Both China and India are developing countries with very fast economic growth in the world. Both the international community and China and India like to make a comparison between the two countries. There have been many articles on the comparative analysis of the economy of China and India. Here we will not focus on the analysis. This article will make a comparative analysis of the two countries from the perspective of the cement industry. As a basic material for economic construction, cement can also reflect the economic development of the country to a certain extent.
First, the total size of China's economy is far larger than that of India, and the two countries are currently growing at the same rate.
According to World Bank statistics, China's GDP in 2016 was $9.51 trillion in constant 2010 dollars, nearly four times India's $2.46 trillion in 2016. In 2016, China's per capita GDP was 6894 US dollars, India's was 1861 US dollars, and China's was 3.7 times that of India. Therefore, the first thing we can see is that there is a big gap between India's GDP and China's in terms of total and per capita.
In terms of economic growth, China's economic growth has generally surpassed India's since 1990, but the situation has changed in recent years. China's economic growth has slowed down at the moment of structural adjustment, and India has begun to surpass China. In 2016, China's GDP grew by 6.7 percentage points, while India's was 7.11%. According to the World Bank's forecast, the economic growth rate of China and India in 2017 remained basically unchanged from that in 2016, with 6.7% in China and 7.2% in India, and the economic growth rate of India was slightly adjusted by 0.09 percentage points. China's growth is beginning to lag behind India's. Does this mean that China's economy is failing? Of course not, after the economic development has reached a certain scale, it is natural for the growth rate to decline. At present, China pays more attention to adjusting the economic structure and maintaining the quality and stability of economic growth.
Figure 1: Comparison of economic data of China and India from 1990 to 2016 (calculated in constant US dollars in 2010)
Source: World Bank, China Cement Research Institute
Two, the scale of India's cement industry is still decades behind China.
The beginning and end of each fiscal year in India is slightly different from that in China. A complete fiscal year in India is from April to March of the following year. India produced 279 million tons of cement in the 2016-2017 fiscal year, while China produced 2.403 billion tons of cement in 2016. In terms of quantity, China's current cement production is 8.6 times that of India. On a timeline, India's cement production is only at the level of China's production from 1991 to 1992. Although we can not conclude that India's economic level is still at China's economic level in 1992, there are similarities between the two countries in terms of population, land area and development stages, from which we can see the differences between India and China in their current economic stages.
Figure 2: China's cement output from 1990 to 2016 (10,000 tons)
Data source: National Bureau of Statistics, China Cement Research Institute
Let's compare the per capita consumption, which is more comparable to the total output. According to the data of the US Geological Survey, we calculate that the per capita cement consumption of India in 2014 is 212 kg, and that of China is 1826 kg. From the time axis, we can see that the per capita consumption of 212 kg is about the level of China's per capita cement consumption in 1991. In these 24 years, India's per capita cement consumption increased by 3.77 times, with an average annual growth of 5.69%, and the cumulative consumption was 2948 kg, while China's per capita cement consumption increased by 9.87 times, with an average annual growth of 10%, and the cumulative consumption was 19664 kg. From the above data, we can see that in the past 24 years, the average annual growth rate of cement consumption in China has doubled that of India. It will take more than 40 years for India to reach the level of China in 2014 at the current per capita cement consumption growth rate, which is after the middle of this century.
But after all, this is the historical data of the past, whether it is China's economic development or the growth of cement consumption, it is also after the reform and opening up that the explosive growth began, so the recent data can better reflect the current changes in cement demand in China and India. According to the data of the Cement Association of India, although the year-on-year growth of cement production in India since April 2014 is unstable, the overall growth rate is higher than that in China.
After entering 2017, India's cement growth rate began to show negative growth, which is the first time that India's cement production has shown negative growth in consecutive months after years of continuous growth. As of June 2017, India's cumulative cement production this year has decreased by 2.8% compared with the same period in fiscal year 2016-2017. According to the report of ICRA, an Indian rating agency, the decline in cement production in the first half of 2017 was mainly due to the shortage of sand and gravel in some parts of India and the slowdown of real estate and construction in the western region. In addition, bad weather factors and the new goods and services tax implemented by the government were also important reasons for the decline in cement production in India in the first half of this year.
Figure 3: Comparison of per capita cement consumption in China and India Figure 4: Comparison of cumulative growth rate of cement in China and India (%)
Source: USGS, Cement Association of India, China Cement Research
Three, India's railway construction is slow, and China's growth is rapid .
India's cement consumption is so low, does that mean that India's infrastructure construction has been as perfect as Europe and the United States, so the cement consumption is lower? The answer is no.
Figure 5: Mileage of China-India Railways in Operation (10,000 km) Figure 6: Mileage of Indian Railways in Operation and Electrification (10,000 km)
Source: National Bureau of Statistics, Ministry of Finance, China Cement Research
According to the data released by the National Bureau of Statistics of China and the Ministry of Finance of India on the number of railways in operation between China and India, we can see that at the beginning of this century, the number of railways in operation between China and India was not very different. In 2003, India's railway operation mileage was 63000 kilometers, while China's was 73000 kilometers, and China's railway operation mileage was nearly 15.87% longer than India's. However, in the more than ten years since then, India's railway operation mileage has not changed much, while China's railway operation mileage has increased explosively.
As of 2015, China's railway mileage in operation has reached 121,000 kilometers, an increase of nearly 64%, while India's has only increased by 5%. I believe most Chinese people are impressed by the picture of Indian trains full of people inside and outside. From the change of railway operation mileage, we can see that although the demand for cement in India has increased greatly in the past 10 years, it has not been used in infrastructure construction such as railway construction.
In addition, although they are both railways, there are essential differences in the quality of railways between China and India. At present, China has basically realized the full electrification of railways, moving towards the pace of comprehensive high-speed railway construction, while most of India's railways are still in the last century, only 33% of the 66000 kilometers of railways have been electrified. As for high-speed rail, until today, India has not completed a high-speed rail, the current planning of Mumbai and Ahmedabad high-speed rail project is only just established, has not yet broken ground, the railway Japan has given a large number of low-interest loans, which also exposes the embarrassing situation that India wants to achieve rapid economic development and lack of funds for economic construction.
Four, China and India are facing excess cement production capacity, but the future development potential is different.
According to data released by the Cement Manufacturers Association of India (CMA), India's current cement production capacity has reached 425 million tons per year. According to the data we collected, the cement production capacity of the top five cement enterprises in India is nearly 220 million tons, accounting for 51.7% of the total cement production capacity in India, more than half, especially UltraTech, which has absolutely occupied the leading position in the cement industry in India. After a deal with Jaiprakash Associates this year to acquire six integrated cement plants and five grinding stations, UltraTech has further expanded its capacity and market. At present, UltraTech has 18 integrated cement plants, 25 grinding stations and 7 cement transfer depots in India, with a total capacity of nearly 93 million tons per year.
Figure 7: Capacity data of the top five cement enterprises in India (10,000 tons/year)
Data source: public information of Indian cement enterprises, China Cement Research Institute
It is also because of the rapid expansion of Indian cement enterprises in recent years that the cement industry in India has begun to have a surplus. The production capacity of 425 million tons is facing the output of 279 million tons in the fiscal year 2015-2016, and the capacity utilization rate is only 65%, even lower than the current capacity utilization rate of 69% in China, resulting in nearly 100 million tons of overcapacity.
Although India's cement overcapacity is serious, there is an essential difference between India's cement overcapacity and China's current overcapacity. China's overcapacity is based on the fact that China has basically completed infrastructure construction, and China's current urbanization rate has reached 56%. India's current situation is completely different from that of China. India's infrastructure is still extremely weak. Both transportation facilities and urban public facilities are far from meeting the needs of India's current economic development. Although India's urbanization level has been higher than that of China before the 1990s, it has been left far behind by China's accelerated development. Therefore, India's future urban construction and infrastructure construction will need a lot of cement. In the long run, the slight decline in cement production in fiscal year 2016-2017 will only be a small setback in the process of its rising demand for cement.
Figure 8: Urbanization Development and Change in China and India (%)
Source: World Bank, China Cement Research Institute
V. Summary
From the above comparison, we can see that India is far behind China in terms of economy and cement industry, and its cement production and human consumption are only at the level of China in the early 1990s. India's infrastructure construction is still very backward, urbanization needs more infrastructure construction, and the demand potential of cement is far from being fully tapped. At present, the development of India's cement industry has exceeded the growth rate of its demand. In the short term, India's cement industry may face some twists and turns. However, according to China's development experience, India's cement industry is still in the early stage of growth, and the real prosperity of the cement industry is far from coming.
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