Abhijeet wrote:Here's another thought that I've mentioned before. Let's say we take the following as given:
1. India's GDP in 2012 is $2 trillion (2012 $), and China's GDP in 2004 was $2 trillion (2004 $)
2. Consumption is 60% of GDP in India and 35% of GDP in China (the specific numbers could be off, but I believe are roughly in line with reality)
3. That would mean that the consumer market in India in 2012 should be worth 0.6*2T = $1.2T approx. (2012 $), and the consumer market in China in 2004 should have been 0.35*2T = $700B approx. (2004 $).
The question is: is this actually the case?
Not at all. Which is why many of the largest MNCs count China as its largest or second largest market throughout the new millenium but India barely registers anywhere near the top. For modern amenities like air conditioners, refrigerators, washing machines, autos and electronics the sales numbers in China as tabulated by MNCs are many multiples of India's.
India's consumption of those items are nowhere near what China's were in 2004 otherwise we would be placing India in the upper echelons where China was even in 2004.
Clearly, it's impossible to sum up the market sizes for all possible consumer goods. However, couldn't we compare the market sizes for common household appliances etc. (China in 2004 and India in 2012) to see if they are in line with these estimates? Assuming that most people in both countries buy similar basic necessities, the sum totals of the top 10 market categories (say) should be an appreciable fraction of these estimated sizes.
I don't have the data, time or expertise to do this, but perhaps someone who does sales forecasting or market sizing could contribute some of this data (chola?).
I'll put up some numbers when I have time. Offhand I know of the color tv market (mainly because I have a clipping from a 2004 China story in my files. )
TVs are a pretty good indicator of a country's consumer society. It's something that everyone wants once that they reach modern levels of development. There is a joke in global market research that a society that doesn't want tv is a society still doing subsistence farming. With television, of course, you would end up with all the other trappings of consumer society since it is the most dominant form of media in the world today and through which all the trends and wants are foisted on people.
In 2004, the chinis produced 73 million color tvs which constitute at 55% of the world's total. Around 46 million of those were sold domestically while the other 27 million were exported. In 2012, the total sales of color tvs in India is around 9 million. That alone tells me that Chinese economy in 2004 was far larger and more advanced.
It should say the same if we dig into sales from the multinationals (we like MNC sales figures more than government numbers, any government!)
Quickly googling, I see that GM sold 490,000 cars in China in 2004. They sold 110,000 in India in 2011.
If the consumer markets in China were 10% or 20% or even 60% larger, we can make a case that the two economies were equivalent. But not when the ones in China are 500% or more larger.
MNCs trust their sales. The ivory tower economists touting who is a consumer society and who is not do not register in the halls of the international corporates. Simply because the numbers from the field are so overwhelmingly China-dominated year after year. This is why 80% of the developing markets strategies are geared towards China while the rest of the non-western world get the remainder. Sales drive everything.
As I wrote earlier in this thread, China undersells its economy to cheat in the WTO and to undervalue its currency. Its consumer society is many times what it reports.
From the MNC standpoint, I would have to say that China in 2004 was far larger than India 2012. Again, that is from sales which drives strategy which drives investment. When it comes down to money, we can't afford to lie to ourselves just because we find India more palatable than a communist dictatorship.
When brings up the point I and others have made repeatedly. We should never have compared India with China. As a democracy we have many advantages. We need to compare ourselves with Japan, South Korea and Taiwan and see where we went off track. South Korea was poorer per capita than India at one point.
Whatever is working in China is not because of its government, it is because of the processes it had imported from the developed parts of East Asia.
Our real race is to fix our free society before the Panda becomes a free society. If you look at the way MNCs are pushing private credit and intellectual property rights (rule of law) in China, I fear it is a matter of time before they take hold and we see the chinis becoming a giant Japan or Taiwan.
"This would be the worst case scenario, because the profit margins are much lower."