May the force be with us

Font Size

Print

Feedback

Email

Discuss

Save & Share Article

What’s this?

Digg	My Yahoo	Fark
del.icio.us	Newsvine	Reddit

Rate This Article

Rating:  0

The first Goldman Sachs BRIC (Brazil-Russia-India-China) paper contributed to the India Shining story. Contrary to what several people think, the first BRIC report didn’t project very high real GDP growth. It was only around 6%. The explosion was because Goldman Sachs was projecting much beyond the conventional 2020, till 2050. That low 6% trend was symptomatic of most projections before 2003, when the 9% trajectory hadn’t occurred. Most projections don’t factor in labour inputs and the demographic dividend (BRIC being an exception), even if one accepts that productivity increases aren’t significant. They are fundamentally based on capital formation. Before 2003, one hadn’t anticipated increases in savings and investment rates. To a lesser extent, manufacturing take-off was also unanticipated. We are almost certainly on a cyclical downturn now. However, ignoring growth rates in the next two to three years, there still remains the question of what India’s trend rate now is and what needs to be done to maintain it, or jack it up. For instance, in January 2007 Goldman Sachs produced another India report, arguing that India is now on a trend of 8%, with increased manufacturing productivity, movement away from low-productivity agriculture, urbanisation bo nus and better roads all incremental contributors.