In his latest outing to sell the India growth story, India’s Finance Minister P. Chidambaram has underlined that India and China, the two Asian giants with growing economies, will be driving the global growth in the years to come.
“Going forward, China and India will continue to be drivers of world growth, with China growing at 8-8.5 per cent and India at 6.1-6.7 per cent between 2013 and 2014,” he told the alumni of Harvard University in Boston on ‘The Rise of the East: Implications for the Global Economy.’
“ASEAN-4 (Indonesia, Malaysia, Philippines and Thailand) is also projected to grow at more than 5.5 percent. China is reported to have already overtaken the United States in economic size (measured by real per capita GDP in purchasing power parity terms) by 2012-13,” Chidambaram said.
In a realistic strain, Chidambaram, however, acknowledged the potential for competition and tension among countries of the East in their quest for resources, markets and influence.
“In recent months we have seen talk of conflict over islands, underwater resources, or even water itself. We need to work collectively to reduce these tensions and to ensure that trade, investment, and mutual gain trumps narrow self-interest,” Chidambaram said April 16.
Although Chidambaram did not say it in so many words, the relations between India and China are increasingly seen as a model of pragmatic diplomacy wherein the two emerging Asian powers have managed to scale up their bilateral trade dramatically despite festering differences over a host of issues.
Comparing the difference in the trajectory of developed industrialised countries and emerging markets, the finance minister said while China’s investment story has been much talked about, “India’s is just starting out.”
He singled out the demographic dividend, which the East is poised to reap due to overwhelmingly young people in countries like India, as a game-changer in the evolving economic calculus in the world.
“I do not wish to numb you with numbers. But let me mention one other well-known difference between a number of emerging markets and industrial countries: it is the demographics. A lot of the growth in the East is still to come as it reaps its demographic dividend,” he added.
India’s share of the working age population will continue to rise, he stressed. “Nearly one-half the additions to the Indian labour force over the period 2011-30 will be in the age group 30-49, even while the share of this group in advanced countries will decline. This means greater production, savings and investment in India as the demographic dividend is reaped,” he said.
With India facing a very high current account deficit and the Indian economy needing billions of dollars to bridge the infrastructure deficit, the finance minister has been scouting for funds in the capitals of the US, Japan, Germany, Hong-Kong and Singapore to project myriad attractions of India as an investment destination. Economists say the current account deficit could be met by FDI, FII and external commercial borrowing (ECB).
Chidambaram also underlined the need for deft adjustment on the part of key economic actors in the world. Industrial countries would now have to save more, while emerging markets need to spend more, he said.
“Such an adjustment will help industrial countries pay down heavy debt loads, even while leaving global demand to be supported by the emerging markets. Of course, the nature of spending will vary across emerging markets. China probably has to consume more, while India has to invest more,” he said.
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