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Journalism of Courage
Of course Alan Greenspan 8212; his book is out 8212; will be taken seriously. And there can be no quarrel with his fundamental thesis on this country that socialist mindsets, as our columnist explains in detail, have held Indian growth back. Or that the legacy still remains. But even 8216;oracles8217; should be questioned. Some of Greenspan8217;s India-related details are less than perfect. Jawaharlal Nehru may have set up the edifice of socialism. But socialist policy8217;s grand mansion was built by Indira Gandhi, in the second half of 1960s and early 1970s. Greenspan says India8217;s per capita GDP is two-fifths of China8217;s now; it is more like half under the Atlas method used among others by the World Bank and is designed to reduce exchange rate fluctuations in GDP calculations. India may have a cumulative FDI stock of 6 per cent of GDP in 2005, as Greenspan disapprovingly notes, and Vietnam8217;s figure may be 61 per cent. But India is a very large country compared to Vietnam. That should be factored in. Plus, FDI inflows to India have increased sharply since 2005. As for economic insularity, let8217;s note that India8217;s import/GDP ratio of 23 per cent compares favourably with the US8217;s 14 per cent.
Greenspan, like many others, admires Indian democracy. But does he seem a little too lenient about Chinese autocracy in economic policy-making, almost suggesting there is democracy tax to be paid in terms of economic well-being? This is, by the way, not statistically proven. If natural resource oil based economies are excluded, democracies empirically outperform autocracies.
India have inched up while those in China are declining, both because of aging and because Chinese public enterprises are now required to pay dividends, unlike in the past. And remember the difference in savings rates in the two countries is due to public savings, not different levels of household thrift. China8217;s population is greying ten years ahead of what former projections suggested, and returns on investing in India are also higher than those in China. India, like the impact of interest rates on other macro variables, is often underestimated.
