Monday, November 12, 2012

Will India overtake America




 In 2011, the   gross world output in nominal terms, i.e. calculated as the population times the wealth per capita, stood at  US$ 69. 98 trillion.  Of this the United States accounted for    US$ 15. 09 trillion   (21.56 %) and India’s share was US$ 1.84 trillion (3.75 %). The gross domestic output of China was US$ 7.31 trillion  constituting 10.44 % of gross world output. There is considerable variation in the proportion of gross world output    on the basis of purchasing power parity (PPP), i.e. adjusted for  differences in the cost of living in different countries. It is true that recently China and India have been growing fastly and if the recent trends continue over a long period, India’s GDP will increase enormously. But to surpass the GDP of US India has to grow at a high rate (around 9-10%) continuously for a very long period, say many decades, while the growth rate of the US economy will have to hover around or remain below the current rate  of growth ( 2.3 %). Historically continued high rate of growth of GDP  for a very long period is not feasible; for cyclical changes may cause distortions in the growth performance. Moreover, if the present level of bribery, corruption, misappropriation and embezzlement of public funds persist, it will be very difficult for India to sustain the level of high growth rate for a long time. Moreover, staging away  a large proportion of the county’s output in foreign countries by politicians and crony capitalists will deprive   the country of the investment requirements to sustain high growth rate. In order to reach the current level of GDP of the US by the end of the present century India has to grow at around 8% per annum. By the time the US will also continue to grow moderately ant the current rate of 2.34%, the economy of United States would be more than  treble that of the current level of US$ 15. 09 trillion. But at present the  per capita income ( nominal) of Indians ( US$ 1,514)  is abysmally low compared  to  Americans  US$ 48,328.  The position is slightly better when comparisons of per capita incomes is made on the basis of purchasing power parity (PPP), to adjust for differences in the cost of living in different countries( US$ 48,442  for America and US $ 3,652 for India. According to OECD, India’s economy is expected to be bigger than the United States over the "long term.”  Moreover by 2100 India’s population would have reached  around 1.6 trillion while that of the US will be around  0.4 trillion; i.e  almost ¼ of India’s population. The OECD projection of the performance of Indian economy over a long period is unrealistic. It looks like paid news indented to boost the morale of the reformists.

Dr.C.Murukadas, The Times of India, Nov.8, 2012


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