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India, China growth race 'silly', says Nobel winner

India 'cannot pollute way to prosperity' says minister
New Delhi (AFP) Feb 14, 2011 - India's crusading environment minister has rejected criticism that his pro-green policies are driving away foreign investors and said the country "cannot pollute its way to prosperity". Jairam Ramesh, whose push to enforce environmental rules has put him in conflict with business, said there was "no robust empirical evidence" to suggest his blocking of industrial projects had contributed to a drop in foreign investment. India, whose economy is expected to grow by 8.6 percent in the current fiscal year, must ensure that its growth "is ecologically sustainable," Ramesh told a gathering of foreign journalists late Monday. "The time has come for India to make tough choices," said Ramesh, whose ministry was seen as little more than a rubber stamp for industrial projects before he took over the portfolio.

The country "cannot pollute its way to prosperity," Ramesh said. "All I am doing is enforcing the laws of the land." Ramesh has created waves in recent months by shelving plans by British giant resources Vedanta to mine bauxite on land held sacred by tribal people, ordering the demolition of a 31-storey luxury condominium in Mumbai, and stalling construction of a $3 billion luxury residential town in western India. The minister, who is reported to have been prodded by ruling Congress party colleagues to be more conciliatory, last month approved plans by South Korea's Posco to build a $12 billion steel mill but attached over two dozen conditions. Worries have been raised in financial circles that Ramesh's zealous enforcement of environmental rules is creating an uncertain regulatory climate that is deterring foreign investors.

In 2010, foreign direct investment (FDI) in India slid 32 percent from a year earlier to $24 billion, according to United Nations figures. India's central bank recently voiced concern that "a major reason for the decline in inward FDI is reported to have been the environment sensitive" policies pursued by the government. India badly needs investment to upgrade its shabby ports, highways and other transport as it seeks to end bottlenecks and propel economic growth to double-digit levels the government says are needed to reduce massive poverty. Ramesh said he was attaching more conditions to some environmental approvals "but I have never said I am here to reject projects". "I am not Dr. No," he said, referring to his media nickname.

The minister said many of the conditions that he attached to industrial projects were a "leap of faith" because the government lacked the administrative network to police their enforcement. He said he had to trust that the "public gaze will put pressure on companies to become much more (ecologically) sensitive". In the past, he said, there was a "certain laxity" in enforcing environmental rules -- not all of which could now be corrected. "I would spend all my life reopening files. I have to look to the future," he said.
by Staff Writers
New Delhi (AFP) Feb 14, 2011
India's leading economist, Nobel Prize winner Amartya Sen, dismissed on Monday the "silly" obsession of comparing the economic growth rates of China and India.

In a lengthy critique of the practice, Sen argued that New Delhi was far behind in the growth race, but more importantly it lagged in other criteria that showed real living standards were far inferior in India.

"Despite the interest in this subject (of comparing India's eight-percent growth to China's 10 percent)... this is surely a silly focus," Sen wrote in The Hindu.

Growth as estimated by gross national product (GNP) was an arbitrary measurement, he said, and "the lives that people are able to lead -- what ultimately interests people most -- are only indirectly and partially influenced by the rates of overall economic growth".

In an unflattering portrait of his country, Sen drew on data from World Development Reports of the World Bank and Human Development Reports of the United Nations to show China far ahead on most criteria.

Life expectancy at birth in China was 73.5 years compared with 64.4 years in India; Infant mortality rate is 50 per thousand in India and just 17 in China, and the under-five mortality rate is 66 for Indians and 19 for the Chinese.

China's adult literacy rate is 94 percent, compared with India's 65 percent, and mean years of schooling in India is 4.4 years, compared with 7.5 years in China, he said.

"Almost half of our children are undernourished compared with a very tiny proportion in China," Sen added.

"Comparing ourselves with China in these really important matters would be a very good perspective, and they can both inspire us and give us illumination about what to do -- and what not to do," he said.

India's finance minister and prime minister routinely refer to their target of double-digit economic growth, which they say is required to make a dent in India's enormous poverty numbers.

India and China, which both have billion-plus populations, are often grouped together by analysts and pundits as Asia's emerging powerhouses despite their different levels of development and diplomatic influence.

Sen said that growth in GNP, a statistical measure of economic output by citizens of a country, was enriching many Indians, but the focus on the new affluent middle classes obscured the larger picture.

"Those gains are, of course, good, and there is nothing wrong in celebrating their better lives through economic growth... but the exaggerated concentration on their lives, which the media tend often to display, gives an incomplete picture of what is happening to Indians in general," he said.

Sen won the Nobel prize for economics in 1998.

earlier related report
Japan overtaken by China as No. 2 economy
Tokyo (AFP) Feb 14, 2011 - Japan lost its 42-year ranking as the world's second-biggest economy to China in 2010, with data on Monday showing a contraction in the last quarter due to weak consumer spending and a strong yen.

While Japan was expected to fall behind a surging China in the year, the data underlined the weak state of a Japanese economy burdened by deflation, soft domestic demand and pressured by the industrialised world's biggest debt.

"It is difficult for the deflation-plagued Japanese economy to achieve self-sustained growth," said Naoki Murakami, chief economist at Monex Securities.

While China's leap forward reflects a shift in economic power as the country transforms itself from poverty-hit communist state to global heavyweight, it highlights the need for shrinking Japan to energise its economy, analysts said.

Japan's post-war "economic miracle" put it at number two behind the United States for more than four decades, but stagnation after the Japanese property bubble burst in the 1990s helped put China on course to supplant its neighbour.

However, Japan remains around 10 times richer on a per-capita basis, noted top government spokesman Yukio Edano. GDP per head in Japan is around $40,000, say economists.

Predictions vary as to when China may overtake the United States as number one economy, but it should happen by 2025, according to estimates by the World Bank, Goldman Sachs and others.

Most Americans already believe China is the world's leading economy, a poll said Monday.

Some 52 percent of Americans said China was the "leading economic power in the world today," against 32 percent who said their own country, the Gallup poll said. The percentage who said China has soared over recent years.

Seven percent identified Japan as the leading economic power, according to the poll, which surveyed 1,015 US adults this month.

Japan's real gross domestic product slipped by an annualised 1.1 percent in the December quarter as the expiration of auto subsidies hit car sales, a new tobacco tax sapped cigarette demand and a strong yen hurt exports.

In contrast, China grew nearly 10 percent in the same period.

While Japan's first contraction in five quarters was not as severe as forecasts of a 2.4 percent slide, the preliminary data is subject to revision.

The economy grew 3.9 percent in 2010, its first annual growth in three years. But this was not enough to keep it ahead of surging China.

Nominal GDP of $5.474 trillion in 2010 put Japan behind China's $5.879 trillion, the data showed. China first eclipsed Japan in the second quarter.

Despite Japan crawling out of a severe year-long recession in 2009, its recovery remains fragile with deflation, high public debt, an ageing population and a strong yen all concerns for policymakers.

Pressure is on Prime Minister Naoto Kan, who has seen his approval ratings tumble as his government looks to boost the economy without deepening the debt amid a legislative impasse over a $1.1 trillion budget for next fiscal year.

Last month Standard & Poor's cut Japan's credit rating one notch to "AA-" from "AA", saying the government lacked a "coherent strategy" to ease a debt running near 200 percent of GDP, the highest of any developed nation.

Nearly a third of government spending is being swallowed up by a social security system catering to a rapidly greying society, Standard & Poor's warned, with that ratio set to rise without reforms as Japan continues to age.

Private consumption, accounting for about 60 percent of Japan's GDP, slid by 0.7 percent quarter-on-quarter in October-December as the car subsidies expired and cigarette sales were dented by Japan's biggest ever tobacco tax hike.

Exports slipped in the quarter as the yen surged to 15-year highs against the dollar, making Japanese goods more expensive overseas and eroding repatriated profits.

But many analysts expect the economy to rebound in the March quarter as the rising tide of global recovery lifts Japan, amid a recent pick-up in corporate spending and exports.

"The contraction will not last long," said Murakami. "Companies' manufacturing activities are recovering rapidly in January-March this year from their bottom in October 2010."

The government played down Japan's slide to third biggest economy and said it would benefit from having a booming neighbour.

"We welcome, as a neighbouring nation, that China's economy is advancing rapidly," said Kaoru Yosano, minister for fiscal policy.

The Bank of Japan is expected to leave its key rate near zero Tuesday in its ongoing battle with deflation.

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Japanese ex-coastguard defends China video leak
Tokyo (AFP) Feb 14, 2011
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