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Friday, May 19, 2006

India Growth Going Forward

Beyond growth, India may need to worry about developed countries trade protectionism.

Steve Roach of Morgan Stanley writes about the well known different growth paths taken by China and India since 1980s. He notes the differences in their growth approach going forward: China – increasing consumption & service led middle class boom; India – increasing focus on manufacturing to suck up the unemployed.

Beyound the growth trajectory correction, protectionism from developed countries to IT driven service and manufacturing trade may be an issue that both countries need to maneuver.

"Moreover, IT-enabled connectivity has increasingly transformed once non-tradable services into tradables -- and has moved rapidly up the value chain and occupational hierarchy in doing so."


“However, with nontradables becoming tradable and with educational attainment and skillsets rising rapidly in the developing world, the security of the old way has all but vanished. Sadly, that provides both the justification and the opening for protectionists.”

“This could well pose yet another major challenge to China and India -- learning how to live with the consequences of their successes.”

Steve Roach's views on Indian and other Asian economies with TV18 biz news channel. Link

India may be well on its way to make the transition to manufacturing. Anand Giriharadas write in New York Times about special economic zones and buying of the land in these zones by little know Korean and Italian companies.

“It is hard to say how many jobs the boom has spawned. But recent government statistics show that auto plants and associated industries alone employ more than 10 million people — exceeding the entire worker population of Indian factories in the 1990's.” Link