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VOTE! Will China slowdown have a positive impact on the Indian economy?

By K J M Varma
September 08, 2015 14:34 IST
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A rabbit sculpture is carried away from the Ditan temple fair after a snowfall in Beijing.


China's economic slowdown will not affect India directly but the resultant global sluggishness may have a bearing on the Indian economy, a state-run thinktank here has said and called on the two Asian giants to work on ‘complementary approaches’ to protect their interests.

"The Chinese actions will affect the developed economies enormously, as has already been observed, but whether it grows fast or slow will not affect the Indian economy much," Zhao Gancheng, director of Shanghai Institutes for International Studies, said in an article in the state-run Global Times.

Titled 'Can India benefit from Chinese economic slowdown? Think twice,' the article said the success of the Indian economy is more linked to internal factors.

"The success of the Indian economy in the years ahead lies in a number of crucial elements, and the most important ones are likely the leadership's policy options and internal interactions, which have so far not yet presented a very optimistic picture," it said apparently referring to divisions between the government and the Opposition over key pending legislations on the Goods and Services Tax and the land acquisition.

"The Indian economy is full of potential, and how to make it become real growth tests the wisdom of leaders.

“When (Prime Minister Narendra) Modi was the Chief Minister of Gujarat, the state's remarkable achievements were a proof of how important good policies are.

"The Indian people chose Modi as their leader in the hope that the Gujarat model can be copied to the whole nation."

It said although Modi has been devoted to creating an foreign direct investment friendly environment in order to attract more investments, the results have not been as good as expected.

"Local interests are difficult for the federal government to coordinate and address when implementing relevant policies," it said.

While China does not compete directly with India, the effect the world's second largest economy has on the global economy is likely to influence the Indian economy, it said.

In this regard, whether a slowing Chinese economy will really create more opportunities for the Indian economy needs rethinking, it said.

"The key to understanding the situation is interactions between the global economy and the Indian economy.

"When the Indian economy developed very slowly, one of the reasons was the government's choice to keep the Indian economy distant from the global economy. That was also the root cause for reform first in the early 1990s and now by Prime Minister Narendra Modi," it said.

"Thus, if the global economy slows down further as part of the results of Chinese economic restructuring, it would be difficult to see why a sluggish world economy would help the Indian economy anyway," it said.

"In fact, India's growth rate of the second quarter this year has fallen to 7 per cent from 7.5 per cent of the first quarter, perhaps an indication of influence of the global decline.

“That is a warning sign that both China and India may have to work together to find complementary approaches for sake of their own interests," it said.

Image: A rabbit sculpture is carried away from the Ditan temple fair after a snowfall in Beijing. Photograph: Jason Lee/Reuters


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K J M Varma in Beijing
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