news

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Not terribly surprising news, most of us could see where the wind was blowing, but still disappointing. The US has its agent inside BRICS, though it is still unclear precisely what the function of BRICS will even be anyway, given their slow progress towards anything that can approach the US dollar, let alone overcome it (either via a shitload of bilateral trades, or something more bancor-esque), and I don't really think China is putting all their eggs in one basket either given their activity in ASEAN lately, trying to persuade Europe to not destroy itself, the Belt and Road Initiative, etc etc. So this news is more concerning than alarming, to me.

This does all remind me of an article on how India just doesn't really have the capability of catching up to China meaningfully though, from August. It is just the opinion of one guy, obviously, but he does bring up some pretty relevant statistics. The GDP stuff is obviously kinda whatever, who gives a shit, but the manufacturing statistics are much more eye-opening.

Forget world domination, India won’t catch up with China any time soon

Last year, as Prime Minister Narendra Modi celebrated 75 years of India’s independence from British rule, he called on the nation to “ dominate the world”. Earlier this week, once again at the Red Fort, he evoked “Amrit Kaal” – a crucial era when the gates of opportunity open.

His “reform, perform, transform” mantra involves dreaming big. He was possibly dreaming of those halcyon days up to 1870 when India and China counted as the world’s two largest and most powerful economies. But a dream does not make a plan. And in the nine years since Modi came to power, his plans to propel India to the top table of the world’s most powerful economies remain largely that – plans.

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To be fair to Modi, his government’s economic performance is respectable after decades of stagnation and disappointment. India’s gross domestic product has grown by about 6 per cent every year on average since 2014, reaching an all-time high of 9.1 per cent last year – impressive in light of the upheavals of the Covid-19 pandemic and recession in many parts of the world. But a wide range of structural reforms are needed if India is to escape the shackles of its economic past. These include the grip of caste, bureaucratic friction, impenetrable tax rules, still-chronic protection of local business magnates and import tariffs that are among the world’s highest.

Columbia University’s Arvind Panagariya has similar projections, calculating recently in Time magazine that if India’s real GDP grew at 8 per cent a year into the 2040s and 5 per cent after that, and if the US continues to grow on average by 2 per cent a year, India would overtake the US in 2073.

These are big “ifs”, even for those brave enough to make forecasts a half-century away. And huge bodies of data point India towards a more humdrum trajectory. According to Allison in Foreign Policy, back in 2000, China and India had economies worth less than US$2 trillion each. It took China five years to pass the mark and India 14 years. Last year, India’s economy was worth US$3.4 trillion – a fraction of China’s US$18.3 trillion.

Also, many other important economic indicators remain problematic. India accounted for about 1 per cent of global manufacturing in 2000, compared with 7 per cent for China. By last year, India’s share had grown to 3 per cent against China’s 31 per cent. In 2000, India accounted for just 1 per cent of the world’s exports, and China 2 per cent. By last year, China accounted for 15 per cent of global exports against India’s share of 2 per cent.

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As Bloomberg noted in April: “India is far behind China in key aspects important for manufacturing that include infrastructure, bureaucracy, attention to detail and even a sense of urgency.” Supporters of India in search of a “hobble China” narrative have been encouraged by companies such as Apple and its main Taiwanese manufacturer Foxconn, which have made tentative steps to build investments in India, but ignore the challenges they have faced, and the reality that China remains their main manufacturing base. They have ignored the withdrawals of companies like the Royal Bank of Scotland, Harley-Davidson and Citibank, and the many other companies with plans on hold. They have tended to celebrate the deliberate obstacles to prospective investment in China, even where China is a natural partner and the benefit of collaboration is huge.

India aligning against the Arab League was a sign that this would happen.