Sunday, October 30, 2016


In an recent election campaign speech, Mr Trump, the republican presidential candidate praised India's GDP growth and promised the Americans that he will take US GDP to the level of India, if voted to power. It appears that Mr.Trump does not understand world economy. He is comparing India's growth to US and he thinks USA can grow at 6% and above. To grow at that rate a country needs to have a very large poor population. Most of them should live in abject poverty. The gap between haves and haves not should be wide. The desire to improve ones living standard and better life offers huge growth opportunity for developing countries like India. The labour costs are here cheap, compared to developed countries. Hence, most of the world's top companies would like to invest in India to take cost / growing market advantage. This has cascading effect on the economy, including employment generation. USA does not have such population. The country is very well developed. Labour cost is abnormal. USA imports almost every thing from China, because of forbidding local wage structure. Mr. Trump, first, should ponder over why US is so much dependent on China for its daily needs. ( Total net imports by America from China this year till Aug is at 2,25,000 million USD.)

To grow even at 4%, US should stop importing from China and manufacture locally. That is next to impossible and cost prohibitive. Hence comparing GDPs of India and China with US and aspiring to emulate that is ridiculous. US can not achieve that kind of GDP in the foreseeable future. 

1 comment:

  1. You have touched a very important point, which I often pondered on, is that if Economic Growth is necessary? Also, whose growth and at what cost?