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'Indian economy will overtake China's'

July 24, 2003 19:16 IST

Economist Joydeep Mukherji, who tracks India and China for Standard and Poor's, has joined the minority of economists who believe that with a little more effort India can overtake the Chinese economy.

Mukherji, The Wall Street Journal notes, who has taken a number cruncher's approach to back his observation finds the Chinese miracle 'less impressive than its press clippings.'

Shaving off a bit of exaggeration in official Chinese statistics, it is found that China has grown perhaps 7 per cent a year for the past decade or so against India's 6 per cent, Mukherji said.

But China, as a nation, saves about 40 per cent of income against India's 24 per cent. "A huge amount of money in China is wasted, particularly investments made in China by the Chinese government," the Journal quoted Mukherji as saying.

"For a country that is so big and saving so much, China is unusually dependent on foreign investment," the Journal added.

Mukherji said that is the key to China's success, but it also underscores how poorly its domestic investments fare. About half the loans made by China's banks will never be paid back as a lot of Chinese savings have been squandered, he said.

"India," said Mukherji, "gets more bang for its buck. Its banks have less than half as many bad loans as China's. The bottom line for me is if India can raise its savings and investment rate modestly, then it can raise its growth rate quickly."

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