India may soon rival China in growth
July 14, 2015
by Morton I. Sosland
No matter how remote a company considers itself as being relatively uninvolved internationally, it is the rare enterprise that has avoided all effects from what has occurred in China in recent years. From its impact as a buyer of grains and influencer of global supply-demand to amazing economic growth, China won the constant attention of grain-based food companies of all shapes and sizes. Even as China’s economic growth has begun slowing from an astonishingly high double digits, it has a neighbor in India that is seen as having similar potential to exert much the same influences on the global grain economy. These two Southeast Asia behemoths may affect the state of global business in ways that could reach every part of the U.S. grain and grain-based food industry.
Predictions have been made so often about India’s potential for rapid growth, only to be followed by failure soon after, that present-day commentators are cautious in predicting that India is on the verge of rapid improvement. Comparisons with China mainly reflect population, where China’s current total of 1.4 billion slightly exceeds India’s 1.3 billion. The expectation is that India’s numbers will soon be larger than China’s.
But it’s not massive population alone that is cited for growth potential. India’s population is much younger than China’s where the aging share has increased to a point of concern. India is a liberal democracy with a political system considered positive for growth. Excellence in education has created a large pool of young people highly trained in technology. These advantages are offset by vast numbers of poor, undernourished people working in agriculture and in cities on paltry incomes. Hardly 10% have jobs of western standards. Food distribution and food manufacturing reflect adequate crop production lessened by dismal distribution due to terrible infrastructure. India is the nation where the Green Revolution began decades ago, only to fall short in ending hunger for other reasons.
It has been noted that if India has a chance of emerging as the fastest growing nation in the world. If that happens, it will be due to the low level from which that occurs. From 1980 through last year, China’s domestic product per capita grew 17 times. In the same period, the International Monetary Fund says India’s per capita GDP rose four times. These numbers hide income improvement enjoyed by millions in India. Such estimates also underscore the chasm India now views as its target for changing.
While better infrastructure is absolutely necessary for India even to consider taking on such a task, promoting private sector investment is given equally great urgency. Financing public investment is an immediate goal, and this needs to be conducted in a manner that does not interfere with private banking. Much attention has been given to adopting a sales tax as a forerunner to establishing a nationwide market that is sorely absent at present. Lack of national markets surely weighs on the few food brands and food manufacturing operations that have tried to extend beyond a headquarters city or state. Along this very line, it is no surprise that the prime minister elected last year, Narendra Modi, has pledged that he will seek to improve the environment for business, including easing the burden of the bureaucracy. His progress is so far quite limited, with constant complaints about state efforts to impose special taxes on businesses as well as worrying about labor relations and inspectors.
India is ranked by the World Bank as 142nd out of 189 countries rated for ease in doing business. It is one place above the West Bank and Gaza. Mr. Modi’s government has a tough balancing act to help business while not seen as neglecting the poor and farmers. It is easy to assume that only limited improvements are likely to make India a better place for business. Yet, small gains by that huge nation are likely to have quite a significant impact on global as well as domestic grain businesses.