China thrust on domestic consumption to emulate India
24 May 2010
In what is seen as an emulation of the Indian model, China is preparing to give a major push to domestic consumption rather than depend excessively on exports. Chinese president Hu Jintao said on Monday that China, the world's third-largest economy, would make huge efforts to boost domestic and household consumption.
Observers say Hu has taken his cue from the successful Indian story that has kept the latter's economy relatively safe during the global financial crisis, termed as the worst ever, surpassing even the Great Depression in the US in the early parts of the last century.
Also, when the tide finally turned positive, India was much swifter in recording a recovery.
Earlier in the day, Hu also said China would continue to work towards reforming its currency system and liberalising its economy with more reforms.
At the same time, Yuwa Hedrick-Wong, economic advisor for the APMEA region, MasterCard Worldwide, said that despite some short-term concerns, such as rising interest rates and high inflation, the long-term story for domestic consumption in India looks good for it. The qualitative shift in consumption demand in foreseeable future will make the domestic manufacturing industry more competitive in the global market, he said in an interview with The Economic Times.
He said India has the advantage of a very advanced services sector, which will make exports very competitive. Thus, India will have next generation of service intensive manufactures rather than labour intensive manufacturing as occurred in South East Asian in 60s and 70s.
On the India-China comparison, he said currently India is growing at the rate of 7-8 per cent a year, while China is growing at above 10 per cent. China is unlikely to continue at such rapid pace forever and the growth may decelerate to 7-8 per cent over the years, while India is expected to accelerate its growth to 9-10 per cent, bridging the gap.
''However, here the underlying assumption is that India will gradually become more efficient in addressing infrastructure deficit problem and urbanisation will be managed properly resulting into broad based economic growth across tier I-III cities. If that happens then there will be no doubt that India could take over China in another 10-15 years,'' he said.
