India will be the World’s No.1 Economy by 2050

Sorry if you fell off your chair on reading the post title. But I could not resist using the title of a rediff slide-show (they put it on multiple pages so that the number of page clicks goes up) that some people have started breathlessly forwarding. These people are the type who are always in a hurry to report that “India is the second largest this” or “India has the most of that” and other hyper bullshit generally peddled by the likes of The Times of India and other rags. Anyway, that reminded me of a story.

The Flying Horsies

The story goes thusly. Once upon a time there was a king. One day he got really really upset with his minister and in a fit of anger ordered that the minister be shot at dawn the next day. The minister pleaded with the king to spare his life for just three years. Why, demanded the king. The minister said that he will develop flying horses and that will take three years. He reminded the king what a great advantage his armies would have with flying horse technology. The king thought about it and said, OK but if there are no flying horses in three years, his (the minister’s) ass is grass.

So then, the minister goes home and his wife says to him that he’s really dumb. How the heck can he develop flying horse technology in three years, she laments. The minister said to his wife, “Three years is a long time. In three years, the king could die, and if he does his orders are no longer valid. In three years, I could die. And who knows, perhaps in three years someone will develop flying horses. We don’t even know what will happen tomorrow, forget three years.”

~ ~ ~ ~ ~

Predicting the Future

Cast your mind to, say, 1980. What would you have said if someone had told you that by the end of 1991, the USSR will be dissolved — gone, kaput, expired? You would have told the person to lay off the drugs. What if someone has told you in 1975 that China would become a manufacturing giant in a few decades and that the US would be indebted to China? You would have had that person committed to a mental institution.

What if in 1947 someone said that India will be ruled by an Italian-born practically uneducated, grossly corrupt woman whose only claim to fame was that she had married the grandson of one of the present set of politicians?

What if you were told in 1947 that in about 50 years the number of abjectly poor people in India would be three times the number then?

~ ~ ~ ~ ~

Horse Doo-doo

Only very deluded people make projections into the far future. The only long-term forecast one can believe in is the one which says that the future will be unimaginably different from the present. No one had predicted the revolution in the information technology — not the cell phone, not the computers, not the internet.

James Burke likes to put it this way. He says that if you, in the year 1700, had told your drinking mate that in a few centuries, every Londoner will have his own personal transportation and that he would be able to go wherever he desired, your friend would have fallen off this chair laughing — the image of London streets six-feet deep in horse dung would have been too ridiculous.

~ ~ ~ ~ ~

Pile of H S

The projections like the one CITI is peddling are worth less than horse dung. People who take them seriously are intellectually challenged, to put it most politely. I don’t have the patience to point out all the errors built into its conjectures — which are piled high and dry — but let me just point out the most glaring. Its projection are reported in “purchasing power parity” or PPP, terms. PPP is itself a steaming pile of horse dung. So there.

~ ~ ~ ~ ~

I believe that it is better to tell the truth than to lie. I believe that it is better to be free than to be a slave. And I believe that it is better to know than to be ignorant.

Go read the rest of this great quote from Mencken.

~ ~ ~ ~ ~

Whom the gods would destroy they first make mad, observed old Euripides. I am afraid that insanity is spreading rapidly in India.

~ ~ ~ ~ ~

Per capita GDP Time Equivalent of Cost

A better measure for comparing incomes across economies is based on time.

Time is a great measure for all sorts of things once you have an invariant in hand. For measuring distances, the speed of light provides an invariant measure. Thus, you can say that the sun is about 8 light minutes away and the nearest galaxy to the Milky Way, the Andromeda galaxy, is about 2.5 million light years away.

Costs can be measured in terms of time, provided we have an invariant. In our case, we really don’t have an invariant because the time to earn a unit of money varies from person to person, and from region to region. However, there is already a measure of average incomes in a specific location. That is the total production of final goods and services measured in monetary terms over a year for a specific collective of people that is called the gross domestic product (GDP). GDP divided by the number of people gives you the GDP per capita.

GDP per capita is a handy “local invariant” of sorts. India’s GDP per capita is about $450 per year. In a sense, you can say that the average person earns $450 a year and that is a local invariant. Now if something costs $450, then one may say that it costs one year. The “Per capita GDP Time Equivalent of Cost” is what I am provisionally proposing, or PGTEC. (The stress is on the word “provisionally.”) The units are time: so you could measure PGTECs in hours, days, months, years, and life times.

I can now denote the cost of an 800 sq foot apartment in my neighborhood for a laborer as 200 years. Since the working life of an average person (given the life expectancy of about 65 years and a productive life of about 40 years), the cost of the apartment would be five laborer lifetimes. Astounding.

What good is the PGTEC measure? Well, for one thing, it is easy to understand and compare costs across regions. The median house in the US costs around $70,000. And the per capita GDP is around $23,000. So the average house cost in terms of PGTEC is 3 years. Compare that to 200 years in India. India is therefore about 70 times more expensive than the US when it comes to housing.

That is from a post from nearly five years ago: The High Cost of Living. (March 2006).

14 thoughts on “India will be the World’s No.1 Economy by 2050

  1. Those straight line long term projections are what economists at banks do to whip up investor interest to crazy levels. Which is why you end up with crazy valuations in the tech bubble, sentiments like real estate prices will never go down, etc.

    In any case, to put things in perspective, those projections should also point out that India will overtake China as the most populous country by 2030.

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  2. Any progress or lack of progress – economic, cultural and social – is a direct result of the ideas that are prevalent in the society. Ideas, ideology most popular in the society and accepted at large, historically make the difference between national prosperity + general happiness and poverty and despair. South Korea accepted free market capitalism, North Korea tried communism/socialism. We know the results. USA promoted free market capitalism, Soviet Union – communism/socialism. One country is thriving, other does not exist. West Germany, free market capitalism. East Germany, communism/socialism. East Germans were giving up their lives trying to escape to the western part, not the other way around, till the Berlin Wall came down. Before China opened up its economy, it was a basket case. Now, it is a competitor to the US.

    Whats the story in India ? After 64 years of damage, socialists still hold sway. True, 1991 reforms changed a lot. But a lot more still remains the same. Governments talk of inclusive reforms – which really is a euphemism for socialism.

    America was built by businessmen, traders and entrepreneurs, big and small.Indians still are contemptuous of the businessman. Indians as a people seem to be very good at forming NGOs advising the successful on how to spend their money. (On Barkha Dutt’s show I remember an NGO chap being widely applauded for his statement about how business people suffer most heart attacks, because they have no heart.)But very few take up to starting their own businesses or enterprise. Those who do, are preyed upon by the rulers of India – the bureaucrats and politicians.

    It really is a battle between looters and moochers versus the wealth creators. The ruling class is very particular about wealth redistribution, while paying scant attention to wealth crreation. In fact, every time a little wealth is created by private enterprise, it is soon frittered away in the battle to get more votes. Wealth creators are harassed, tortured, looted and obstructed at every turn.

    How can such a country be any good ?

    India has had its chance. But by voting for the Family in 2004, and again in 2009, the people of India have shown their intention to always be poor, desperate and pathetic in general… and at their rare best utterly mediocre. They have confirmed that they do not want to be competing with USA or China. They would rather see themselves in comparison with Pakistan and Bangladesh, and be happy, if they get slightly ahead.

    Again, I repeat, how can such a country be any good ?

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  3. My comment has not appeared yet. I dont know why….

    <>

    Any progress or lack of progress – economic, cultural and social – is a direct result of the ideas that are prevalent in the society. Ideas, ideology most popular in the society and accepted at large, historically make the difference between national prosperity + general happiness and poverty and despair. South Korea accepted free market capitalism, North Korea tried communism/socialism. We know the results. USA promoted free market capitalism, Soviet Union – communism/socialism. One country is thriving, other does not exist. West Germany, free market capitalism. East Germany, communism/socialism. East Germans were giving up their lives trying to escape to the western part, not the other way around, till the Berlin Wall came down. Before China opened up its economy, it was a basket case. Now, it is a competitor to the US.

    Whats the story in India ? After 64 years of damage, socialists still hold sway. True, 1991 reforms changed a lot. But a lot more still remains the same. Governments talk of inclusive reforms – which really is a euphemism for socialism.

    America was built by businessmen, traders and entrepreneurs, big and small.Indians still are contemptuous of the businessman. Indians as a people seem to be very good at forming NGOs advising the successful on how to spend their money. (On Barkha Dutt’s show I remember an NGO chap being widely applauded for his statement about how business people suffer most heart attacks, because they have no heart.)But very few take up to starting their own businesses or enterprise. Those who do, are preyed upon by the rulers of India – the bureaucrats and politicians.

    It really is a battle between looters and moochers versus the wealth creators. The ruling class is very particular about wealth redistribution, while paying scant attention to wealth crreation. In fact, every time a little wealth is created by private enterprise, it is soon frittered away in the battle to get more votes. Wealth creators are harassed, tortured, looted and obstructed at every turn.

    How can such a country be any good ?

    India has had its chance. But by voting for the Family in 2004, and again in 2009, the people of India have shown their intention to always be poor, desperate and pathetic in general… and at their rare best utterly mediocre. They have confirmed that they do not want to be competing with USA or China. They would rather see themselves in comparison with Pakistan and Bangladesh, and be happy, if they get slightly ahead.

    Again, I repeat, how can such a country be any good ?

    Like

  4. Coming to think of it… If I claim that I would be world’s foremost expert or technologist or whatever in like 20 years from now, how stupid that would seem.

    Now I begin to feel how stupid these claims appear to other powerful developed countries. Incidentally (as you have noted many times), China never blabbers this kind of gibberish. No wonder they are really becoming a super power.

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  5. This presentations are prepared by the crooked wealth managers to dupe the investors.They charge hefty fees for these otherwise they are the dumbest lot as they are always in the other direction of the unfolding markets.They advise to sell when they should be advising to buy.This predictions are biggest scandals.

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  6. rediff article’s are not to be taken seriously,after some months the same article will be published as the study being done by some other agency,anyway by 2050 most if not all who are reading that wont be around,so nobody to be answerable to.

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  7. That rediff report is by Citi, you know, those guys who couldn’t even manage their own money, and had to go with a begging bowl to be bailed out by the US government?

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  8. Would PPP continue to BS. With my limited imagination and intellect, I feel that there is no better measure than PPP to actually conclude that country X is “better off” than country Y. PPP is indirectly a measure of labour hours (time) that Atanu has so well elaborated – Per capita GDP time equivalent of cost. But if no PPP then what measure best explains well being. Making an apple to apple comparision. If I compare some posh area of Mumbai (e.g. Colaba) to an equivalent area in NYC e.g. Manhattan..then on PPP terms Incomes of people living in Colaba Mumbai in PPP terms is far less than the incomes of people living in Manhattan. But the real question is what does PPP include. It doesnt doesnt consider the fact that some currencies are inherently over valued and some are under valued and that makes savings in some countries more appealing than other countries. Given There is no such thing as “global” basket of goods and services that everyone in the world actually consumes but a prima facie comparision of “value added goods” would quickly reflect that Colaba is more expensive than Manhattan given the cost of real estate alone.

    Atanu: Would you like to once again elaborate on this complicated topic.

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  9. Please point this article to the “The Habit of Being Honest” post too! We were to be the largest economy by 2025 then 2030 and now 2050!

    Maybe some day if population size is what matters or if we can change our national charector!!

    Like

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