China economic slump and India slowdown not same; here’s what sets the dragon apart from the elephant

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January 17, 2020 4:32 PM

China’s economic slump to a 29-year low may look similar to the depression in India’s economic growth, but policymakers back home must be cognizant of the different factors guiding the two neighbouring economies, and the efforts India needs to make to escape the slowdown.

modi government, Narendra Modi, R Nagaraj, 5 trillion economy, IGIDR, GDP ratio, India GDP growthAccording to the first advance estimates, India is expected to grow at 5 per cent in FY20.

China’s economic slump to a 29-year low may look similar to the depression in India’s economic growth, but policymakers back home must be cognizant of the different factors guiding the two neighbouring economies, and the efforts India needs to make to escape the slowdown. Both China and India have different economic growth models and therefore, it is not equitable to compare them, the economists added. The two are different-sized economies and share very different problems, Indranil Pan, Chief Economist at IDFC First, told Financial Express Online.

It is important to see the addition made by China in absolute sense to its economy in the given period before comparing it with India, Indranil Pan also said. India doesn’t have comparable deep pockets as China to finance its fiscal deficit. China – the world’s second-largest economy – grew by 6.1 per cent last year, its worst performance since 1990. While China’s economy had been gradually losing steam over the first three quarters, growth stabilised at 6 per cent in the last three months of 2019, China’s National Bureau of Statistics said.

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According to the first advance estimates, India is expected to grow at 5 per cent in FY20. “We should not seek solace in the slowdown in Chinese economic growth, given the domestic constraints as well as low visibility of a pickup in the investment cycle,” Aditi Nayar, Principal Economist, ICRA told Financial Express Online.

Taking stock of the matter, Madan Sabnavis, Chief Economist, CARE Ratings told Financial Express Online: “Chinese model of investment led growth was not sustainable in the absence of consumption picking up, which has not taken place. With domestic demand being low, the country is dependent heavily on exports. With the trade war controversy coming up and the US putting curbs the economy has slowed down sharply.”

Even as India is a domestic-oriented economy, the exports can help to push growth, he added. However, it’s rarely the deciding factor as India typically runs a large trade deficit and never a surplus, he also said, adding, India has to concentrate on boosting the domestic economy on the demand side.

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