Response to "India Won't Be China in Commodities"
By Jackie Steinitz
19 Dec 2006 at 12:55 PM EST
resourceinvestor.com
LONDON (ResourceInvestor.com) -- Thank you for your detailed reply to the article, “India vs. China,” and for all the figures and sources that you quote in your article, “India Won’t Be China in Commodities.”
In many respects it would seem that we are singing from the same song sheet and arguing the same points. We seem to be in agreement about the current relative status of India vs. China and both explicitly say:
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China’s economy is currently far bigger than that of India’s (by a factor of three).
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Although India’s growth rate is high and above the world average it is below that of China’s and so it is not yet catching up.
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China’s manufacturing sector is far and away bigger than India’s (100 million workers in Chinese manufacturing vs 7 million in India).
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China therefore currently consumes far more base metals and energy than India. (For example the table in my article shows that for lead, the most extreme case, China consumes almost 20 times as much as India).
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India’s agricultural sector has yet to be reformed.
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The Indian economy is multi-speed. The consumerist side of the economy is indeed only a small proportion of the total and sadly there are many millions of malnourished children in India (a third of the world’s total). The majority in India are poorly educated.
We both also agree that India has made good progress in certain sectors (though you argue that it is not appropriate to use the example the growth in the number of mobile phone subscribers - from 3 million at the end of 2000 to 100 million by the end of 2005 - as an example of exploding growth as demand has grown rapidly everywhere.
My point here, however, was not that the growth rate has been explosive in percentage terms (India’s 90-100% average annual growth rate in the number of subscribers over the last 5 years has been matched or exceeded in quite a few other countries that were also growing from a low base). It was merely that in absolute terms 97 million new subscribers over 5 years - and even more so the current growth rate of 4 million new subscribers per month - is a lot, albeit less than China’s).
With regards to the future, your ‘simple English’ conclusion is that “India won’t consume commodities as voraciously as the Chinese.” Mine, more verbosely perhaps, is that:
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India won’t be the new China for most commodities in the short or medium term. It still has a long way to go.
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However it is already the number one consumer in the world in several commodities including gold, tea and sugar.
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Whether or not India is ever bigger than China in the long term (and we both agree that India faces monumental challenges) its impact on commodity markets is growing. In the decades to come it will have a significant impact on commodity demand and thereby commodity pries.
Again the conclusions have some similarity – but I would be interested to know what range of long-term growth rates you envisage for India and whether you anticipate that India will be of sufficient size in the twenty-first century to impact on commodity prices.
Thank you again for your comments. |
