India and China: "The Economist" Weighs In

The December 13th edition of The Economist hones in on China and India, to discuss how the global financial crisis will affect their two economies and to take an in-depth look at the two countries. Two areas of focus popped out at me while I was reading, which I briefly detail below:

Differences in How India and China Will Cope with the Economic Slowdown
The first difference is in the countries' economic focus on exports. China’s economy is more export and manufacturing-oriented, which may increase its exposure to western economies’ struggles in the coming months.
“Nobody yet knows how serious the slowdown will be, but in theory a recession in the rich world should hurt India less than other emerging markets: exports amount to only about 22% of India’s GDP, against 37% of China’s.”

The second difference, pointed out in the lead Economist article on China and India, relates to the countries’ political systems. Indians can voice their displeasure, or satisfaction, with political decision-making in the upcoming elections, while concerned Chinese citizens have fewer traditional outlets. This could lead to increasing protests and demonstrations in 2009 within China.
“The country (China) is a statistical haze, but the trade figures for last month—with exports 2% lower than in November 2007 and imports 18% down—were shocking. Power generation, generally a reliable number, fell by 7%. Even though the World Bank and other forecasters still expect China’s GDP to grow by 7.5% in 2009, that is below the 8% level regarded, almost superstitiously, as essential if huge social dislocation is to be avoided. Just this month a senior party researcher gave warning of what he called, in party-speak, “a reactive situation of mass-scale social turmoil”. Indeed, demonstrations and protests, always common in China, are proliferating, as laid-off factory-workers join dispossessed farmers, environmental campaigners and victims of police harassment in taking to the streets.”

Infrastructure is India’s Biggest Handicap
In this article, the Economist focuses on the how India’s inadequate infrastructure is its largest constraint to development. The Economist throws around a lot of statistics, but the reason I highlight this article is it does a great job covering several infrastructure components, including sanitation, energy, transport and education. That said, some stats that caught my eye follow below:
• Sanitation: About 700 million Indians do not have access to a proper toilet
• Power: Last year, demand outstripped supply by 15%
• Education: 96% of children attend school, BUT 50% of ten year-olds cannot read at the basic standard of six year-olds. 60% cannot do simple division.

Enough of my thoughts. Check out the Special Report on India here.