BusinessWeek just published a massive issue dedicated exclusively to India and China (via SAJA). I’m talkin’ huge.
… most economists figure China and India possess the fundamentals to keep growing in the 7%-to-8% range for decades. Barring cataclysm, within three decades India should have vaulted over Germany as the world’s third-biggest economy. By mid-century, China should have overtaken the U.S. as No. 1. By then, China and India could account for half of global output. Indeed, the troika of China, India, and the U.S. — the only industrialized nation with significant population growth — by most projections will dwarf every other economy…
The closest parallel to their emergence is the saga of 19th-century America, a huge continental economy with a young, driven workforce that grabbed the lead in agriculture, apparel, and the high technologies of the era, such as steam engines, the telegraph, and electric lights. But in a way, even America’s rise falls short in comparison to what’s happening now. Never has the world seen the simultaneous, sustained takeoffs of two nations that together account for one-third of the planet’s population. [Link]
India and China accounted for more than 50% of world gross domestic product in the 18th century and to my mind, there is no doubt this will be repeated. [Link]
Their sudsing machine is on hype cycle high:
Google… principal scientist Krishna Bharat is setting up a Bangalore lab complete with colorful furniture, exercise balls, and a Yamaha organ — like Google’s Mountain View (Calif.) headquarters — to work on core search-engine technology… “I find Bangalore to be one of the most exciting places in the world,” says Dan Scheinman, Cisco Systems Inc.’s senior vice-president for corporate development. “It is Silicon Valley in 1999.” [Link]
Today’s reality is more sobering:
Today, China and India account for a mere 6% of global gross domestic product — half that of Japan. [Link]
If India ever gets its infrastructure under control, the implications for science and engineering are remarkable, although it obviously isn’t a pure manpower game:
… the balance of power in many technologies will likely move from West to East. An obvious reason is that China and India graduate a combined half a million engineers and scientists a year, vs. 60,000 in the U.S. In life sciences, projects the McKinsey Global Institute, the total number of young researchers in both nations will rise by 35%, to 1.6 million by 2008. The U.S. supply will drop by 11%, to 760,000. [Link]
India, efficient?
India, by contrast, has had to develop with scarcity. It gets scant foreign investment, and has no room to waste fuel and materials like China. India also has Western legal institutions, a modern stock market, and private banks and corporations. As a result, it is far more capital-efficient… Indian corporations have achieved higher returns on equity and invested capital in the past five years in industries from autos to food products. The average Indian company posted a 16.7% return on capital in 2004, vs. 12.8% in China. [Link]
The usual yadda yadda about how China’s political model gives it an early lead over India, but it will falter unless it’s reformed:
“I believe India has a better model than China, and over time will surpass it in growth…” China has yet to prove it can go beyond forced-march industrialization. China directs massive investment into public works and factories, a wildly successful formula for rapid growth and job creation. But considering its massive manufacturing output, China is surprisingly weak in innovation… It’s not for lack of genius. Microsoft Corp.’s (MSFT ) 180-engineer R&D lab in Beijing, for example, is one of the world’s most productive sources of innovation in computer graphics and language simulation. [Link]
Sadly, the Fortune 500 mirrors U.S. policy towards dictatorial regimes. It’s about government, government, government:
Ironically, Indian democracy is viewed as a hindrance vis-a-vis the stability of China’s authoritarian regime on its liberalizing market and docile unions. [Link]What holds India back are bureaucratic red tape, rigid labor laws, and its inability to build infrastructure fast enough. [Link]
Some disturbing cultural trends (the Fair and Lovely ad is so wrong, I can’t even begin to enumerate why):
Now [Sania] Mirza is something of a youth icon, with many Indian teens coveting—and copying—her nerdy black-rimmed glasses and nose ring. [Link]Unilever… played on that sentiment with a recent controversial — but successful — ad for its Fair and Lovely line of beauty products. A daughter came home and found that her parents had no sugar for coffee because they couldn’t afford it. She became an airline hostess after using the Fair and Lovely products to make her beautiful. She then visited her parents and took them to a first-class restaurant. [Link]
Marry Matthew Perry? Kill me now.
“The relationship with the husband used to be one of awe,” Singhania says. “Now, women want a partner and a relationship of equals. They want to marry a man like Greg of Dharma and Greg or Chandler of Friends.” [Link]
Of course, it wouldn’t be BusinessWeek without a reassuring ode to the invisible hand, incorporating tropical fruit. It’s economic mangoroticism!
BAIF workers found their way into the pathless mountains on motorcycles, carrying seed and fertilizer with them. They helped the farmers plant saplings and fruit grafts on the hillsides. They taught them to level the small patches of land and harvest rainwater by building small stone dams at the front edge of each patch. In the first year, 90% of the mango and other trees planted survived…Today, villagers like Mahale are local role models. Mahale owns the largest house in the village of Kharonda: an eight-room structure with brick walls and a red-tiled roof. Inside, the house boasts electricity, running water drawn by motor from the local well, satellite TV, a sofa set, and a large bed in the master bedroom. Last month, Mahale bought himself a motorcycle… Their income is now nearly $4,000 a year, the fruit of the 20 mango trees, 40 cashew trees, and a stand of eucalyptus, plus the 6,000 mango-sapling grafts they sell annually. [Link]
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