For centuries, China was the world’s largest economy (from tenth to fifteenth century) and if experts at the International Monetary Fund and others are correct, China will soon regain the title as the world’s largest (healthy) economy.
However, it is confusing. If we listen to The Economist in The X Factor, we are told that India’s economic growth may soon outpace China’s.
The Economist says, MORGAN STANLEY thinks it could happen in 2013; the World Bank thinks it might happen next year. Many pundits have speculated about when India’s growth might outpace China’s.
However, the International Monetary Fund’s (IMF) World Economic Outlook says that has already happened since China grew by 10.3% in 2010 and India by 10.4%.
Then from Yahoo Finance we learn the IMF says, “According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016.”
After reading the previous paragraphs, it sounds as if India will grow its economy past China and China will outgrow the United States leaving the US in third place.
In fact, India is far from growing a larger economy than China or the US.
In 2010, India’s economy ranked 10th globally or fourth depending how you stack the numbers.
India’s nominal GDP was placed tenth at $1.53 trillion, while another way of looking at the numbers says India ranked fourth at $4.06 trillion, but its public debt was $758 billion or 55.9% of GDP with $201 billion in exports and $327 billion in imports and a credit rating of $1.164 trillion.
This means India, like the US, is spending more than it earns.
China, on the other hand, had a nominal GDP of $5.88 trillion but a GDP (based on PPP) of $10.08 trillion placing it 2nd globally. China’s public debt was 17.5% of GDP, which is a long way from India’s 55.9%. Everything else about China leaves India far behind China’s economy.
India’s exports were more than seven times lower than China’s $1.506 trillion while its imports were almost four times lower than China’s $1.307 trillion and China has a credit rating of $8.156 trillion—much higher than India.
China is likely to resume its role as the world’s largest economy by 2015.
Any way we look at it, how can India beat China unless they are talking about the annual percent of economic growth?
Considering how much smaller India’s economy is, they would have to have a lot more growth to equal China dollar for dollar. If India’s economy grew by 10.4% and its economy was either $1.53 trillion or $4.06 trillion (depending how one looks at it), that is still a far cry from China’s 10.3% economic growth based on a much larger GDP.
On the other hand, America, the world’s largest economy, looks like a cancer patient with six months to live.
America may have the world’s largest GDP at $14.66 trillion but having $14 trillion in public debt at 93% of GDP just about cancels that out. Even India is doing better.
Then America’s exports were $1.280 trillion compared to $1.948 trillion for imports telling us more money is pouring out than coming in. How will America pay off its debt if losses outpace earnings?
The Economist seems to want people to think India is beating China but the numbers tell a different story. To beat China, India has to grow a much larger economy and reduce its public debt while erasing an illiteracy and poverty rate that’s embarrassing for a country touted as the world’s largest democracy.
Anyone that studies history knows that a democracy survives if the citizens are literate and understands the issues.
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Lloyd Lofthouse is the award-winning author of the concubine saga, My Splendid Concubine & Our Hart. When you love a Chinese woman, you marry her family and culture too.
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