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The recession also idled 6 million people in the United States and a similar number in Europe. This is no heavenly curse on the West, but the result of its spendthrift behavior. India survived because it is not yet economically tied to the West in a big way, but rather is an internally consuming economy. China is a different matter.

China should have fared worse as 60 percent of its gross national product is consumed in the West. But it survived and prospered because it instituted a large stimulus package that pushed consumption, although its value and amounts are disputed. Also, its exports continued as usual, helped by its low currency value.

Financially strapped consumers in the West flocked to low-priced, low quality goods from China. The United States, being the biggest debtor of China, could do nothing to stop the flood of cheap goods. China growled every time the idea to free float its currency was raised.

The Indian economy suffered a major shock initially in late 2008 when its textile sector received no orders from the United States and Europe. Its information technology and business process outsourcing industries also braced for a major downturn. But again the West’s cash-strapped and money-losing financial and industrial sectors turned to India for low-cost services. The IT and BPO sectors did not grow by leaps and bounds like they did for the past eight years, but nevertheless they grew.

Three indirect stimulus packages that India instituted provided the cushion for industry to grow. These were cleverly designed financial incentives, unlike what the United States, China and Europe had done. The first economic stimulus, released on Dec. 7, 2008, gave a push to real estate, textiles and the automobile industry as well as to small and medium-scale industries. The second stimulus package in January 2009 mainly provided liquidity to businesses, lowered interest rates and withdrew government duties on certain items.

The first and second packages injected around US$40 billion to US$60 billion in the monetary system. The third stimulus package, unveiled in February this year, cut excise duties and service taxes on goods by 2 to 4 percent. The government decided to forgo another US$8 billion in tax revenues, but it was well worth it as it kept the wheels of industry humming.

The results of these well-managed incentives became apparent when the government as well as independent agencies forecast India’s growth to be around 6 to 7 percent. The recession elsewhere had bypassed India just as it had China.

The Chinese were too eager to announce their stimulus package, with an eye on their economy and the media publicity it would generate. When the United States announced a US$700 billion bailout for banks in November 2008 and was talking about another US$787 billion public works program, China pre-emptied it and unveiled its own US$586 billion stimulus package, which is 15 to16 percent of its gross national product.

Later it was realized that China’s stimulus package was not new money but funds that had already been earmarked for development. A small additional amount was directed toward the rural sector to address social, political and economic concerns. The government was concerned about a wave of sit-ins, protests and suicides and so pre-empted further unrest with the stimulus package. Thus China announced the 8 to 9 percent growth for 2009.

There is one curious note about statistics from China. If a drop from its previously announced 12 percent growth to around 7 percent for 2009 could cause so much uproar, then, is its published data correct?

Even the 7 percent growth is respectable by world standards. Then why was there such a commotion at the street level? The answer lies in the validity of published data. The 7 percent predicted growth is in fact China’s new zero. Fallacies like this remain in its statistics.

In the United States, Obama described his stimulus package in February as “investment and jobs.” He was referring to creating new jobs and growth for the future. He said he would invest in upgrading roads, bridges and electricity grids, refurbishing schools and colleges, harnessing the sun’s power as an energy source along with other renewable energy sources, and helping beleaguered homeowners.

These are job-creating initiatives and there was a great sigh of relief, as the worst hit sectors of the economy began to revive. But the initiative has not been without problems. Unemployment is still high and business profitability is a long way away. By all accounts, it is the vision of a person with a socialistic bent.

But the big stimulus package created a bigger deficit. The U.S. national debt has ballooned by US$1.4 trillion in a single year. The unemployment rate has risen from 6 to 10 percent, with 15 million people out of work. The question is, had this stimulus package not been unveiled, would the situation be any different? Had the spending been replaced with tax cuts as the opposition wanted, would the situation be any different? We will never know. Presently the economy is signaling a turnaround, and in a year all the bad times may be forgotten.

As for China, nobody has figured out how much new money was infused into China’s stimulus package. As most of it would have been spent anyway, the net change is minimal. Perhaps this was a mere public relations exercise rather than a stimulus package. Unlike in the United States, where stimulus funds come from federal and state governments, China’s package comes from state banks and state institutions, which have been asked to continue spending as usual.

Surprisingly, Chinese banks lent US$1.4 trillion in new loans in 2009. It will be interesting to see whether China will face a situation similar to Dubai’s debt crisis if some of the loans go bad.

Compared to the size of the Chinese economy, its US$586 billion stimulus package is astounding. I admire the Chinese for keeping domestic peace with all this money and labor.

India’s stimulus package is the most sophisticated. While the United States and China spent large amounts of money, India spent only about US$20 billion to $30 billion in new expenditures, with the rest in the form of financial incentives to various industries. This indicates the maturity of India’s political and economic leadership, which no longer carries the socialistic banner.

Also, the man at the helm of affairs in India – Prime Minister Manmohan Singh – is an economist. He resembles the U.S. Republicans who opposed government spending and wished for tax cuts instead.

India’s economy is predicted to grow by 7 to 8 percent in 2009. It is fairly well insulated from globalization and so incentives have had the desired impact. Also, as India’s domestic consumption is high, it is not greatly affected compared to China if there is a fall in consumption in the West.

The United States is slowly coming out of recession while China has put people back to work and its exports are maintaining momentum. India is doing well and looks confident of the future.

In short, 2009 saw three distinctly different economic stimulus packages at work to revive the global economy. Each had the same desired effect. Only time will tell which package is better.

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(Hari Sud is a retired vice president of C-I-L Inc., a former investment strategies analyst and international relations manager. A graduate of Punjab University and the University of Missouri, he has lived in Canada for the past 34 years. ©Copyright Hari Sud.)