Financial Daily from THE HINDU group of publications
Saturday, Jan 21, 2006
Columns - E-Dimension
A second Earth needed to sustain India and China
China and India are becoming a planetary power, writes Christopher Flavin, President of the Institute in his preface. "If the two countries were to use as much oil per person as Japan does today, their demand alone would exceed current global oil demand." If China and India were to match the consumption levels of Europe, "we would need a full planet Earth to sustain these two countries," alerts Flavin.
What is striking, however, is that for a range of commodities, the US uses 10 to 20 times as much as China or India does on a per capita basis, and "twice as much as European countries that are almost as wealthy as the US." In grain consumption too (measured in kg per person), China (292) and India (173) are far behind Europe (561) and the US (918).
"Grain area in the two countries is very small relative to their populations just one-and-a-half basketball courts per person, or some 600 sq metres in China and 650 in India, compared with about 1,900 sq metres in the US." As population grows, grain area may tend towards that of a cricket pitch.
An interesting analysis is that of global footprint as a share of biocapacity, factoring in total area of biologically productive land. "India, with over 1 billion people, and Japan, with one-ninth as many people, use similar shares of the earth's biocapacity: 7 and 5 per cent." China and Europe take up about one-fifth share each. The US, with 4.5 per cent of the world's population, hogs 25 per cent of total global biocapacity.
Do you know that the two countries have as much population as that of "the next 20 largest countries combined"? Or that "some 80 per cent of the companies in Wal-Mart's database of suppliers are now Chinese", compared to the mid-1990s situation when only 6 per cent of the company's products came from outside the US? It may, however, be tough to accept that "India now has 2.4 million young finance and accounting professionals compared with fewer than 1.8 million in the US".
There has been ample hype about nuclear power, but the report is sceptical. "Up to 30 plants are planned in each country over the next two decades," it notes. "Neither country will be getting even 5 per cent of its electricity or 2 per cent of its total energy from nuclear power in 2020," declares Worldwatch.
A chapter on safeguarding freshwater ecosystems informs that it can take five times as much water to supply 10 grams of protein from beef than from rice; that worldwide one lakh synthetic chemicals are on the market; and that river flows reaching the Indus delta have declined by 90 per cent over the last 60 years.
"To support the diets of the additional 1.7 billion people expected to join the human population by 2030 at today's average dietary water consumption would require 2,040 cubic kilometres of water per year as much as the annual flow of 24 Nile Rivers." Pat yourself that the report showers praise on the rainwater harvesting system implemented in `some 70,000 buildings' in Chennai.
On `renewable alternatives to oil', the report speaks about the prospects of biofuels such as ethanol and biodiesel. Currently, these meet only 2 per cent of the world's transportation fuel need. In Brazil, which leads in this field, ethanol from sugarcane accounted for roughly 40 per cent of non-diesel motor fuel demand in 2004.
"More than 300 small planes in Brazil now fly on ethanol. Embraer, one of the world's largest aircraft makers, has a two-year waiting list to convert gasoline engines to ethanol." Example worthy of emulation in India, through tax breaks for flex-fuel vehicles.
"Europe produces 95 per cent of the world's biodiesel, mainly from rapeseed and sunflower seeds. Germany accounts for more than half of this production." The reports takes note of India's claim of successfully replicating `small-scale biodiesel programmes' in 100 villages, with hopes of "bringing revenue to depressed rural communities while powering local electrical grids and irrigation pumps."
There are insightful chapters on disaster management, trade, and corporate responsibility. Authors of the report call for a rethink on the global agenda, through four steps. One, the world has to welcome both the nations as leading global players. How? By making China a member of the OECD (Organisation for Economic Cooperation and Development), and offering India a permanent seat on the UN Security Council.
Two, "China, India and the US should act collectively to ensure adequate energy supplies for all, even as they work together to move away from fossil fuels." Three, "commit to developing a new model for agriculture" in the place of "the current mixed system of commodity price subsidies and partially opened food markets", by moving away from a meat bias.
The last step may be the toughest, because the report exhorts countries around the world to embrace China and India more fully by helping their citizens better understand the people and cultures of these two important nations. Useful read for the many statistics and sidelights, though not for the overly optimistic prescriptions.
Arrival to adulthood
For a different discussion of the two countries, I turn to "China and India: Towards Global Economic Supremacy?" by Rita Dulci Rahman and Jose Miguel Andreu, from Academic Foundation (www.academicfoundation.com). The future economic landscape will be "the automatic result of the working of a non-neutral version of the neo-classical model," say the authors, and I'm sure that should elicit some knowledgeable nods.
China's future lies "on a delicate equilibrium between rapid growth, redistribution of incomes, and unavoidable democratisation," opine the authors. Their prescription for funding social security is an overhaul of the fiscal systems with stress on direct taxation, while indirect taxation is homogenised.
Also, dysfunctions in the banking system have to be corrected.
Will there be hindrances to the progress that China and India seek to achieve? The book devotes a whole chapter to answer this tricky question. In the backdrop of "new military interventions with or without support of the Security Council," by you-know-who, India and China may take ad hoc measures to avoid oil problems, in the authors' view.
They see further signs of commercial agreements between the two countries. There may be "additional facilities for the movements of capital and mutual FDI," hypothesise the authors. Rahman and Andreu foresee that China and India may finance LDC (less developed countries) development, "to protect their long term economic interests and to gather international support."
On the flip side is the possibility that the developed world meddles in by putting new hindrances to industrial exports of the developing countries through "additional emphasis on quality and technical standards, spare-parts guarantees, sufficient branching for post-sale services," and also by raising questions on farm subsidies. `Some ways of commercial castling' are also likely.
However, it will be a difficult and costly fight against `the law of gravity' were the West to enter into a situation of economic and/or political confrontation with Asia, foresee the authors. What is advisable is `a more intelligent position' of adjusting to the new economic environment. That would be arduous, though, putting to test the Western politicians over the next decade.
Looking at the ratio of total available savings (s) in terms of GDP, `the main conditioning variable for rapid growth', the authors state that India with 23 per cent (in 2002) is at a significant disadvantage in comparison to China's 43.7 per cent. India should increase its ratio to at least 30 per cent, urge the authors, but that has to happen despite low incentives to financial savings and high decibel consumption drivers.
Global strategy may involve the realignment of international institutions, postulates the book. That means democratising the UN, reformulation of international policies to overcome economic deprivation of some countries, and thrashing out fairer rules in WTO. The short-mid term seems bleak on such things to happen, the authors admit.
"Practically the only successful method that the poor or deprived have historically found for getting justice in political and economic fields has been to put pressure in a coordinated way against powerful minorities." The big question is whether the same method can work now.
Two power reads for the weekend to celebrate the `arrival to adulthood' of two big economic populated nations.
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