India globalising
The long-term prospects look good
There is good news for India in the Global Economic Prospects 2007 report of the World Bank. And it is mostly about the economy’s long-term prospects. While placing India’s GDP growth at a heady 8.7% in 2006, the report expects the economy to slow down a little, to 7.2%, over the next two years, mainly because of higher interest rates and further fiscal tightening. In other words, the World Bank does not see India outpacing China anytime soon. But, as with projections of varied kinds, what the report says about the next quarter century is far more interesting. It would be an era of no historical precedents, the report makes plain, with the global growth scenario setting the stage for achievements of far-reaching consequence. The absolute number of global poor will decline by half. Total global trade in goods and services will more than treble to $27 trillion, even as the global economy doubles to $72 trillion. India will play a big role in this, its fortunes propelled by the trade dynamism in services, an acknowledged zone of competence and a component of international trade expected to perform very well indeed. India’s global ranking in terms of output would go up by three ranks to 7th position. That should swell a few chests.
But India must get its act together on some other issues. Of the 1.5 billion increase in global population, as much as 320 million will be accounted for by India, almost double the figure for China, and India’s population is likely to surpass China’s. India’s labour force will also grow three time faster than China’s, and both countries will need to create 8-10 million jobs each year. Though the rise in the ‘skills premia’—ratio of skilled wages to unskilled wages—in India is slower than in China, the country could see an 11-point increase in the Gini coefficient, which implies income inequality of roughly Venezuela’s level. But India is better placed than China in some respects. The elderly dependency rate—ratio of workers to pensioners—in India will go up from 11 to 16 by 2030, while that of China will shoot up from 12 to 25. Similarly, India’s share of agricultural workers in the total workforce will go down to 34%, while China’s will fall just to 42%. Though the report is clear that the overall growth prospects may be even better than earlier envisaged, it does not gloss over the stress points that could threaten the story of India’s emergence. Income inequality, labour market tension and environmental degradation need a good hard rethink.
:tea:
The long-term prospects look good
There is good news for India in the Global Economic Prospects 2007 report of the World Bank. And it is mostly about the economy’s long-term prospects. While placing India’s GDP growth at a heady 8.7% in 2006, the report expects the economy to slow down a little, to 7.2%, over the next two years, mainly because of higher interest rates and further fiscal tightening. In other words, the World Bank does not see India outpacing China anytime soon. But, as with projections of varied kinds, what the report says about the next quarter century is far more interesting. It would be an era of no historical precedents, the report makes plain, with the global growth scenario setting the stage for achievements of far-reaching consequence. The absolute number of global poor will decline by half. Total global trade in goods and services will more than treble to $27 trillion, even as the global economy doubles to $72 trillion. India will play a big role in this, its fortunes propelled by the trade dynamism in services, an acknowledged zone of competence and a component of international trade expected to perform very well indeed. India’s global ranking in terms of output would go up by three ranks to 7th position. That should swell a few chests.
But India must get its act together on some other issues. Of the 1.5 billion increase in global population, as much as 320 million will be accounted for by India, almost double the figure for China, and India’s population is likely to surpass China’s. India’s labour force will also grow three time faster than China’s, and both countries will need to create 8-10 million jobs each year. Though the rise in the ‘skills premia’—ratio of skilled wages to unskilled wages—in India is slower than in China, the country could see an 11-point increase in the Gini coefficient, which implies income inequality of roughly Venezuela’s level. But India is better placed than China in some respects. The elderly dependency rate—ratio of workers to pensioners—in India will go up from 11 to 16 by 2030, while that of China will shoot up from 12 to 25. Similarly, India’s share of agricultural workers in the total workforce will go down to 34%, while China’s will fall just to 42%. Though the report is clear that the overall growth prospects may be even better than earlier envisaged, it does not gloss over the stress points that could threaten the story of India’s emergence. Income inequality, labour market tension and environmental degradation need a good hard rethink.
:tea: