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India, China lag in providing basic living standards: ADB

India, China lag in providing basic living standards: ADB
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First Published: Wed, Aug 01 2007. 12 33 AM IST
Updated: Wed, Aug 01 2007. 12 33 AM IST
China and India may be economic growth engines that together account for one fifth of the growth in the world economy, but a new study by the Asian Development Bank (ADB) has found that the two countries lag others in the Asia-Pacific region in terms of providing basic living standards to the population.
“The data shows how far India has still to travel if it has to reach East Asian or even Chinese standards,” Ifzal Ali, ADB chief economist, said in a telephone interview from Manila.
“It is basically a lot of cold water on the current euphoria in the country about how it is close to becoming an economic superpower. Even to reach Hong Kong’s level of consumption, India will take 33 years assuming its real GDP (gross domestic product) per person grows at 6.5%, while China would take 16 years,” he added.
The 2005 Purchasing Power Parity preliminary report under the International Comparison Program (ICP) on Asia and the Pacific released by ADB on Tuesday finds that China and India account for 45% and 19%, respectively of the total real GDP of the 23 economies studied, which automatically makes them the two top economies in the region.
The ICP, the world’s largest data collection initiative in six regions and over 140 countries, is managed by the World Bank.
But in terms of actual final consumption of households (AFCH), the ranking of China and India drops to 15 and 17. A person spends an average of $1,470 (Rs59,388) a year in China and $1,202 in India, compared with $16,012.68 in Hongkong, the top ranked economy in the region.
“The report is a snapshot of Asia in 2005, ensuring robust comparability of GDP expenditures across diverse economies in the region,” said Ali.
AFCH includes total purchases of goods and services by households as well as services supplied by governments, such as education and health care. The price surveys for India were carried out by the National Sample Survey Organisation in 2005.
Brunei tops the region in terms of per capita real GDP ($34,448.91) followed by Singapore ($30,239.99). In terms of AFCH, Hong Kong tops the list followed by Taipei.
Ali also said that ADB was unlikely to revise its current year forecast of 8-8.5% growth for India in 2007-08. “It is easy to revise forecasts,” Ali said, “but the more important question is to sustain growth and investment.” He added that “micro policy reform is in a neutral gear in India.”
In terms of investment, India and China improved their ranking marginally to 17 and 10, with the per capita real gross fixed capital formation of $322.67 and $1,020.65 respectively. However, India still lags behind the region’s average of $677.03. Indexed at 46, India’s living costs are lower than the regional average of 55; Fiji and Hong Kong reported costlier living conditions at 117 and 100. This, Ali said, conforms to the usual trend of richer countries investing more in infrastructure development and poorer countries reaping the advantage of lower wages and cheaper services, resulting in lower cost of living.
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First Published: Wed, Aug 01 2007. 12 33 AM IST