Sunday, August 09, 2015

Maoist policies would not change China's future growth rate

I found this hard to believe when I read it but it appears to be the result of solid research. If China were to revert to Maoist policies, the Chinese economy would grow on the average at 4-5% every year between now and 2050- about one percentage point lower than the growth rate projected for China under the pro-market liberal policies it has had since the 1970s. These projections have been made by four US-based economists, says a report in the FT.

The projections made for the Chinese economy under current policies are interesting:
Assuming a continuation of current policies, the paper predicts the Chinese economy will expand by 7-8 per cent for the next 10 years or so, with growth slowing to 5.2 per cent on average between 2024 and 2036 and then a rate of just 3.6 per cent between 2036 and 2050.
India's economic growth should overtake China's this year. India's superior growth rate should persist thereafter until 2050- barring unexpected political shocks.

The interesting question thrown up by the projections on China is whether the focus on continued "reforms" isn't a little overdone in India. Perhaps, the PM's instincts are right: it may be more useful to focus on implementation of existing policies than on bringing about radical policy changes that are, in political terms, a hot potat.

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