16. 67% import tax

I worked on a construction project in India. We could hardly import anything. They wanted us to teach them how to make everything from low tech to high tech. Pollution is terrible, worker rights are non existent. And the class system is alive and well.

Bil Gates was there every month getting his factories and call centers going. The Indian project managers (most all of the Brahman high class) love to tell us how they were taking all our jobs.

Why we should reward this type of economic growth is beyond me.



By the way Dell moved their call center to the Philippines because of better work conditions. Macintosh experimented with a call center in India but left after one month.

this message was typed on a Mac.

[liberalpragmatist]

18. The Indian economy is mostly being driven by the domestic market

I'm not disputing a lot of what you're saying - real free trade is nonexistent as import taxes are VERY high and pollution is HORRIBLE in the big cities - the NYT has a whole series this week on how terrible the water supply is in major cities.

That said, I think it's a good thing that there IS economic growth and the evidence is there that it IS having an effect; the poverty rate has fallen 10% in the past ten years, the middle-class has quadrupled in size, the population growth rate is falling (from 2.2 in the past to 1.4% in 2006), and - and this is crucial - most of the growth is being generated by the domestic market. Exports make up a comparatively small percentage of the Indian economy and while there has been a lot of hype about call centers, they employ a very small sector of the Indian population.

Moreover, India has several excellent universities and is a democracy, unlike most developing countries.

It is by no means perfect. And though I'm Indian-American and am proud of India's achievements, I'm quite glad to live in the U.S., and would also prefer living in Europe or Canada to living in India. You'll find these kinds of abuses in developing countries all over the world and India has done better than many to spread growth relatively equitably and to do it while still preserving democratic rights.

Moreover, economic growth isn't a zero-sum game; India's gain doesn't necessarily mean America's loss. And the U.S. is hardly "rewarding" India's economic growth that heavily. Call centers have caused a lot of resentment and I can understand why and agree with much of the critique against them, but overall U.S. investment in India is VERY low compared with China or Mexico or much of the rest of the world. Last time I checked it was something like 5 billion per year, which was about 1/10 of what was invested in China.