The good news from India keeps coming. This week, the international credit rating agency, Standard & Poors pronounced that the “Third World” nation had become so prosperous that the risk of lending money to the country had fallen significantly.
New York-based Standard & Poor’s said it upgraded India’s sovereign rating to BBB-, the lowest investment grade rating, from BB+, the highest junk rating.
The rating revision could help reduce India’s borrowing costs on the global market.
As anyone who has taken out a personal loan or mortgage will know, getting a stronger credit rating is a big deal. India is now ahead of economic basket-cases such as Argentina or Venezuela, and has got there by a programme of economic liberalisation. I keep banging on about the vigour of the Indian economy – notwithstanding the still-grinding poverty in parts of the country – because it is probably the most positive economic story of our times. It shouts, loud and clear, that markets work. Market economics is doubly potent when combined with a relatively robust civil society, protection of property rights and the priceless asset of an international language like English.
Meanwhile, India-based Tata Steel has sealed its purchase of UK steelmaker Corus.
My delight at seeing India doing so well is exceeded only by the thought of what that success must mean for the aid industry. How upset will they be as India becomes richer through nasty capitalist enterprise instead of being so pleasing dependent (not to mention grateful) for the efforts of certain charities?
I wonder if any of the aid industry employees have realised another little matter; India’s success comes from their having finally put that nice, spiritual, even saintly, Mr Ghandi behind them, with his “spinning wheel in every home”?
I too find the growth of India to be the most exciting development of the early 21st C. It seems that everyone thinks the 21C will be the century of China, but my money is on India; it has democracy, civil society, and a history of pluralism – these are what matter in the long term and India is ahead of China in this respect.
Yes, but let’s remember, these credit-rating agencies have got plenty of track record for getting things spectacularly wrong in Asia. And with even the RBI giving a pretty comprehensive warning about the credit cycle overheating, there’s plenty of scope to be wrong here too.
The central bank reported today: “It is important to note that bank credit continues to grow at a rapid pace for the third year in succession and the rates of growth are clearly excessive . . . ”
And you probably didn’t notice the “other ” rating agency, Moody’s, warned that India may not be able to sustain 9%+ GDP growth owing to capacity constraints and inflationary threat. “Above potential growth is expected to continue for another year or so, but . . . ”
What is the total government deficit as a percentage of G.D.P. these days?
Remember as India is a peace and is the middle of strong economic growth, there is no excuse for a government deficit (i.e. they should not be borrowing money at any rate of interest).
And what is the government doing? Oh yes it is making the “antipoverty” schemes bigger.
India is doing well at the moment and certainly taxes and government spending, percentage of G.D.P., are much less than the United States (the United Kingdom is not worth considering). But many decades of terrible statism (the “permit raj”) have left vast poverty – and the government reaction to the poverty (spending money) will (if it continues) undermine the very economic progress that is the only real solution to poverty.
India is a very problematic country, lots of inner conflicts, 20+ guerila internal wars raging, strife between religious groups, a lot of corruption, desperate poverty….
It is certainly good to see her grow, but … cool you enthusiasm. It does well in comparison to it’s disastrous recent past – but it has a long way to go to become a “normal” country.
Michael, I did notice the Moody’s position, by the way. S&P has indeed made mistakes in the past, and it damaged the agency’s reputation. It has sorted out its act in recent years. They would hardly have made such a shift had they not thought it through. You sound like you are determined to look for flies in the ointment.
“India is a very problematic country, lots of inner conflicts, 20+ guerila internal wars raging, strife between religious groups, a lot of corruption, desperate poverty….”
It has its problems, but your take strikes me as daft. For a “problematic” country, India seems to be doing very well. Its entrepreneurs are buying companies all over the world; its food production is rising, it has a large and growing middle class, and of course it is a major centre for things like computer software. I have acknowledged that the poverty there is still bad, but the situation has improved immeasurably. Compared with most of Latin America and Africa, India is in a good position.
Editor’s note: Do you have any idea what an internet etiquette no-no you have just pulled? A completely off-topic link request in a comment? You have just spammed us – comment deleted
Compared with most of Latin America and Africa, India is in a good position.
Wrong. The poverty, corruption, inner armed struggles in India are worse by far than in most Latin Americs, worse than in Brazil, for instance. The diversity of the population, causing inner conflicts is also much greater.
GDP per capita: India=$3700, Brazil=8500.
And Brazil is by no means a model of progress.
Jonathan,
Well, we’ll see how well the rating agencies manage to read India’s credit cycle when it has finally burst.
I think in your further comments you might have confused me with someone else. For what it’s worth, I think the shorthand view that India’s economy looks a lot like China’s 10 years ago has a lot to commend it. But if you remember China 10 years ago, you’ll remember the extraordinary credit cycles which tore around the economy just as they are tearing around India now. And now I’m very very positive about China. . . .
India’s growth rates are faster. And it does not appear, Jacob, to have the sort of scumbags in power like Chavez,
etc.
Michael, I jumbled up some comments of yours with Jacobs. Apols.
The 21st Century will not the century of China NOR India.
It will simply be the century of Asia. And obviously, India and China will be the twin colossi astride the world stage. Where the rest of us end up is going to the big question, especially in little Singapore.
Neither country has exclusive advantages that the other cannot obtain(command of english language, political will, infrastructure, etc).
The rest of us had better get on with the program. I think that’s one reason why the Singapore government is busy pulling in students from both China and India to study here. Hmmm… students from both countries in the same schools and staying in the same hostels… now that’s an interesting thought…
India’s growth rate is faster because they are on a much lower level. The lower you are – the fatser the growth rates (rates relative to your low base level). Same for China.
As to scumbags – Chavez is small change compared to Nehru or Indira Ghandi. There is no guaranty that another Nehru won’t rule in India.
Not all Latin America is Chavez. Scumbags come and go in Latin America same as in India.
Latin America in general is much more developed, civilized and pleasant to live in than India.
Nehru and Indira Ghandi were certainly bad Jacob (they tied India up in the red tape of the “Permit Raj”, they wasted money and they generally made a mess of things), but I believe you underestimate just how bad Chavez is.
For example, if Nehru had been like Chevez (as opposed to the Fabian he actually was) there would have been no large private companies left in India – and no private estates either.
One can snear at some of the overconfidence of Indian companies (for example the 6.7 billion Pounds that T. has just paid for Corus steel – a company that is a pile of crap, it may well turn out that the largest enterprise in India has just made a very serious mistake). But India does have large private companies – and did even under the Permit Raj.
Under Chevez things will soon be very different in Venezuela. He is in the process of taking over everthing – no property will be safe under him. There will be no rule of law, no opposition in Congress, no independent media.
“Sounds like India under the “Emgergency” of Indira” – no. Bad as that was Venezuela will be much worse.
What you seem to be saying (although I hope I am mistaken about the latter part) is “scumbags come and and go in Latin America – stay in for the long term”. This is terrible adivse for anyone who lives in or has dealings with anything in Venezuela – they must GET OUT NOW.
Also (for all its communist and muslim rebel groups) India does not have the history of revolutions and civil wars that so much of Latin America does.
For example, there is nothing like the 1952 Bolivian revolution in Indian history.
By the way, a very wealthy country can still have a high rate of economic growth.
One does not have to start from a low base to achieve such a rate of growth.
And I am not talking about credit bubble boom-bust growth either.
Examples ?
The US is happy with a 3.5-4% growth, Japan and Europe would be happy with 2%.
As to India vs. Latin America – seems that India’s level of development, as measured by the GDP is about half Latin America’s.
It is on the right road now, but it has some way to go.
I really don’t get why everybody bashes Argentina so much. All over the internet.
Despite the worst economic crisis of our history, we are still the most developed economy in Latin America (according to the UN human development index), and we have been enjoying 9-8% growth rates for the past three years.
I really don’t understand why so much hate. Videla, Menem and Cavallo caused Argentina to bust, but there is an opportunity for argentina to reclaim its position in the developed world, position it held until the 1970’s, when our poverty rates were lower than those in France or the US.
We are not a basket case. A crashed economy in recovery, yes.
As for India/China, I bet on the latter. India has too much internal problems to be fully stable, while China has an increasingly great economic importance and is currently the one sustaining the US fiscal deficit by buying assets. For better or worse, the XXI century will be the Chinese century.