India moving forward and sometimes back – now again higher tariffs on certain imports

February 19, 2018, by Hubert Fromlet, Kalmar

India is not always easy to understand. At the World Economic Forum some weeks ago, Prime Minster Shri Narendra Modi presented himself as a dedicated supporter of free trade – more or less in the same way as China’s leader Xi Jinping did a year ago at the same place shortly before President Trump’s inauguration. For a couple of months, Xi was celebrated as a kind of new global defender of free trade and antipole to protectionist Donald Trump. During 2017, however, China was again accused more strongly of protectionism by the U.S. government, particularly because of its enormous subsidies to certain industries. Consequently, cross-border trade mood between the Trump administration and China deteriorated further in the course of 2017.

These American-Chinese tensions may partly explain Modi’s efforts some weeks ago in the Swiss mountains to back up free trade. Modi is, of course, aware of the increasing role that India plays in the world economy. India is already the seventh largest economy in the world – and even number three on a Purchasing Power Parity (PPP) basis. India’s GDP growth is right now in line with China’s. Demography, digitalization and the growing middle class give India good potential in theory –  “but the quality of education is still a serious concern”, as one can read in chapter 47 of the new budget.

On February 1, the Indian Minister of Finance Arun Jaitley introduced the central budget for the fiscal year 2018-2019 (i.e. from April 1 to March 31). India’s next general election has to be held by 2019. For this reason, the Indian budget for 2018-2019 is observed with quite critical eyes. Certain comments – also from abroad – have judged the overall picture of the Union budget document as populistic. In my view, this grading may be too strict. Many structural needs and concrete measures are announced in 61 pages. There is quite a lot of supply side policy in it. Check it out, use this link:

So, what’s the reason for the criticism of being populistic? It is indeed – certainly surprising after the Prime Minister’s speech in Davos – that India introduces protectionist measures concerning a number of import goods which made the Trump administration very upset. Higher customs duties are proposed on, for example, imported juices, vegetable oils, furniture, parts of cell phones, and auto components. The reintroduction of long-term capital gains on stocks also surprises many observers.

Sure, India is a complicated country for economic policy since most central measures have to be accepted by the 29 different states of India (when they are affected by a central law). As an example, it took years to implement the necessary move to more indirect taxation by a so-called Goods and Services Tax (GST) – but now it is there nationally since July 1, 2017. Economic policy is easier in China than in in India – the latter country often regarded as the largest democracy in the world.

The recent tariff hikes announced in the budget on certain imports were obviously not a very wise decision, and one may wonder how many Indian jobs will be saved or created this way. The psychological damage may be considerably larger in a global economic climate where India indeed had gained credibility in recent years. Unfortunately, it will be widely concluded that moving back in economic policy remains an Indian option also in the future.

Thus, it is not the velocity of economic reform policy that really counts in the country analysis of India but the steadiness of moving forward. Also smaller moves back can do harm!

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board


Back to Start Page

Learn more about China’s geography and history!

February 6, 2018, by Hubert Fromlet, Kalmar

During many years as a chief and academic economist, I visited quite a number of emerging countries in all continents. Particularly China drew my attention many times. One of my conclusions from all these trips to China, for example, has to do with insufficient Western knowledge about this giant country. But also the understanding of China and of many other emerging markets – and, of course, also of advanced countries – is very important when we meet people from these countries.

Necessary knowledge and understanding include history, traditions, culture, popular sports, geography and many other issues. It is always good to know what people from other countries are proud of and what may be sensitive national issues for them. Talking about undesirable sensitive issues can even shatter business negotiations. We are talking about applied business psychology.

Turning to China again, I still get particularly confused about the lean knowledge that foreigners tend to have about Chinese geography (apart from business people with commercial reasons to get around). My experience is clearly that the Chinese like to tell their foreign guests during a dinner or a coffee break where they come from – or to be asked about it. One certainly can get bonus points when knowing the location of this specific province and the name of a major city there. Furthermore, if you also can mention the names of China’s currently best table tennis players like Fan Zhengdong, Ma Long or Chen Meng, you can quite easily gain further sympathy points.

I got the idea for this article with its “knowledge angle” when I recently saw a message in the Chinese press that another two cities had joined China’s
“1 trillion yuan GDP City Club” (not considering in this context statistical shortcomings). Now there are 14 cities that have exceeded this magical amount of production; altogether they stand for as much as 30 percent of China’s GDP.

If you need assistance: 10 of these 14 places can be found in Eastern China, 2 of them in Central China and two in the West. Now you can try and find out (or know) where these 14 expanding cities are located (east, central or west) – and then you can try to add the name of the province. Enjoy!

China’s 1 trillion yuan GDP City Club, 2017  (ranked):

¤  Shanghai
¤  Beijing
¤  Shenzhen
¤  Guangzhou
¤  Chongqing
¤  Tianjin
¤  Suzhou
¤  Chengdu
¤  Wuhan
¤  Hangzhou
¤  Nanjing
¤  Qingdao
¤  Wuxi
¤  Changsha

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board


Back to Start Page

China’s National Bureau of Statistics praises the country’s political leader(s) for good GDP growth in 2017

January 18, 2018, by Hubert Fromlet, Kalmar

This morning, China’s National Bureau of Statistics (NBS) announced that GDP had risen by 6.9 percent in 2017, well in line with the official objective of “6.5 percent or more”. China’s political leader XI Jinping is praised particularly for this result by the statisticians. Having read the document, I would like to add some comments on the new statistical numbers for 2017.

  1. Expected result: The China Survey Panel of Linnaeus University ( predicted in December a GDP growth for 2017 at roughly 6 ½ percent. My own estimate, however, was somewhat higher, i.e. at 6.8 percent because of the obviously good mood and optimism shown by most of the important political leaders. In my eyes – without further discussing the credibility of Chinese statistics – achieved GDP growth at the upper end of the official objective was very predictable.
  2. Services somewhat disappointing: The downsizing of the growth rate for the primary and secondary industry is visible again in the latest annual statistics. However, one must wonder why the production of services rose by just 0.1 percent to 8.2 compared to 8.1 in 2016. One could have expected a somewhat higher increase since the expansion of the service sector has so much political priority.
  3. Investment in secondary industry continues to weaken: The development of investments during 2017 pointed in the right direction: slowing down of investments by the secondary industry but good investment growth of the high-tech industry and the tertiary sector. Investment in residential buildings picked up strongly also in 2017 but it seems still unclear where healthy equilibria between supply and demand in the residential housing sector of major cities may be located. Thus, bubble and debt risks still exist also from this angle.
  4. Too little information about private consumption: The official accounting of private consumption still shows obvious shortcomings in classification. Double-digit increases of retail sales indicate, however, that private consumption in China should have developed quite well in the recent year. But more detailed information about the composition of private consumption would have been appreciated.
  5. Supply-side reforms on track: The Chinese mean – unlike Westerners – by supply-side policy mainly the modernization of production structures and capacity (reducing overcapacity in traditional sectors and achieving visible progress for the innovation-driven enterprises) – and also improvements of the environment. According to the NBS further supply-side progress was noted in 2017. This is positive and should probably not be doubted – and will remain crucial for the future development of China.


Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board


Back to Start Page