The one difference between China and India is that of Democracy. Even though both the nations boast of a corrupt governance system, yet the fact that in India, a non functioning government is more likely to get kicked out by an increasingly well aware population, makes it a safer bet in the long term I guess.
To Quote Thomas Friedman[0]:
"If India and China were both highways, the Chinese highway would be a six-lane, perfectly paved road, but with a huge speed bump off in the distance labeled "Political reform: how in the world do we get from Communism to a more open society?" When 1.3 billion people going 80 miles an hour hit a speed bump, one of two things happens: Either the car flies into the air and slams down, and all the parts hold together and it keeps on moving -- or the car flies into the air, slams down and all the wheels fall off. Which it will be with China, I don't know. India, by contrast, is like a highway full of potholes, with no sidewalks and half the streetlamps broken. But off in the distance, the road seems to smooth out, and if it does, this country will be a dynamo. The question is: Is that smoother road in the distance a mirage or the real thing?"
I agree completely. Personally, I'm really optimistic about India and excited to see the progress that they had lately.
But at the same time, investor's optimism has a positive feedback right until the crash, so investors will inevitably get _more_ optimistic about India than they should.
Modi, the current prime minister of India got into power with big majority as the coalition govt(UPA coalition) at the was too corrupt. Modi promised big reforms, like Obama when he got first elected, but nothing positive yet for the majority of population. He is some what pro business, but not enough pro business or pro masses to worth any applause. I don't think pro business and pro masses policy is mutually exclusive. So far it looks like his election campaign was just a marketing campaign to get elected.
See gas price, crude oil price and rupee/dollar rate over last few years. *sorry about the formatting as this is html doesn't care about white spaces and <pre> tags doesn't work here
year 10 11 12 13 14 15 today
$ Crude 74 109 90 99 108 61 33
Rs.gas 51 63 71 63 71 66 64
$ vs Rs 46.2 44.7 57.1 59.2 60.2 63.4 66.8
The prices are deregulated. But still even though crude prices has fallen so much, govt keeps retail gas prices costlier by increasing taxes. Taxes form the majority of retail gas price.
Taxes vary between states, which is detrimental for business due to the amount of paperwork. Unified tax rate named GST was to be introduced(its not a law yet). The outrageous statement made by someone was that even though GST will charge uniform tax rate somewhere in the range of 14-18% gas prices will be kept out of its purview for the time being. The horror!
But things are bright for India in the long term as youth have high education. All most all have college degree. There are press or internet censorship.
I don't understand how keeping taxes on gas prices meant that he is all marketing gimmicks? Did he promise that he'll keep gas prices low? Gas is neither cheap nor costly with the current price in India[1]. It's midway compared to most of the countries and almost the same as China. India is not a oil producing country and keeping it cheap will hurt its economy. Btw INR/USD in 2010 was way stronger than today.
What I hate about the guy is the increasing religious intolerance that is happening because of this party, and him doing not much about it. He gained a lot of votes by promising to fix corruption and telling "good days are coming". People are actually frustrated as "good days are not coming".
India imports majority of crude and refines all petroleum within the country. Business aren't paying international wages for their refinery workers, they get paid normal wages like for any other Indian. Yet when it comes to selling the petroleum products refined within the country, oil marketing companies used to say they were selling at loss. Not real loss, but hypothetical loss if they weren't selling at international prices -the companies were always making profit. These are listed companies and their annual reports are public.
Now Modi may have not promised he'll keep gas prices low, but is keeping it artificially high what he should do?
Keeping it cheap will not hurt economy as it has a direct impact on prices of food and transportation. People would've been able to save more.
Keeping gas prices high isn't a bad thing. It helps India not fall into the trap of consumption increasing when prices are low and crying for subsidies when they go back up.
India used to have subsidies on retail gas prices. Now it doesn't since complete price deregulation and so whenever global crude price changes those was supposed to reflect on retail prices. As expected prices increase whenever crude price increases, but whenever crude prices decreases central govt is increasing taxes. Current govt has raised taxes on gas/diesel almost every two weeks and yet again last week.
I wrote a script to calculate what the prices should be, factoring in the exchange rate and crude price prevailing at the time and these are the results I got.
Month/Year [retail_price vs would_be_price(if taxes were not increased) ]
June 2014 (Rs 71.51 vs Rs 71.51) - taxes when he got into power
June 2015 (Rs 66.93 vs Rs 39.89)
Jan 11, 2016 (Rs 64 vs 36.27)
Also the tax on gas prices are really complicated.
Oil marketing companies refines and their selling price includes their markup. On that selling price there are a couple of central govt taxes. Now on that price(including the central govt taxes), there are couple of state taxes. Current cost of petrol/gasoline including markup of refineries is around Rs.25 Rest are taxes.
India has a long ways to go before it catches up to China. Have you ever been? The differences in development are pretty stark.... even more so when you compare secondary cities. It's really night and day... not at all even comparable. Many Indian cities still lack decent plumbing. Westerners seem to equate India with China, some even seem to think that India is more developed on account of the english language skills and the growth of their services based economy. Couldn't be further from the truth.
Indians I know that have been to both are always surprised by how developed China is.
Westerners should travel more. It'll really open your eyes...
I've heard this view echoed by friends who've visited China (I'm Indian). A major reason for this difference might be the fact that China opened up its markets in the late 1970's while India's market liberalization happened only in 1991.
Agreed. Have visited both and driven all over India and across southern / SE China.
China is cleaner, more developed, more organised, things work, better roads / facilities and generally less chaotic with less signs of extreme poverty.
I have not been to China, have been to india. Something gives me hope for india: http://forum.hindivichar.com
Looks like the Hindi speaking part of the country is finally discovering the internet.
To Quote Thomas Friedman[0]:
"If India and China were both highways, the Chinese highway would be a six-lane, perfectly paved road, but with a huge speed bump off in the distance labeled "Political reform: how in the world do we get from Communism to a more open society?" When 1.3 billion people going 80 miles an hour hit a speed bump, one of two things happens: Either the car flies into the air and slams down, and all the parts hold together and it keeps on moving -- or the car flies into the air, slams down and all the wheels fall off. Which it will be with China, I don't know. India, by contrast, is like a highway full of potholes, with no sidewalks and half the streetlamps broken. But off in the distance, the road seems to smooth out, and if it does, this country will be a dynamo. The question is: Is that smoother road in the distance a mirage or the real thing?"
[0] http://www.nytimes.com/2005/06/08/opinion/bangalore-hot-and-...