Chillin' out till it needs to be funded
Balance of Payments deficits and a larger Current Account Deficit continue to nettle Indian industry and politicians, a double digit inflation waiting to get hurt by a groth thati is already as low as 5% and the number has counted as the extreme end of a slowdown historically. On the other hand China has hit the deflation barrier ith inflation at 2.2% and PPI contracting for the fourth consecutive month to -2.1% on 2011 again in June and its banks reported more than $200 M of lending in May after a dry run in response to the continued easing program. Credit growth in India continues at 18% laying false claims of recessions and slowdown outside metals and resource based industries and utilities
Investors have recently been enticed by the Indian Elephant as much as they have been impressed by China’s continuing growth at 8% and the Presidential Election mid month is further likely to clear the path for continuing the reform agenda separating hot money from Direct investment in Indian retail, aviation and healthcare sectors. India’s open democratic system on the ground faces the same challenges of a large rural poor and not enough to spend on education, healthcare and services but the different political systems have in the recent past given China the edge to fine tune Execution and grow faster into a big brother role for the global trading Economy. India thus focusses on late reforms to entice investors and global corporations for a larger innings in an Economy here Consumption is currently just 33% of GDP and even Debt is just 66% which compares with the best unlike Europe and USA home economies which Global Corporations yearn to grow out of. However China’s consumers have responded instantly to luxury brands and global accessories and automobiles companies while in india the Dollar parity keeps prices a key concern for global corporations entering India apart from policy and distribution limitations while Indian competitors provide a more even Western model to compete in.
The coming slowdown in Commodities and basic inputs will intensify and break the inflationary spiral while the continuing Services sector growth will jumpstart dormant growth in the Indian Economy, while the US battles slower growth and increasing unemployment despite the Services jump thru 2008-2012 and China is in an almost similar situation will be able to afford another injection of liquidity which it has been prefacing in the last few months while increasing its share of the currency in Global trade growth. Japan Aussie and even the UK and Europe rely on Chinese investment and consumer class to revive and maintain their exports and their net GDP growth
China is looking to spend most of its 12th plan on key objectives of providing manufacturing infra and jobs in Interior China as well as groing an international manufacturing base, while India looks to invite over USD 2 Tln in private investment in its ports, aviation, power, roads and other infrastructure sectors.