【09.10.10 ANN】Asian giants

微澜止水

ndia is one of the fastest growing economies in the world but upuntil recently there was no question in the minds of most economistsand economic pundits that it would long play second fiddle to China.That belief is now being stood on its head. There is growing body ofopinion that believes that growth in India will overtake that of China,not in the medium- to long-term but next year. The World Bank nowpredicts India’s Gross Domestic Product (GDP) will grow 8 percent,compared to 7.7 percent in China in 2010.The reality, of course,is that China’s economy will still be three and a half time larger thanIndia’s; last year Chinese GDP was worth $4.2 trillion compared toIndia’s $1.2 trillion. In fact that is part of the explanation. Indiastarts from a lower base. If both countries add an extra $1 billion toGDP, the growth in percentage terms will be higher for India than forChina.
But there is more to this than playing with statistics.There is no doubt that India’s economy has taken a drubbing with therecession. Indian shares tumbled, as did property prices. Exports inAugust 2009 were worth $14.3 billion, 19.2 percent down in dollar termsfrom the $17.7 billion for the same month in 2008 (although in rupeeterms, down just half of that, 9.2 percent; amazing what can done withstatistics!).
But it is nothing like the drubbing suffered byChina. That is because China is a wholly export-oriented economy;exports have driven its spectacular growth. They account for a third ofits GDP. When foreign markets cut back in the recession, it hits hard.Exports plummeted, factories closed, an estimated 40 million Chineselost their jobs.
India’s economy is on more solid foundations —and that is why it is thought it will now fare better in the currenteconomic climate. Indian exports are, as a percentage of GDP, abouthalf what China’s are — around 14.5 percent compared to 33.1 percent.Indian production is much more geared to the domestic market. At theend of the day, markets are what matters. A company, a country, canproduce as much as it likes but if it cannot sell it is in trouble. TheIndian domestic consumer market is much larger, with more disposableincome, than the Chinese one and much hungrier for goods.
So what does this mean for businesses here in the Middle East and in Saudi Arabia in particular?  
Asa result of the 2006 visit to India by Custodian of the Two HolyMosques King Abdullah, economic ties at state level have strengthened.But Saudi businessmen, dazzled with China’s growth, saw only it andlargely ignored India. With the recession they are now wary ofinvesting there — and still they ignore India. They should think again.They should pay much more attention to the opportunities in India — aswell as the potential from having so many Indians working in theKingdom. They understand Saudi Arabia, its needs and the way it worksalmost as well as any Saudis. They are the chain links in what is inreality, though no one ever says it, a special relationship. WithIndia’s star bright in the economic firmament, it would be folly toignore it.


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http://www.arabnews.com/?page=7§ion=0&article=127200&d=9&m=10&y=2009

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