India Could Outpace China with Shifts in U.S. Policy

India Could Outpace China with Shifts in U.S. Policy

In a long article, supported ably by charts, the South China Morning Post compares the differences between the economies of India and China, and puts forth reasons why “India could trump China as U.S. policy shifts“.

China's A50 vs India Nifty 50

Highlights of the publication’s views:

SCMP Views onIndiaChina
DebtIndia’s debt ratios are only half of those of China and have not been growing during the past decadeThe country is awash in debt. China’s total debt (public + private) portends slower growth
TradeMuch less export dependent: Exports account for 13 % of GDPExport dependent: Exports total 21 % of GDP
Exports to US: 1.6% of GDPExports to US: 4% of GDP
India’s lack of dominance in the traded-goods sector may help avoid the ire of a more insular U.S.Vulnerable to any change in the mood in Washington
PoliticsIndia doesn’t appear to be on President Trump’s radar and…President Trump has focused his trade concerns on two countries: China and Mexico
… This is good news for India and worrisome for ChinaA trade war with the US could destabilize China’s economy and augment the probability of a debt crisis and a currency devaluation
CurrencyThe Indian rupee is probably about fairly valuedCurrency is overvalued
India’s FX reserves rose from $326 billion in early 2016 to $337 billion in early 2017Spent one quarter of its currency reserves defending the renminbi
Equity MarketsIndia’s Nifty Fifty Index has vastly outperformed the China A50 in recent years; trades at 18.6x earningsChina A50 trades 12.8x earnings for Chinese shares
Demographics and AgricultureIndia’s per capita consumption is 2500 calories per dayChinese per capita consumption is now over 3,000 calories per day
India’s population will probably expand by 30% over the next 25 yearsChina’s will probably stay about the same adding about 0.1 per cent to China’s population per year
India represents an enormous opportunity for the world’s farmers, especially those who can provide lentils, peas, chickpeas, almonds and other dietary staples. Also, as India grows richer, consumption of dairy and vegetable oils will probably grow considerablyChina, by contrast, has a mature diet and its food consumption needs may not change a great deal going forward

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