China will slow down, 50-50 chance for India story

ruchir-sharmaAuthor and analyst Ruchir Sharma could easily be mistaken for a model, with his clean good looks and impeccable manners. But if you were to talk to him and have even a nodding acquaintance with his bestselling book “Breakout Nations: In Pursuit of the Next Economic Miracles,” you are sure to be struck by his searing intellect and his gift for cutting through contemporary myths and reigning buzzwords. Sharma, head of Emerging Market Equities and Global Macro at Morgan Stanley Investment Management, sees hope where others see deepening gloom and despair: the eurozone is looking up, he says. China’s growth rate will slow down, but for India there is a lot of room for catch-up as its per capita income is still very low, Joshi says in an interview with Manish Chand, Editor-in-Chief of India Writes (

(Excerpts from the interview):

Q) In these times of global recession, how do you see the resilience of the Indian economy? How do you see the economic trajectory of India in the coming days?

A) The economic resilience is because of the simple fact that the per capita income of India is just $1,500. From such a low base, you have a lot of room for catch-up. And, to me, that is the fundamental India story. It’s not the fact that India is growing at 6-7 per cent and the world is not….Surely, the US or Europe can never grow at 6-7 per cent. Not because there is something wrong with them. They are wealthy; you can’t keep compounding with such large economic base.

Q) What’s your take on the new wave of economic reforms introduced by the Indian government?

A) The Indian government is getting reformist now. But the biggest thing that is helping us is that the commodity prices globally are coming down or are stable.

Q) Do you see India emerging as a breakout nation?

A) The chances of India becoming a ‘breakout nation’ are 50-50.

Q) A new leadership is taking charge in Beijing. How do you look at economic fortunes of China under the new dispensation? Do you think the new regime will be pro-reforms?

A) It’s too early to say that – whether they will step up reforms or not. My issue with China is that its economy is too large to grow rapidly. The per capita income of China is $6,000-7,000. China’s economic growth is going to slow down to 6-7 per cent. The days of double-digit growth are over. The 8 per cent target is much too ambitious.

Q) With labour costs going up in China, do you think China’s position as a manufacturing hub will get dented?

A) China’s labour and manufacturing costs have gone up. A lot of factories and new plants are migrating to Indonesia, the Philippines and Thailand. Some of the Southeast Asia economies are now very competitive.

Q) Durban will host the 5th BRICS summit in March. How do you look at the prospects of the BRICS grouping which has emerged as an influential club of emerging economies?

A) BRICS is a concept that’s sort of going to fade away. Some of the celebrated stars of the past decade like Brazil, Russia and China are not doing well. South Africa is going to be a flashpoint. Last year, Brazil’s growth was barely 1 per cent. Russia’s growth is slowing down to 3.5 per cent. I am against catchy acronyms. They club different countries together which have nothing in common. I am not upbeat about the BRICS. There is a leadership shift happening in emerging markets. In 2012, Turkey was up 60 percent and the Philippines up 45 percent.

Q) Is there a political model conducive to accelerating economic growth?

A) If you look at 120 high growth cases in the last decade, 50 per cent are democratic and 50 per cent are authoritarian. It’s fifty-fifty.

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India Writes Network
India Writes Network
India Writes Network ( is an emerging think tank and a media-publishing company focused on international affairs & the India Story. Centre for Global India Insights is the research arm of India Writes Network. To subscribe to India and the World, write to A venture of TGII Media Private Limited, a leading media, publishing and consultancy company, IWN has carved a niche for balanced and exhaustive reporting and analysis of international affairs. Eminent personalities, politicians, diplomats, authors, strategy gurus and news-makers have contributed to India Writes Network, as also “India and the World,” a magazine focused on global affairs.