Also, grass roots innovation in India is still absent or very little. We have one of the advantages compared to china: Proven low cost auto accessories manufacturing destination [Tata's Indica & their 1 lakh car]. In almost all other cases we have been beaten by Bangladesh & Srilanka [Textiles] Vietnam[Textiles & Electrical Manufacturing], Russia[High end secure software], Brazil[Agriculture]. Well, I rest my case :)

Production cost cheap in China because their currency is cheap. They keep their currency cheap by buying foreign currency aggressively. This should normally cause inflation, but they somehow manage it (probably by creating manufacturing capacity fast. This is my biggest mystery.)
We can’t buy too much dollars because it will lead to inflation, and our economy dont have the momentum to absorb it yet.. (my guess).
In my opinion, growth for developing economies is all about the momentum. The chinese have it, and we are slowly getting there.

I am a student trying to read articles about the all time low in US housing, and boom in Indian..

2. Of course, 30 years of 10% growth does have positive impact on the quality of life. We in India have a better life than what our parents had. Rite? That means there has been some growth somewhere. Of course not at the pace that we would have liked to.

3. Well, the biggest challenge to any govt or country is managing the people’s aspirations. That’s more difficult to handle than building physical infrastructure. Whether the whole thing will implode or a smooth transition will lead to an even bigger growth is something that is to be seen.

My example was just my friend’s experience. I accept that i can’t paint the whole situation with one brush. As for the wages part, its very easy to generalise by money conversion which research websites / professionals are so good at.

A good example is going to a barber to get my hair cut. It costs me Singapore $10 (280 rupees) per haircut. In Hyderabad, India i can get it done for 20 rupees (less than 1 singapore dollar). The Singapore barber’s contribution to the GDP is 280 rupees whereas the Indian barber’s contribution to the GDP is 20 rupees. Whereas both of them are doing the same job and with the same efficiency and skill. Does it mean that the Indian barber’s contribution to the economy is in any way inferior to the Singaporean one? Its the typical mentality of converting dollars into rupees. Things are not so simple.

So, all this comparison documents made by the “armchair economists” are simply hogwash. Just to sell their logic and paper. Dont read much into them. Its like the scientists coming with a study that drinking a cup of coffee can keep you healthy. The next day his colleague comes out with another study that says that coffee can increase your blood pressure leading to stroke and even death. Its just a case of “the glass is half full or half empty”. Its how you look at it.

Forget the Indian labour unions getting you a higher pay. The Indian manufacturing industry is today in a mess simply because of the poor labour unions that are inefficient and corrupt. That is one reason why NASSCOM doesnt want the unions to enter the IT/BPO field.

China is where it is today because it sustained 10% growth for 30 years. India has just touched 8% or 9% for past 2 years. We have a long long long way to go. But as for who will sustain the growth, it will be India for sure. Demographics is one, a proper law and order structure in place, institutions are in place and most importantly the power is in the hands of the people. China is yet to experience all these. The real test for China is yet to come. That is when people get richer and then they start to demand their pound of flesh politically.

Btw, iam in no way denying China’s growth and the great hardwork their citizens have put in to achieve that. What rankles is the absolute disdain for the Indian growth model by these so called “economists”.

I think the author of the blog must be annoyed that we are hogging the messageboard ;) Apologies.

minimum wage in China’s manufacturing sector is between two to three times that of India! Data from where your friends stayed, Guangdong

the minimum wage level in Chinese “sweat shops” is much higher than in India where unions have bargaining power in the legislative process of labor laws.

according to IMF data, typical monthly wage for manufacturing workers in China is almost 4.7 times that in India By by Deloitte and Touche “India and China: The Reality Beyond the Hype”
http://www.deloitte.com/dtt/cda/doc/content/US_ChinaIndiaReality_Research.pdf

In India, the moment the govt wants to expand a road, temples, mosques, churches and other worship places spring up beside the road. The results are there to see. It then becomes a communal issue. That’s just one of the million reasons why our cities are have lousy infrastructure.

Vijay, yup the Yuan is highly undervalued. That’s one reason why they are able to keep the cost of production of goods so artificially low. Also the wages are not determined by the market forces but by the govt.

A friend of mine was sent from Singapore to Guangzhou (China) for a project for 3 months. His company was setting up a factory there. During his interaction with the managers there (local chinese), he realised that they were paid a pittance for their work (a manager in a factory is paid approx 2000 yuan which is around Rs 10k) whereas my friend (also a manager level cadre) was paid almost 10 times the amount. My friend was under strict instructions from his bosses in Singapore not to reveal his salary to the locals there. Lest they were afraid that workers might be demotivated or maybe they could revolt.

FYI - The company iam speaking about is a massive US based conglomerate which has operations in India too. But in India, the company pays the market rate (which is almost 5-6 times what an average manager earns in China).

It seems the Chinese govt has no qualms with its citizens being ripped off by all these MNCs who setup shop in China. That’s why i find it funny when people in India equate the people working in BPO/IT related firms as “cyber coolies”. If they compare them to the poor workers of China, i wonder what will they be known as.

Its a long race. But if you ask me where i invest my hard earned money for my future. Its India. Period. Even though i live in Singapore which is the financial hub of Asia.

Suresh, over a period of time, the Indian companies will scale up. Relax. Rome was not built in a day. No one invests in India or China because they love them. They invest simply because the future market lies there, the cost of production is low, there is abundant supply of cheap and good labour. As affluence grows in both these countries, the cost of doing business increases, these companies move to some other cheaper country (maybe Africa, who knows)

Phew, cant believe i wrote such a long post. Sorry ;)