Friday, September 23, 2005

India Rising

You must admit that over at PBS Charlie Rose conducts some of the most interesting interviews seen on TV. Sure, I hate it too when he fawns over actors and movie directors as if they were actually consequential in this big picture that we call life. Occasionally, however, Charlie has on a guest who you would never, ever be introduced to in any other venue. This is what makes Charlie Rose a consequential person.

This week Charlie had on the Finance Minister of India and I must say it was a treat to listen to him quietly validate many things we capitalists believe about growing and sustaining an economy. In the process they have lifted millions out of poverty and into the middle class.

P Chidambaram is a US educated lawyer who upon graduating from Harvard Business School returned to India a hard core leftist. (It has to make you wonder what they're teaching at Harvard) Once he was faced with the reality of the condition of the socialist system in India he under went a remarkable transformation into a pro-growth capitalist. He realized that the government was ill suited for certain aspects of economic stewardship and private enterprise was an asset not an enemy.

India's economy under Chidambaram led policies has become the second fastest growing economy in the world. At 7% annual growth they trail China by mere fractions of a percentage point. Where India has it over China is in age demographics. A majority of their population is under 35 years of age with a huge proportion of that being under twenty five. China's population is an aging one not unlike the US or Europe.

He is convinced that India can become one of the two or three largest economies in the world in a decade or so. At India's present trajectory number two Japan is realistically in its sights.

Keeping the numbers in perspective India and China have a long way to go to reach into the same realm as the US in per capita income and wealth. Still, the numbers are no less staggering. India has nearly 240 million in the middle class. That's close to number of people in all of the US. They also have 300 million below the poverty line. The rest live somewhere between destitution and the middle class. Per capita income in India is around $700 and in China it is around $1000, and America - over $30,000. If adjusted for buying power those numbers are more like US = $25,000 China = $7,000 India = $3,000. Due to the sheer size of India and China's population it is unlikely that they will ever approach the US, but with those numbers both countries total national income could potentially dwarf the US in just a few decades.

India needs massive capital investment in jobs, and infrastructure if any of their dreams are going to come true. Chidambaram's policies are more likely to attract foriegn investment than what the had before. This is true primarily because India is serious about education - real education and not the self-esteem, self-loathing baloney America is getting.

Since India has embarked on a path away from command and control socialism they have seen remarkable improvement in nearly every aspect of their counties fortunes, monetary and otherwise. China, Europe and even America should be taking notice.



Timothy Birdnow said...

They say to be careful what you wish for because you might get it; I tend to worry about India. India will, most likely, be a decent ally and will definitely be a good counterbalance to China, but I still don`t know that we can predict what direction India will go.

I agree; India WILL emerge as the next superpower, if they don`t screw it up. Let`s hope they emerge as friends!

Great post!