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This magnificent shot of the Himalayas and the
Kanchenjunga, taken from Darjeeling is courtesy of Prasad V
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? ? ???? ?? ?????? ?
???? ?? ??????????? ? ?????????????? ??? ??
OM Asato ma sadgamaya, tamaso ma jyotirgamaya,
mrityormamritam gamaya
OM (Lead me) from falsehood to truth,
from
darkness to light, from death to immortality.
Brihadaranyaka Upanishad,I:3,28
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FAQ on Economic
Performance
1.Why is Economic History Important
?
For years it was alleged that
India was condemned to experience a low rate of economic growth,
derisively referred to as a Hindu rate of growth, even though the
economy was at a dismally low level to begin with. It was also
derisively alleged that there were structural reasons for such a low
rate of growth having to do with the sloth of the average Indian
worker. The fallacy with this line of argument is that for most of
History, India was one of the dominant countries in the world
economy rarely falling below 2nd place. It was only in the 1600's
that India began a slow descent to the depths where it had descended
at the time of independence. Angus Maddison has done a yeoman job in
compiling the data leading to the inescapable conclusion that
India was a major player in the world economy for well nigh 2
millennia if not longer and that the present day poverty of the bulk
of the people is by no means a characteristic that has been
invariant throughout her History, but is in fact an artifact of
several centuries of Islamic autocracy coupled with the greed and
incompetence of the British colonial overlord. It is apropos to
recall in this context Napoleons dictum namely 'attribute not to
malice that which can be ascribed to incompetence'. It is clear that
India is in the process of clawing its way back from the depths of
the quicksand like bottom and is now poised to be the 3rd largest
economy in the world on a PPP basis
2. What is meant by PPP basis
PPP stands for Purchasing Power
Parity. It is determined using a basket of goods and services to
determine the actual purchasing power of the currency, in this case
the Rupee vis a vis the official exchange rate of the Re versus
other major currencies. This is definitely the common sense measure
since that is what your money would buy. For example the official
exchange rate of the $ versus the Re is about 45. But we all know
that the $ will not buy 45 Rs worth of goods, except in rare cases
such as Gasoline and a few manufactured goods. I have been observing
the purchasing power of the $ in India over the years and it has
been my observation that it roughly follows the square root law. in
other words, the actual purchasing exchange rate is the square root
of the official exchange rate. Thus, if we take the square root of
45 we get roughly a PP exchange rate(PPER) of 6.6, that is a $ will
buy approximately 7 Rs worth of goods in India. Therefore, a PPPGDP
= PPER *GDP in US $
Here are some
interesting estimates of India's share of the World economy compiled
by Angus Maddison at the University of Groningen, Netherlands
Estimates of GDP of leading countries through the ages
GDP
(PPP) ranking in 2004 (World Bank)
GDP (PPP) Ranking (IMF)
Angus Maddison rewrites economic history again. - book review
Angus Maddison
Born in 1926 in Newcastle-on-Tyne, England, Angus Maddison is
Emeritus Professor at the University of Groningen in the
Netherlands and Honorary Fellow of Selwyn College, Cambridge. He
was educated at Cambridge, McGill, and Johns Hopkins
universities, before teaching at the University of St Andrews in
Scotland. His professional relationship with the OECD began even
before the Organisation's birth. He was Head of the OEEC
Economics Division from 1953 to 1962 when the organisation
became the OECD. From 1963 to 1966, he was a Fellow of the newly
created OECD DevelopmentCentre. He left the Organisation in
order to undertake research for the Twentieth Century Fund and
Harvard University's Development Advisory Service but, by 1971,
Professor Maddison was back at the OECD as Head of the Central
Analysis Division, a post he retained for seven years.
Angus Maddison has been an advisor to the governments of
Brazil, Ghana, Greece and Pakistan and has travelled widely in
developing countries as part of his research interests. His
major research interest today is the assessment of the forces
affecting the economic growth performance of nations, with
particular emphasis on quantitative analysis in historical and
comparative perspectives.
Professor Maddison is the author or co-author of 25 books and a
great many articles in academic and financial journals.
Angus
Maddison, The World Economy: A Millennial Perspective
Martin Wolf: What India must do to outpace China
Getting India
Right
India
Rising (ABC news video where he makes specific mention of the
fact that knowledge is worshipped. Welcome ABC to the land where
Saraswati reigns as the Deity of Knowledge)
 or those who
missed the symbolism of Indian flags draped from the
White House’s Old Executive Office Building, President
George Bush’s words on the morning of July
18, 2005, while standing next
to Indian Prime Minister Man Mohan Singh, drove home an
emerging reality with trademark pithiness: “The
relationship between our two nations has never been
stronger, and it will grow even closer in the days and
years to come.” Combined with the Bush administration’s
visible push to strengthen Japan’s hand in managing
Asian security, the Indian prime minister’s visit to
Washington cemented a growing de facto strategic
partnership between the United States and India ...
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There’s More to Growth than China by Martin Feldstein
Martin Feldstein's association with India
predates his recent renewed Interest in the subcontinent to the
early years whenthefirstFive year Plans were being formulated by P C
Mahalanobis
China
and India move up together in the growth league tables
It was bound to happen, and
finally has. Bloomberg reports this morning that
China's Economy Grew 9.9% in 2005, Passing U.K. as 4th-Largest
(based on market exchange rates):
China's economy grew 9.9 percent in 2005,
probably overtaking the U.K. as the world's fourth largest,
powered by record exports and investment in manufacturing. Gross
domestic product rose to 18.2 trillion yuan ($2.3 trillion)
after expanding 10.1 percent in 2004, statistics bureau
Commissioner Li Deshui said today in Beijing. Investment in
urban areas jumped 27.2 percent last year, he said.
The economy grew 9.9 percent in the fourth
quarter from a year earlier after expanding a revised 9.8
percent in the previous three months, the NBS said today.
Economists forecast growth of 9.5 percent in the quarter and 9.8
percent for the full year, according to a Bloomberg News survey.
Li told reporters he's "cautiously
optimistic'' about China's growth outlook for this year. "The
driver of the economy is shifting from investment to a more
balanced situation based on consumption,'' he said. Average GDP
growth of 10 percent is sustainable for "many years,'' said Li.
...The U.K. economy was worth $2.14
trillion in 2004, according to the World Bank, and the
Organization for Economic Cooperation and Development has
forecast 1.7 percent growth for the country in 2005. The U.S.
economy, which measured $11.7 trillion in 2004, is the world's
largest.
Love that last sentence - just in case you
didn't know! Meanwhile, today's Financial Express reports
'India to be world No. 3':
India
will surpass Japan as the world's third largest economy in 2006
as measured in Purchasing Power Parity (PPP), according to a
forecast by a US professional services firm. India's economy,
measured in PPP terms, will eclipse the $4 trillion mark in
2006, making it equal to or greater than Japan's. Only the
United States and China will possess larger economies, according
to Keystone India's Chief Economist William T. Wilson.
"The results of liberalizing strategic
sectors such as telecom, banking, aviation and real estate are
now beginning to show. After growing at 8.5 per cent and 6.9 per
cent in 2003 and 2004 respectively, India's economy is expected
to grow 7.8 per cent in 2005-2006 (fiscal year ending in March)
then decelerate modestly to 7 per cent in 2006-2007.
As my previous post
Can China overtake the US? pointed out, China is already the
second largest economy on a PPP basis - and should outstrip the
United States within the next decade or two.
India tilts to the west as the world's new poles emerge by
Charles Grant
Key Economic
Indicators* For China vs. other Leading Countries
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Key |
Indicator |
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China |
USA |
Japan |
Germany |
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|
GDP |
Growth |
Rate |
(%) |
9.5 |
4.3 |
2.6 |
2 |
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|
GDP |
(US$ |
billion) |
|
1,601 |
11,750 |
4,621 |
2,673 |
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|
PPP |
(US$ |
billion) |
|
6,913 |
11,175 |
3,612 |
2,318 |
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GDP |
Per |
Capita |
(US$) |
1,227 |
39,991 |
36,184 |
32,404 |
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PPP |
Per |
Capita |
(US$) |
5,299 |
38,031 |
28,278 |
28,104 |
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Current |
Account |
Balance/GDP |
(%) |
2.4 |
-5.4 |
3.4 |
4.4 |
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Fiscal |
Balance/GDP |
(%) |
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-2.2 |
-4.9 |
-6.9 |
-3.9 |
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Inbound |
(US$ |
billion) |
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53.5 |
29.8 |
6.3 |
12.9 |
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Outbound |
(US$ |
billion) |
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1.8 |
151.9 |
28.8 |
2.6 |
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* |
Based |
on |
2004 |
data |
except |
FDI |
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*** |
FDI |
based |
on |
2003 |
data |
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Source IMF, World Economic Outlook
Database
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