Despite reports that India's growth rate will overtake that of China it is too soon to draw any conclusions, a leading English daily of China stated on Thursday.
“The substantial quantities of reports over whether India's growth rate will overtake that of China and make it the world's fastest growing large economy have reflected a wide confidence in its economy,” the Global Times said in an article headlined “Too soon to hype India’s growth rate as country still faces obstacles” following reports that India's growth rate reached 7.5 percent in the first quarter of the 2015-16 fiscal year.
“India believes that it has already bailed its economy out of its slump, thus its forecasts are generally optimistic... Yet whether such predictions are inflated remains unexplained and difficult to verify,” the article based on an interview with Zhao Gancheng, director of South Asia Studies at the Shanghai Institute for International Studies, stated.
According to Zhao, “some argue that India's new growth figures are due to the revised calculation of GDP, which was launched in January”.
“Whether the amendment was based on international measurements or its own national standards is not yet clear either. Therefore, it is too soon to draw any conclusion,” the article stated.
Howver, Zhao conceded that “given the Indian economy's low starting point, low labour costs and enormous market potential, it is highly likely that the country will enjoy a rapid development in the future, if there is no global economic recession in the years to come”.
At the same time he contended that “a starry eyed view is the last thing India needs for now, because its way of calculating GDP may need reforming, so does its economic structure”.
“For quite a long time, much of its (India's) growth came from the service sector, while its manufacturing and agricultural industries remain weak. This year, agriculture could prove to be a major issue, since drought has been long and painful. If its farming output falls sharply, this will lead to inflation in no time,” Zhao opined.
“In terms of manufacturing, China has been the world's manufacturing hub for the past couple of decades. Compared with this giant neighbour, India has attracted much less foreign direct investment.”
The article stated that “India has realised that the gear of China's economic growth is shifting from high speed to medium-to-high speed”.
“There is no point in the constant comparison of the Indian and Chinese economies. They are simply not comparable with each other,” it stated.
“However, once India's growth rate catches up with China's, it is bound to be hyped. That is because highlighting India's economic figures is done for political ends.”
According to Zhao a key factor in Indian Prime Minister Narendra Modi's election victory last year was his promise about reviving the economy.
“Hence, he has to make great efforts in bringing the country fruitful results, and not to fail to honour the stated commitment,” the article stated.
It said Modi will keep boosting support for investment-friendly policies.
“The country has its advantages, but also huge problems, such as unbalanced industrial structure and poor hardware to sustain the manufacturing, or resistance from local governments against decisions from the central government,” Zhao said.
“So, anything can happen in India, and it is too early to portray a rosy picture of its economy for now,” the article concluded.