NaMo takes on the Inscrutable Chinese!

Dear Reader, this article appeared in the Hindu Business Line today under my column titled “Tweakonomics”. You can see the original article at

There is a lot riding on this visit. Such as settlement of disputes pertaining to border, trade, border, economy, border, investment, border, railways and just in case you missed it, border. Bordering on the border of the impossible. Ony NaMo’s charms may be able to push the Indian bull (now officially growing at a faster-than-dragon pace) into the proverbial China shop.

The Indian PM will start his visit on the Xi homeground, at Xian. This is largely, claim the diplomats with an all-knowing nod, to reciprocate the Jhula ride at Ahmedabad. The PM will be taken for a ride to the Wild Goose ummm Pagoda, before he can do the WG chase on getting Indian goods more access to the Chinese markets. One of the many economic objectives of this visit is obviously to boost the total trade between the Hindi-Chinis from $70 billion to around $100 billion. While it sounds grand this side of the border, it sounds grander on the other. Because, of those $70 billion, around $ 58 billion are exports from China. That’s about 80%, folks. If only the same ratio be maintained! Why $100 billion, we should try for $ 120 billion, the dragon will roar. I can almost see the Chinese Tai-Itching in glee at the thought. Though I am admittedly more worried about the Indian Yogic Acceptance-Of-The-Inevitable trance at the moment.

While Xi will give NaMo the home comfort, Li will meet him next day at Beijing to do the State honors. Premier Li Keqiang is not only China’s head of Government, but an economist to boot. This is the guy who is the brains behind the current Chinese strategy of looking at internal consumption as a harbinger of growth rather than on the more traditional, more reliable, more let-the-west-look-east, export-oriented strategy. Keqiang is also extremely famous, or infamous, depending on which side of the argument you are, for one more thing: THE Keqiang Index! The index by itself is not so interesting as the making of the same. As the story goes, Li Keqiang had apparently told a US ambassador in 2007 that he didn’t really believe in the official GDP figures (now you know what gossip happens at those by-invitation-only dinners) and instead relied on railway freights, power consumption and loans disbursed by the banks to know how well the economy was really doing. The Wikileaks dutifully leaked this to the world.

In the meanwhile, the Economist, which since the Mac Index had enthralled readers based on pure snobbery and pessimistic forecasts, saw that their golden moment had arrived, yet again. Let no one say that the Brits don’t understand economics. The Economist used its in-depth analysis to create the Li Keqiang Index! Using the same three indicators as Premier Li. While you may accuse the British of being non-creative in terms of variable selection, let no one accuse them of plagiarism. The American Investment Banks took this personally as a blight on their index-building capacities and came out with the more powerful “augmented” Keqiang Index. That neither the basic Brits nor the augmented Americans are privy to internal Keqiang data and are hence using the wrong “official” data, beating the whole purpose of the index, is of course, statistical trivia.

Any eco-political talks start with GDP growth rates. I wonder how much the Indian delegation will be able to convince Premier Li that India is REALLY growing at 7.9%. Sigh. After all that effort we put in just to grow faster than the dragon!


2 thoughts on “NaMo takes on the Inscrutable Chinese!

  1. Great article mam! Somehow it is inevitable that this new development will work wonders in favor of Chinese than the Indian, we know it and we are going to accept it with arms wide open.

    As far as the Li Keqiang Index (and its siblings – enhanced index, index 2.0 etc) is concerned, I feel it is highly skewed. If I’m not wrong, Li gave these factors back in 2007-08 time, when China was heavily dependent on manufacturing (It still is!!) If we look at it, railway freights, power consumption and loans disbursed by the banks, all are somehow shadows of how the heavy/ power/ energy sector is doing. Freight in China was used to carry coal mainly, power consumption heavily depends on the manufacturing sector in China, and loans, well they’re are mostly given to state owned industries looking for setting up factories, (again manufacturing). So Li Keqiang Index tries to explain how is the entire economy doing by just looking at factors highly correlated with heavy/ manufacturing industries. The world has changed since 2008. China’s service industry has grown considerably since then and is now a significant contributor to their GDP.


    • Hi Utkarsh! All points very very well argued! China has changed the GDP composition and so the K Index is using outmoded proxy variables indeed! One would need to really benchmark the included variables to the GDP composition in order to have a pertinent index…proud of you for such a perfect observation! On the flip side, maybe Premier Li DOES use different variables at a personal level, but is now scared to talk to US ambassadors 😉


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