china and india: sustaining high quality growth · china and india: sustaining high quality growth...

CHINA AND INDIA:

SUSTAINING HIGH QUALITY GROWTH

New Delhi

March 19-20, 2012

Session II: Development Paths

Global & Asian Balance of Power:

Building Institutions for Peace

Arvind Virmani

Presentation

3/16/2012

AV:Imf 1

Global & Asian Balance of Power: Building

Institutions for Peace

Arvind Virmani

(views are personal)

19th March 2012 ImfIndCh:av

Introduction

• World/Asian Balance of Power: Transformed in 21st century

–Globalization and Reform

• Projections

– Index of Power (VIP2)

–New Developments, Global Crisis

–Old and New estimates

• Asia Peace or Conflict?

–Build Inclusive Institutions

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Indices of Power: VIP2, VIP

• Size of Economy (GdpPpp)

–GDP = Population * Per capita Gdp

–Quantity Comparison: PPP

• Projections

–Population/Demographics

–Catch-Up growth

• Economic Power : Index(VIPP/VIP2)

• Overall Power: Index (VIP)

–Strategic Technology and Assets


Fig 1: Catch-up Growth Potential - World Shares of Pop-Gdp


-20

-15

-10

-5

0

5

10

15

P

o

p

s

h

a

r

e

-

G

d

p

s

h

a

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2005 2011

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Fig 2: Asian Country VIP2


0%

5%

10%

15%

20%

25%

30%

35%

40%

1980

1981

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1983

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Japan China

India Asean

Korea, S Australia


Uni- Polar to Bi Polar

• US NIC (Dec 2004)

– Based on Goldman Sachs October 2003

– China’s GDP(US$) could be 2nd largest by 2020

– India’s GDP(US$) could be 3rd largest by 2035

• Virmani(2004)

– China, India rise will be faster than NIC(2004)

• Demographic decline (Russia, Japan, Ger, Itly, Fra)

• Kissinger(94): US,EU,Russia,Japan,China,India(?)

–Bi Polar Transition • China: GDP at PPP equals USA by 2015

• Power potential 70% of USA by 2035

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Bi Polar to Tri Polar

• Virmani (2005)

– "the (current) uni-polar world will be transformed into a bipolar world during the first quarter of this century and into a tri-polar one (China, USA, India) during the second quarter of the century."

– Rise of India: • Third largest economy 2015,

• Real GDP=USA by 2040

• Power potential 80% of US by 2050.

– China’s Power potential = US 2030-35

• Virmani (2006) (Academic Foundation)

– Weakness and threats to China, India’s growth • China: Export-Investment led growth [Gross->net; Ag->Fdi->Inf->Real Estate)

• India: Governance/Public Goods e.g. Rule of Law (Police, legal system), Urban (planning land use, parking, public transport)


US NIC: November 2008

• “The eight largest economies in 2025 will be, in descending order: the US China, India, Japan..”

• “By 2025 China will have the world’s second largest economy and will be a leading military power.” – A global multi polar system is emerging with

the rise of China, India, and others

– The development of a globalized economy in which China and India play major roles

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New Developments: 2008-10

• Oil, Energy Price Boom

–Russia’s comeback, Brazil

• New PPP estimates from ADB-WB

– India, China: -36%/40%

• US-EU FinancialCrisis

–Differential Impact on economies

• Domestic vs. Export oriented

• Fiscally constrained vs. non-FC

• Forecasts (Ch,Ind) = Outcomes

3a Economic Size (GdpPpp)


0.1

0.3

0.5

0.7

0.9

1.1

1.3

1.5

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

United States China India

Japan Germany Russia

Brazil United Kingdom

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3b Economic Size (GdpPpp)


0.05

0.10

0.15

0.20

0.25

0.3020

11

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

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2047

2049

Japan Germany

Russia Brazil

United Kingdom France

3c Economic Size- Asia


0%

20%

40%

60%

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100%

120%

140%

160%

2011

2012

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2015

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2050

India Japan Asean Korea, S Australia

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Fig 4a: Long Term Evolution Power Potential VIP2


0.0

0.2

0.4

0.6

0.8

1.0

1.2

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1.8

2.0

2010

2012

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2050

USA China Japan Germany

India UK France Russia


Global System: Long Term • Global Power: VIP2 > 25%

–China 2010, India 2027 (Japan -09)

• Super Power: VIP2 = 50%

–China 2016-17

– India 2036-37

• Uni-polar: US Sole super-power

–Peak 1999 (1990-2010)

• Bi-Polar: 2025, Tri polar: ~2040 • ASEAN: Not a virtual state

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Figure 4b: Emerging Tripolar Clarity (VIPP/VIP2)


0.05

0.07

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0.25

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2015

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2027

Japan Germany India

UK France Russia

Figure 5: Sustainability of Growth- Per Capita GDP


0.05

0.15

0.25

0.35

0.45

0.55

0.65

20

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20

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China India Russia

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Figure 6: Indian Economy Relative to China


0.2

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2010

2012

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2050

Economic Size Economic Power Per Capita Gdp

Changing Power Balance: Risks and Opportunities

• History – Heightened Risk of conflict, Attitude(s) of

rising and declining power(s), corresponding institutional response

• Europe lessons – Pre-WW, Cold War: Attitude of Rising

power(s) ‘Might is Right,’ => Balancing of Power => Exclusive institutions (Seato,Cento)

– Post-War: Global Rules for Conflict Minimization / Resolution -> Inclusive Institutions (EEC, EU, IMF, WTO)


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Institutional Change

• Exclusive Institutions

– ‘Tributary System’ (Frieberg)

–Balancing Coalitions

• Inclusive Reform: New Reality

–Security Council

–Asian Security Forum


Inclusive Institutions

• Equal Partnership (China, Japan, India,

Asean, Others)

–Asian Economic Community

• Asian Energy community

–Asian Monetary Arrangement

–Asian Social Assembly: e.g. NGOs


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Conclusion • Multi-polar World?

–No, merely a Transition Phase

• West (US) vs. The Rest?

–Unlikely! Diversity of Interests

• Will China Rule/Dominate the World?

–Tri-polar(VIP2): USSR(27%), EE(37%)

–Strategic Assets: US stock, Lags(Ec-Str)

–Attitude/Approach of Power(s):

• Will to Power (USA, Russia, China; India?)

• Aggressive Action–>Countervailing reaction



References 1

• Website:http://sites.google.com/site/drarvindvirmani

• Blog: http://dravirmani.blogspot.com/

• “Globalisation, Economic Growth and National Security” chapter in, Comprehensive Security for an Emerging India, Editor AVM Kapil Kak, CAPS 2010

• From Uni-polar to Tri polar World: Multi polar Transition Paradox, Academic Foundation, New Delhi, 2009.

• The Sudoku of India’s Growth, BS Books, New Delhi, 2009.

http://sites.google.com/site/drarvindvirmani

http://sites.google.com/site/drarvindvirmani

http://dravirmani.blogspot.com/

http://dravirmani.blogspot.com/

3/16/2012

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References 2 • Propelling India from Socialist Stagnation to

Global Power: Growth Process, Vol. I (Policy Reform, Vol. II), Academic Foundation, 2006.

– “A Tripolar World, India, China & US,” Lecture delivered at India

Habitat Centre on May 18, 2005.

– “Economic Performance, Power Potential and Global Governance:

Towards a New International Order”, Working Paper No. 150, ICRIER, December 2004. (http://www.icrier.org/page.asp?MenuID=24&SubCatId=175&SubSubCatId=233).

– “A Tripolar Century: USA, China and India,” Working Paper No. 160, ICRIER, March, 2005. (http://www.icrier.org/page.asp?MenuID=24&SubCatId=175&SubSubCatId=233).

– VIP2: A Simple Measure of Nations (Natural) Global Power, ICRIER Occasional Paper, July, 2005().


References 3

• China’s Socialist Market Economy: Lessons Of Success, Working Paper No. 178, ICRIER, December 2005.

• Global Power From The 18th To 21st Century: Power Potential (VIP2), Strategic Assets & Actual Power (VIP), Working Paper No. 175, ICRIER, November 2005. http://www.icrier.org/page.asp?MenuID=24&SubCatId=175&SubSubCatId=233.

• Trilateral Nuclear Proliferation: Pakistan’s Euro-Chinese

Bomb, IDSA Monograph Series No. 1, Institute of Defence Studies and Analysis, New Delhi, December 2006.

http://www.icrier.org/page.asp?MenuID=24&SubCatId=175&SubSubCatId=233







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