The ongoing economical battle between India and China
The debate between who has the better economy, India or China has been going on for quite a while. Recently the magazine The Economist has published an article claiming that exactly this has happened – in 2010. And nobody noticed it.
But how come that such a crucial event has taken place and it goes unnoticed? If you look at the numbers in the traditional way you will see that India grew 8.6 percent in 2010 whereas China could record growth of 10.3 percent.
So at the first view everything seems normal. But the world economic outlook of the International Monetary Fund (IMF) claims that India’s economy actually increased by 10.4 percent. So how is that possible?
China and India estimate their numbers differently. Where China reports the Gross Domestic Product (GDP) “by expenditure”, India reports it “at factor cost”. So while China takes all the merchandise that has been produced within the country and adds up all of the money spent including the taxes, India looks at the domestically produced merchandise and ass the income earned while producing them.
To give both countries the same pre-conditions a couple of things about the Indian GDP have to be altered in particular subsidies and taxes. If both of those numbers are steady they will not affect the increase rate of the GDP, but they might affect its level.
So, considering the fact that Indian taxes increased to 9.2 percent in 2010 compared to the 7.5 percent they were at in 2009, and if India uses the same methods to measure the countries growth rate as other countries do it can be clearly stated that the growth rose to 10.36 percent in 2010. Thus having a 0.06 percent higher growth than China!
The idea that this ongoing battle was won by India for the first time and no one even noticed is funny to some and ironic to others!