Wednesday, January 30, 2013

Must notice how well A Chinese Analyst has analysed the Indian public sector.Everybody should take Notice ???

BEIJING: India is plagued by its "inefficient and impotent public sector", said a state-run Chinese daily, which added that successful Indian software and banking industries "contribute little to the employment and income growth of the overall economy".

An article "Inefficient public sector lets down India's entrepreneurial spirit" in the op-ed section of Global Times said that as the two most prominent emerging countries in the fast-growing Asian region, China and India have often been compared.

It said that despite their commonalities, the two are diverging in development paths and have fostered different comparative advantages for economic growth.

"We also need to bear in mind that there is actually a great gap in terms of GDP per capita between the two countries, with $5,414 for China and $1,389 for India, according to the IMF statistics in 2011," said the article by Xue Lei, a research fellow in the Department of International Organization and International Law of Shanghai Institutes for International Studies.

It said that in recent years, although the Indian economy has been staying in a high growth track, "its achievement was attained with higher costs compared to China".

"India's debt to GDP ratio is now over 70 per cent, accompanied by over 7 per cent inflation. China has performed better in many macroeconomic indicators, with even higher growth rates," said the daily.

It added that China may have stepped into a period of a relatively stable macroeconomic environment combined with rapid growth and moderate inflation rates as well as a healthy fiscal structure, while "India may still be in a stage characterized by fluctuation amid growth".

The daily went on to say that over 50 per cent of Indians are still working in the agricultural sector, "which means it needs further efforts to transform itself into a modern industrialized or post-modern service-led economy. Therefore, we can say that in economic terms India still lags far behind China".

China and India have to face the challenge of economic transformation.

The article said that "India does not need to worry so much about the development of the private sector and entrepreneurial spirit, which are the key to innovative activities".

"Some researchers have pointed out that Indian entrepreneurial and managerial capital has been more successful than China's, especially in taking control of and managing assets in the sophisticated markets of Europe and the US.

"However, India is plagued by its inefficient and impotent public sector."

The article pointed out that one of the crucial bottlenecks for Indian economic development, "the backwardness of its infrastructure, can be traced back to the ineffectiveness of public institutions".

"Investment in infrastructure needs long-term visions and a strong guarantee of continuous flow of income. Hence without the initiating role of the public sector, there will be little incentive for the private sector to participate.

"The restraints caused by the deficiencies in infrastructure investment also become a great impediment to the development of the Indian manufacturing industry, which could lead to greater job creation if given full scope," it said.

It added: "And the successful Indian software and banking industries have often been referred to as economic enclaves which contribute little to the employment and income growth of the overall economy."

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