India may surpass China’s growth rate in 3-4 yrs: Basu

Buoyed by country’s robust growth prospects, Chief Economic Advisor Kaushik Basu today exuded confidence that India could clock a higher growth rate than China in the next three to four years.

“I think we (India and China) are very close in terms of growth rate now. Within the next 3—4 years, for us to overtake the growth rate of China is possible,” Mr. Basu said at a CII post—Budget conference here.

India economy is estimated to grow 8.6 per cent in the current fiscal and up to 9.25 per cent in 2011—12.

In the last three months of 2010, the domestic economy expanded 8.2 per cent while China grew 9.8 per cent during the same period.

Earlier this year, the World Bank projected that Indian economy would overtake that of China - on purchasing power parity (PPP) basis - by 2012.

According to Mr. Basu, it might take time before India could overtake China in terms of per capita income, especially since the neighbouring nation’s per capita income is three times more than India.

In 1978, the per capita income of both countries were the same, he added.

World Bank in its report had projected Indian economy to grow by 8.7 per cent in 2012, faster than 8.4 per cent expected for China.

However, these projections were based on PPP basis, which means that purchasing power of currencies are taken into account for measuring economic growth.

Currently, the size of Indian economy is USD 1.3 trillion while that of China is worth USD 5.5 trillion. Few weeks back, China also emerged as the world’s second largest economy, toppling Japan.

INDIA MEANS.........BUSINESS

I read this article in TOI-crest and wanted to share it on my blog. Read what this article contains:

The numbers are impressive - per capita GDP has more than doubled from Rs 15,625 in 2000 to Rs 37,490 in 2009, foreign exchange reserves have risen nine-fold from $34 billion to $286 billion in the same period, and the Bombay Stock Exchange's market capitalisation has soared from $184 billion to over $1.2 trillion. But the figures still don't truly reflect the Indian economy's triumphant march through this decade, or the intimidating aura that Indian business is increasingly acquiring in western eyes. To get a sense of that, rewind to a recent interview which appeared in TOI-Crest , in which trendspotter Malcolm Gladwell was asked if he had a message for Indians. His response: "One day, all of us in the US will be working for you. Be kind to us." (Actually his answer was the reason for which I liked this article, such a simple answer but means a lot).

Sure, it was a joke. But it also contained a kernel of truth. Thousands of Americans and foreigners of other nationalities already work in companies owned by Indians. If the 1990s was when India let in the world, the Noughties is when it went out to the world - and increasingly did so as a conquering force.

Big-ticket acquisitions made headlines - the Tatas acquiring Corus and Jaguar Land Rover, the Aditya Birla Group buying Novelis, ONGC Videsh taking over Imperial Energy, Videocon picking up Daewoo Electronics. But away from the spotlight, many smaller companies too were planting the tricolour on corporate headquarters around the globe, with Indian companies acquiring 828 foreign firms between 2005 and 2009 alone. The term 'Indian multinational' is no longer an oxymoron, and Tata Group chairman Ratan Tata recently said his successor could well be an expatriate - after all, 65 per cent of the group's $71 billion revenue now comes from overseas operations.

While India Inc was going global, the domestic economy was going from strength to strength. After growing a strong 6.4 per cent in 1999-2000 , it weathered a rough couple of years, but picked up pace from 2003-04 (8.5 per cent) and really accelerated from 2005-06 , posting 9.5 per cent, 9.7 per cent and 9 per cent in three straight years of China-like growth. The global recession slowed down GDP growth in 2008-09 to an estimated 6.7 per cent, and there was talk of it slipping below 6 per cent this year, but an eye-popping 7.9 per cent spurt in the July-September quarter has led the finance ministry to estimate 7.75 per cent growth for this fiscal - a figure the developed world can only sigh about wistfully.

Once, India feared globalisation . Today, World Bank president Robert Zoellick, among others, describes India as a crucial pillar in an interconnected world. The future seems bright - according to several projections, India will overtake China as the world's fastest-growing economy by 2020, and be the world's third largest economy by 2025. But as the rising Naxal menace shows, aspiration from rising growth can easily turn into frustration at exclusion from it. India has done a good job of wealth creation in this decade. It needs to get better at wealth distribution in the coming one.

Turmoil in the US.....

Today, the US economy is in serious financial crisis. The crisis began with the bursting of the housing bubble in the US. Sub-prime crisis what US faces today is the effect of yesteryears. The crisis can be attributed to a number of factors such as inability of borrowers to make their mortgage payments, central bank policies, declining housing prices made refinancing difficult etc..A long-term boom in the US housing prices encouraged borrowers to take more mortgages. Also, it let the borrowers into a false belief that it would not be difficult to refinance the mortgages at a more favourable terms later. However, once the housing prices started reducing moderately, refinancing became more difficult. As a result, borrowers became unable to make their mortgage payments due to which banks suffered a high amount of loss. It is the time which has caused due damage to Bear Stearns, the fifth largest investment bank in the US. It was on the verge of bankruptcy as it was sold off to JP Morgan at a throwaway price. Last month Lehman Brothers filed for bankruptcy and Merrill Lynch was sold off to Bank of America. And now the spotlight had turned on AIG, the largest Insurance company in the US, whose financial predicament was being disclosed few days ago. Though the US government has approved the bailout package to rescue the economy out of the possibe danger by creating necessary liquidity for the banks and financial institutions yet the US economy is suffering from illiquidity. This financial crisis had its major implications on the US economy as well as the global markets.

Will Indian Stock Market stabilize in the near future?

Markets are like women -- always commanding, mysterious, unpredictable and volatile. I think that Indian Stock Market will definitely stabilize in the near future as the fundamentals of the Indian Economy is strong and more so of corporate sector. It seems that the market will take a little more time to stabilize and settle itself in a comfort zone. The turmoil in the global markets need not affect India as “the Indian economy is driven by its own robust investment and consumption. Ours is a long-term growth story based on real investments. If we talk about the Reliance Power’s IPO which receives an overwhelming response from the investors, it clearly shows that investors seem to be confident and have good faith in the future of India. FIIs pulled out nearly $2 billion from equities in just four days after their monumental response to the Reliance Power’s IPO. It is a reflection of the world community in the future of the robust Indian Economy. This outflow of liquid money can also be considered as the reason for the huge recession in the history of the Indian Stock Market ever. Recording another year of impressive performance, the economy grew by 9.6% during 2006-07, leading to over 14% increase in the per capita income. The improved growth has been achieved due to all around improvement in the manufacturing and services sector. One way to judge the fair market value of India's equity market is that to look at the ratio of market capitalisation to the nominal GDP which also gives a broad indication.In India, the ratio reached 173%--a 73% increase in just a year’s time.So i think that Indian Stock Market would have a stable growth in the long run.