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ARTI NANAVATI PROF. OF ECONOMICS DIRECTOR, CENTRE FOR CANADIAN STUDIES MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA VADODARA- 390002 GUJARAT-INDIA DEPT. OF ECONOMICS, SIMON FRASER UNIVERSITY BURNABY, BC, CANADA 18 JUNE, 2009 Indian Economy : A Comparative Overview with China

Indian Economy : A Comparative Overview with China

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Indian Economy : A Comparative Overview with China. ARTI NANAVATI PROF. OF ECONOMICS DIRECTOR, CENTRE FOR CANADIAN STUDIES MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA VADODARA- 390002 GUJARAT-INDIA DEPT. OF ECONOMICS, SIMON FRASER UNIVERSITY BURNABY, BC, CANADA 18 JUNE, 2009. - PowerPoint PPT Presentation

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Page 1: Indian Economy :  A Comparative Overview with China

ARTI NANAVATIPROF. OF ECONOMICS

DIRECTOR, CENTRE FOR CANADIAN STUDIES MAHARAJA SAYAJIRAO UNIVERSITY OF

BARODAVADODARA- 390002 GUJARAT-INDIA

DEPT. OF ECONOMICS, SIMON FRASER UNIVERSITY BURNABY, BC, CANADA

18 JUNE, 2009

Indian Economy : A Comparative Overview with

China

Page 2: Indian Economy :  A Comparative Overview with China

Some General Facts

India is the world’s second most populous country of over 1 billion people after China.

Urban population 28% of total. (China 39%)

More than half of its population is 25 years of age. ‘Demographic dividend’.

Measured in USD exchange rate terms, 12th largest in the world, with a GDP of $3.32 trillion (PPP) , China ranked 2nd largest with GDP of $7.8 trillion. (2008)

PCI $2,900 at PPP and that of China $6100 (2008)

Population below poverty line is 27.5% (2008 est.) China 10%

World Bank classifies India as a low income economy

Page 3: Indian Economy :  A Comparative Overview with China

• The contribution of Agriculture, industrial and service sector (2007-8) in GDP has been 21,24 and 55%. ( In China the corresponding percentages are 11.3, 48.6 and 40 % in GDP 2008)

• Agriculture is the predominant occupation in India, accounting for about 60% of employment ( China 43%) . The service sector makes up a further 28% (China 32%) , and industrial sector around 12% (China 25%).

• Organized sector employs 8% of workforce (two thirds of which are in public sector), and produces about 40% of GDP. Rest in informal sector --with predominance of ‘women.’ Urban informal sector is a fast growing sector.

• 30% of total labour is constituted by casual labour and only 10% are in regular employment.

• Major problem not of open unemployment but of underemployment and disguised unemployment.

• Unemployment rate 6.8% (2008 est., in China 4.3% is official and 17% unofficial UR).

Page 4: Indian Economy :  A Comparative Overview with China

Why India?

GDP growth rate 9% in 2007-2008, slowed down to 7.3% in 2008-9.

Major industries are Textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software.

Services are a growing sector and play an important role in Indian economy. India is an imp. ‘back office’ destination for global outsourcing of customer services and technical support.

Major exporter of highly skilled workers in financial, software, software eng.

Potentials are in , manufacturing, pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding, aviation, tourism and retailing.

Page 5: Indian Economy :  A Comparative Overview with China

Composition of India’s GDP (at Factor Cost by Economic Activity –

at 1999-2000 prices, in%)

2000-01 2007-08

1)Agriculture etc 23.89 20.55

2)Industry 25.80 24.71* 2.1 Manufacturing 15.30 2.2 Construction 05.81 3) Services 50.30 54.74 3.1 Trade, hotel, Restaurants 14.34 26.80** 3.2 Transport, storage & communica. 07.96 3.2 Finance, insurance, etc 13.04 14.32 3.3 Community, social and per. 14.98 13.62 service * Inclusive of2.1, 2.2, ** of 3.2. Source : EPW 14TH June , 2008 and Economic Survey of

India 2007-8Source: EPW June 14, 2008

Page 6: Indian Economy :  A Comparative Overview with China

India- Structural Transformation-?

Economic policy: Approach

i) Since independence (1947) – till almost late eighties followed a socialist inspired approach- strict govt. control over -private sector participation, foreign trade and FDI (Approach-import substituting rather than export promoting) .

ii) India’s low average growth rate ( 3%) from 1947-80 was referred as ‘Hindu rate of growth’, because of the unfavorable comparison with the other Asia countries, especially the ‘East Asian Tigers’.

Page 7: Indian Economy :  A Comparative Overview with China

A period of import tariff, export taxes, quantitative restrictions , approvals needed for 60% of new FDI in the industrial sector.

FDI averaged only $200M between 1985-1991. In 2004, net FDI inflow was about 7-8 USD bn.

( China, 52 USD bn) A large percentage of the capital flows

consisted of foreign aid, commercial borrowing and deposits of non resident Indians.

Largely and intentionally isolated from world markets.

Page 8: Indian Economy :  A Comparative Overview with China

Late eighties: the govt. led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents, removed price control and reduced corporate taxes.

Phase of high growth with high fiscal deficit and worsening current account

Collapse of soviet union – a major trading partner, first Gulf war causing spike in oil prices led to major balance of payment crisis with the prospects of defaulting on its loan.

Prime Minister Narasimha Rao with Finance Minister Manmohan Singh initiated the economic liberalization of 1991.

Reforms did away with license Raj in investment, industrial and import licensing-ended many public monopolies, introduced automatic approvals of FDI in many sectors.

Page 9: Indian Economy :  A Comparative Overview with China

Agriculture

India ranks second world wide in farm output. In 2007, accounted for 17% in GDP employing 60% of the total workforce. After having growth rate of 2% for many years- now the growth rate is

about 4.5%.

Two thirds of India’s workforce still earn their livelihood directly or indirectly through agriculture.

High level of disguised unemployment.

Despite improvements, average yield in India ranges from 30-50% of the highest average yield in the world.

Major agricultural products include rice, wheat, oilseed, cotton jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep goats, poultry and fish.

India is the largest producer in the world of milk cashew nuts coconuts tea, gingerturmericand black pepper.It also has the world's largest cattle population (193 million).

It is the second largest producer of wheat rice sugar groundnutand inland fishIt is the third largest producer of tobacco India accounts for 10% of the world fruit production with first rank in the production of banana and sapota.

Page 10: Indian Economy :  A Comparative Overview with China

Industry

India ranks 14th in the world in factory output.

Industry accounts for 27.6% of the GDP and employs 17% of the work force.

Manufacturing growth rate 8.4%. high-skill sectors account for almost 40 percent of the

manufacturing output of India.

Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output

One third of industrial labour force is engaged in simple household manufacturing only.

Economic reforms led to more private sector participation, an expansion in the production of consumer goods and both domestic and foreign competition.

Page 11: Indian Economy :  A Comparative Overview with China

Services

India is fifteenth in services output.

With largest share in GDP of 55%, it employs 23% of workforce.

The growth rate which was 4.5% in 1951-80 increased to 7.5% in 1991-2000. Recent growth rate 10.7%.

Fastest growing services are –business services, information technology enabled services, business process outsourcing contributing about one third of total output of services in 2000.

India’s IT industry an important contributor to BOP, accounts for only about 1% of total GDP and 1/50th of the total services.

India leads the market in offshored back-office services, but as a manufacturing center it lags behind China, Thailand, and the rest of Asia.

Page 12: Indian Economy :  A Comparative Overview with China

External Sector

Exports $175.7 billion f.o.b (2008 est.)

Export goods petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures

Main export partners

US 15%, the People's Republic of China 8.7%, UAE 8.7%, UK 4.4% (2007)

Imports $287.5 billion f.o.b. (2008 est.)

Import goods crude oil, machinery, gems, fertilizer, chemicals

Main import partners

People's Republic of China 10.6%, US 7.8%, Germany 4.4%, Singapore 4.4%

Page 13: Indian Economy :  A Comparative Overview with China

Almost stagnant export for the first 15 years after independence. Dominated by products like tea, jute and cotton manufacturers having generally inelastic demand.

Since liberalization ex-im have become much broad based.

India’s exports are consistently rising, covering about 80% of its imports.

Merchandise trade of India about 31% of GDP in 2007 (China 68%)

High technology exports as % of total manufacturing exports are 5% in case of India and 30% in case of China.

FDI in India has reached 2% of GDP (China 3%, 2006), compared with 0.1% in 1990

The top five countries in FDI inflows (2000-2007) are Mauritius (44%),United States(9.4%), UK( 8%), Netherlands(6%)and Singapore(5%).

Page 14: Indian Economy :  A Comparative Overview with China

Sectoral Employment Share by Current Daily Status

Industry Division 1993-4 2004-5

Agriculture and allied activities 61.03 52.06

Mining & Quarrying 0.78 0.63

Manufacturing 11.10 12.90

Electricity, gas and water supply 0.41 0.35

Construction 3.63 5.57

Trade , hotels and restaurants 8.26 12.62

Transport, Storage & communication 3.22 4.61

Finance, insurance, real estate and 1.08 2.00business services

Social, community and personal services 10.50 9.24

Source: Economic Survey of India 2007-08

Page 15: Indian Economy :  A Comparative Overview with China

Employment Share: Economically Active Adult population

(%) 2004-

2005

1993 2005----------------------------------------------------------------------------------------------- Agriculture 74.8 68.5

Labour 34.4 30.3 Cultivator 39.3 37.3 Farm regular 1.1 0.9

Non Farm Sector 25.2 31.5 Casual 6.3 7.3 Regular 7.0 9.3 Self employed 11.9 14.9----------------------------------------------------------------------------------------------- 100 100

Source: NSSO, 62th Round

Page 16: Indian Economy :  A Comparative Overview with China

Structure of Employment

Proportion of workers in the workforce (2005-06)

Self-employed55.0%

Workers45.0%

Proportion of workers in the workforce (2005-06)

Self-employed55.0%

Workers45.0%

Page 17: Indian Economy :  A Comparative Overview with China

Growth of working class

142.26168.69

194.10206.39

0

50

100

150

200

250

1987-88 1993-94 2001-02 2005-06

Worker population (in millions)

Page 18: Indian Economy :  A Comparative Overview with China

Rural workers

19.45

83.06

18.39

103.20

20.32

114.85

27.46

116.54

0.0

50.0

100.0

150.0

1987-88 1993-94 2001-02 2005-06

Rural workers (in millions)

Regular Casual

Workers in the countryside have also increased in numbers. There were 144 million rural workers in 2005-06. There is a high proportion of casualisation in rural areas.

Page 19: Indian Economy :  A Comparative Overview with China

Urban workers

There were nearly 63 million urban workers in 2005-06. Proportion of regular workers is more among urban workers when compared to rural areas

28.03

11.72

32.11

14.98

40.87

18.06

45.16

17.24

0

10

2030

40

50

60

70

1987-88 1993-94 2001-02 2005-06

Urban workers (in millions)

Regular Casual

Page 20: Indian Economy :  A Comparative Overview with China

Wages

Wage rates defer between rural and urban areas and between males and females

Page 21: Indian Economy :  A Comparative Overview with China

Working age population

A big majority of India’s population is in the working age group.

Share of working age population (15-59) will increase from 58% in 2001 to 63% in 2011.

In 2005-06, about 60% of the population was in the working age group.

Of the working age group population, roughly 460 million people were in the workforce in 2005-06.

Of these about 206 million (45%) were regular/casual workers.

Page 22: Indian Economy :  A Comparative Overview with China

Youth workers

India has among the largest number of youth workers in the world.

In 2005-06, in the 15-34 age group there were 390 million youth (35% of population)

Of these 40.4% were engaged in gainful activity – i.e, nearly 160 million.

Nearly half of them were workers.

Page 23: Indian Economy :  A Comparative Overview with China

Rate of growth of employment in Organized Sector(% per annum)

1983-1994 1994-2005

Public Sector 1.53 -0.70Private Sector 0.44 0.58

Total Organized 1.20 -0.31

Source: Eleventh Plan Document.

Page 24: Indian Economy :  A Comparative Overview with China

Public-Private organized sector

Total no. of public and private sector workers stagnated between 1991-2001 and slightly decreased in recent times.

05

1015202530

1981 1991 2001 2004

Year

Employment in organised sector (in millions)Source: DGET

Public Private

Page 25: Indian Economy :  A Comparative Overview with China

Public sector workers

Public sector workers by Industry - 2004

Manufacturing

Electricity, gas, water

Construction

Community, social services

Agriculture Mining

Trade, restaurants

Transport, storage

Financing, insurance

Page 26: Indian Economy :  A Comparative Overview with China

Private sector workers

Private sector workers by Industry - 2004

Agriculture

Manufacturing

Community, social services

MiningTransport,

storage

Financing, insurance

Trade, restaurants

Construction

Electricity, gas, water

Page 27: Indian Economy :  A Comparative Overview with China

Is development inclusive?

Page 28: Indian Economy :  A Comparative Overview with China

Labour Market

Growing employment but poor in qualitative terms with low regular employment, underemployment and mismatch between education and employment.

A huge section of the working class lives in rural areas, is unskilled and condemned to low wages. In non-agriculture sector growth in employment is in informal sector.

Even in the urban areas there is a high degree of casualisation, contract labour working in deplorable conditions with no security of work.

Although regular employment has risen, its growth has been almost exclusively in the smaller, least productive enterprises.

About 87% of manufacturing employment taking place in micro enterprises(<10 persons) producing just a third of manufacturing output.

Page 29: Indian Economy :  A Comparative Overview with China

Employment in firms with more than ten employees accounts for only around 3.75 per cent of total employment (one quarter of regular employment) and has been falling. Indeed, India has a much smaller proportion of employment in enterprises with ten or more employees than any OECD country.

70% of Indians(800million), lived on less than 20 rupees( slightly less than C50 cents) per day with most working in informal sector with no social security. (2007 Report on National Commission for Enterprises in the unorganized sector)

Page 30: Indian Economy :  A Comparative Overview with China

Year Sex Ratio

Rural Urban Total

1901 979 910 972

1911 975 872 964

1921 970 846 955

1931 966 838 950

1941 965 831 945

1951 965 860 946

1961 963 845 941

1971 949 858 930

1981 951 879 934

1991 938 894 927

2001 946 901 933

Sex Ratio in Population with Rural-Urban break up

Source : Office of the Registrar General, India

Sex Ratio 1901-91 (Total, Rural and Urban) from Brief Analysis of PCA paper-2 of 1992

1961 Population from PCA 19611971 Population from Social and

Cultural Tables1981 figures from Series Part-II A(I),

General Population Tables – Census of India 1981.

Figures of 1991 (including interpolated data for JK-1991 based on 2001 census) and 2001 from PCA census of India -2001

Page 31: Indian Economy :  A Comparative Overview with China

Trends in Gender Disparity in Literacy Rate

Year

Male

Female Male/FemaleLiteracy rate

disparity

Slightly more than half of total

women are literate.

Male-Female LR

disparity is ondecline.

1961

40.4

15.3

0.45

1971

39.5

18.4

0.38

1981 56.3 29.7 0.35

1991 63.8 39.4 0.28

2001 75.8 54.1 0.21

Source: Census of India various years

Page 32: Indian Economy :  A Comparative Overview with China

Area and Gender based Labor and Work Force Participation

Rate (%)

Labor force Work force

participation rates participation rates

1993-94 2004-05 1993-94 2004-05

Rural male 53.4 53.1 50.4 48.8

Rural female 23.2 23.7 21.9 21.6

Urban male 53.2 56.1 49.6 51.9

Urban female 13.2 15.0 12.0 13.3

Source: Economic Survey of India: 2007-08

Page 33: Indian Economy :  A Comparative Overview with China

Area and Gender based Structure of Employment 2004-2005

Particulars Rural Urban Male Female Male FemaleLabourForce 56% 31% 57% 15%

Self empl. 57% 62% 42% 44%

Regular Wage and Salaried 10% 4% 42% 40%

Unempl.Rate 3% 2% 5% 8%

Source: NSSO 62 Round

Page 34: Indian Economy :  A Comparative Overview with China

Gender based Distribution of Occupation in Rural India (%) 2004

Sector Male Female-------------------------------------------------------------------------------------------------------Agriculture 54.7 30.4 Casual 21.8 15.5 Cultivators 31.8 14.7 Regular 1.1 0.2Non Farm 31.3 7.7 Casual 9.6 2.0 Self empl. 14.4 4.1 Regular 7.3 1.6-------------------------------------------------------------------------------------------------------------Total 86.0 38.1-------------------------------------------------------------------------------------------------------------

Not working 14.3 62.0 ------------------------------------------------------------------------------------------------------------- Casual 31.4 17.5 Self emp/cultivators 46.2 18.8 Regular 8.4 1.4 ---------------------------------------------------------------------------------------------------------------

Page 35: Indian Economy :  A Comparative Overview with China

Year % of women in Public sector

% of women in Private sector

% of women in Total

1995 13.4 20.2 15.4

2000 14.8 23.9 17.6

2001 14.9 24.2 17.8

2002 15.4 24.3 18.1

2003 15.6 24.5 18.4

2004 15.9 24.8 18.7

2005 16.2 24.8 18.9

Share of women employment out of total employment in organized sector in India

Source : Quarterly Employment Review, Directorate General of Employment & Training, Ministry of Labor

Page 36: Indian Economy :  A Comparative Overview with China

Women wage lower than men by 33-40 points. Women-men wage differential is 0.75:1.

The gender based wage differential though has narrowed down with increase in education level. It is still high.

Urban wage differential persists but narrower than in rural area.

Page 37: Indian Economy :  A Comparative Overview with China

INDIA AND CHINA

India China2007

GDP (current US$billion) 1176.9

3205.5

GNP PC (current US$) 950

2370.0

GDP growth Annual % 9.1% 13%

Population growth rate (annual %) 1.3 0.6

Mobile and cellular subscriptionPer ‘ooo population 21 42 Internet user per ‘000 population 7 16

Source: World Bank: World Development Indicators: Country Profile April 2009

Page 38: Indian Economy :  A Comparative Overview with China

Situating India and China in World Trade (2007)

Particulars Unit China India Share in Merchandise

Exports (%) 8.71 1.05 Rank 2 26 Imports (%) 6.70 1.52 Rank 3 18

Share in Commercial Services

Exports (%) 3.63 2.74 Rank 7 10 Imports (%) 4.14 2.49 Rank 6 13

Source: WTO- World Trade Statistics, April 2009

Source: WTO, World Trade Statistics, April 2009

Page 39: Indian Economy :  A Comparative Overview with China

China India world Trade highlights 2007

Particulars China

India

Exports of good & services% of GDP 42

21

Imports of goods & services 32 24% to GDP

Trade per capita($US, 2005-07) 1483

391

Patents granted 67948 4320

Page 40: Indian Economy :  A Comparative Overview with China

China- Merchandise Trade 2007

Breakdown in economy's in total exports: total imports

By main commodity group (ITS) (%)

(%)

1.Agricultural products 3.2 6.8

2.Fuels and mining products 3.4 22.03.Manufactures: 93.2

70.9

By main destination By main origin

1 European Union (27) 20.1 1. Japan 14.02. United States 19.1 2. European Union (27) 11.63. Hong Kong, China 15.1 3. Korea, Rep. of 10.94. Japan 8.4 4. Taipei,Chinese 10.65. Korea, Republic of 4.6 5. China 9.0

Page 41: Indian Economy :  A Comparative Overview with China

India’s- Merchandise Trade 2007

Breakdown in economy's in total exports: total imports ---------------------------------------------------------------------------------------------------------------------------

By main commodity group (ITS) (%)

(%)

1.Agricultural products 11.0 4.4

2.Fuels and mining products 24.3 40.23.Manufactures: 63.6 46.3

By main destination By main origin

1 European Union (27) 21.7 1. European Union (27) 14.82. United States 13.8 2. China 11.23. United Arab Emirates 9.9 3. Saudi Arabia 7.64. China 6.5 4. USA

6.55. Singapore 4.4 5. United Arab Emi. 5.4

Page 42: Indian Economy :  A Comparative Overview with China

Trade in Commercial Services-2007

Breakdown in economy's total exports total imports (%)

(%)

China:1. Transportation 25.7 33.52. Travel 30.6 23.0 3. Other commercial services 43.6 43.5

India:1. Transportation 9.7 40.12. Travel 12.1 11.3

3. Other commercial services 78.2 48.6

Page 43: Indian Economy :  A Comparative Overview with China

Cross Country Comparison

Share of Manufacturing Sector (2004)

24.07 24.00

16.10

39.41

28.34 28.74

31.40

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

Argentina Brazil India China Indonesia Korea Malaysia

Countries

Sh

are

in

GD

P

Page 44: Indian Economy :  A Comparative Overview with China

Composition of Manufacturing Sector Across Countries

12.37

20.39

9.50 8.24

15.22

13.27

8.10 8.83

32.35 20.59

44.9840.90

28.0634.75

29.60 38.24

11.99 11.007.82

3.80

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CHN IND KOR MYS

Countries

Sh

are

(P

erc

en

tag

e)

Chemicals FBT Mach & Transp Others Textiles

Page 45: Indian Economy :  A Comparative Overview with China

Manufacturing Exports: Cross Country Comparison

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.0019

70

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Years

Sh

are

(Per

cen

tag

e)

China Argentina Brazil India Korea Indonesia

Page 46: Indian Economy :  A Comparative Overview with China

Levels of Manufactured Exports Across Countries

9.94

52.19

542.20

55.0540.55

233.99

95.80

0.00

100.00

200.00

300.00

400.00

500.00

Argentina Brazil China India Indonesia Korea Malaysia

Countries

US

$B

illio

n

Page 47: Indian Economy :  A Comparative Overview with China

Size of Labor Force in Manufacturing Sector

1.36

11.72

160.00

53.06

11.65

4.23 2.02

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

Argentina Brazil China India Indonesia Korea Malaysia

Countries

Nu

mb

er

of

Wo

rker

s (M

illio

n)

Page 48: Indian Economy :  A Comparative Overview with China

Spending on R & D as a percentage of GDP (2003)

0.42

1.03

1.3

0.77

0.2

2.5

0.7

0

0.5

1

1.5

2

2.5

3

Argentina Brazil China India Indonesia Korea Malaysia

Countries

R &

D E

xpen

dit

ure

as

a P

erce

nta

ge

of

GD

P

Page 49: Indian Economy :  A Comparative Overview with China

HUMAN DEVELOPMENT INDICATORS-(2006)

----------------------------------------------------------------------------------------------------------------------------

Human Development Index ( Position among 179 countries) INDIA CHINA

Particulars Rank Value Rank Value

HDI 132 0.609 94 0.762

Life expectancy at birth( yrs) 127 64.1 69 72.7

Adult literacy rate (%) 118 65.2 53 93

Combined(pri—ter)enrolment 134 61 113 68.7 ratio

GDP PC($PPP) 126 2489 104 4682----------------------------------------------------------------------------------------------------------------------------

Source: Human Development Report 2008

Page 50: Indian Economy :  A Comparative Overview with China

HUMAN POVERTY INDEX (HPI-1) -2006

Particulars India China Rank Value(%) Rank Value(%)

HPI-1 87 28.5 35 7.9

Probability ofNot surviving to Age 40 (% of cohort) 2000-05 16.8 6.8

Adult Illiteracy Rate1999-2001 34.8 7.8

contd.

Page 51: Indian Economy :  A Comparative Overview with China

HUMAN POVERTY INDEX (HPI-1) -2006

Particulars India China

Rank Value(%) Rank Value(%)

Children UnderWeight for age(% aged under 6, 2005-6) 46 7

Population below Income Poverty line$1.25 a day 41.6

15.9$2 a day 75.6

36.3

National poverty line 28.6 2.8

HPI-1 rank minusincome Poverty Rank -11 -19

Source: Human Development Report-2008

Page 52: Indian Economy :  A Comparative Overview with China

Gender Related Development Index (GDI)

Particulars India China----------------------------------------------------------------------------------------------------- GDI Rank Value % of HDI Rank Value % of HDI 116 0.591 97.1 79 0.760

99.8------------------------------------------------------------------------------------------------------- Male Female Male

FemaleLife ExpectancyAt birth (2006) 66.5 97.1 71.0 74.5

Adult literate(1999-2006) 76.4 53.4 96.3 89.5

Combined grossEnrol. Ratio (%)2006 63.3 57.4 68.9

68.5

Estimated EarnedIncome (PPP US$) 3698 1185 5646 3644------------------------------------------------------------------------------------------------------- HDI rank minus GDI -1 1

Page 53: Indian Economy :  A Comparative Overview with China

Gender Empowerment Measure (GEM) 2007

Particulars India ChinaGEM - Rank 72----------------------------------------------------------------------------------------------------------Ratio of estimatedFemale to male earnings 0.32 0.65----------------------------------------------------------------------------------------------------------

% to total

Seats in parliamentheld by women 9.2 21.3

Female legislatures,Senior officials &Managers - 17

Female professionalAnd tech. workers - 52

Page 54: Indian Economy :  A Comparative Overview with China

India-China comparative Business Scenario-2007

Particulars India China--------------------------------------------------------------------------------------------------------------------------------------------

(Rank out of 183 countries-2008) --------------------------------------------------------------------------------------------------------------------------------------------

1) Corruption perception index 85 72-------------------------------------------------------------------------------------------------------------------------------------------

Procedure (no) duration cost (% GNP) Procd. Duration Cost

2) Starting a business 13 30 days 70.1 14 40 days 7.5

------------------------------------------------------------------------------------------------------------------------------------------

duration cost (as % of estate) Recovery rate duration cost recovery rate

(cents per dollar)

3) Closing a business 10 yrs 9 10.4 1.7yrs 22 35.3

--------------------------------------------------------------------------------------------------------------------------------------------

Source: Transparency international 2008

Page 55: Indian Economy :  A Comparative Overview with China

GLOBAL COMPETITIVENESS RANKING 2008-9: India and China

(Rank out of 134 countries)

Pillars Components India China------------------------------------------------------------------------------------------------------------------------GCI Global Competitiveness Index 50 30------------------------------------------------------------------------------------------------------------------------

Basic requirements 80 421 Institutions 53 562 Infrastructure 72 47 3 Macroeconomic stability 109 11 4 Health and primary education 100 50 Efficiency Enhancer 33 40 5 Higher education and training 63 646 Goods market efficiency 47 517 Labour market efficiency 89 517 Financial market sophistication 34 109 8 Technological readiness 69 779 Market Size 5 2 Innovation and Sophistication factors 27 32 11 Business sophistication 27 4312 Innovation 32 28

Source: Global Competitiveness Report 2008

Page 56: Indian Economy :  A Comparative Overview with China

Major Areas of Reforms Needed

Labour market: Stringent labour laws should be relaxed Business environment: Lowering the barriers to entrepreneurship Ending reservation of products fro SSI Need for Bankruptcy law Dispersion of tariff rates Easing of Service sector FDI restrictions More privatization of public sector enterprises. Financial sector: More liberalization Privatization of public sector banks Infrastructure : Electricity reforms to be speeded up transport: More private sector involvement Public Finances: Better targeting of subsidies, GST Education: Higher public expenditure on primary and education, Addressing financing of higher edu.

India can learn from China in: Social and Physical Infrastructure Improving manufacturing sector’s productivity

Page 57: Indian Economy :  A Comparative Overview with China

In Conclusion

India and China – non comparable: India-- Democracy (messy)

Highly diverse social structure Reforms reactionary in nature- a late starter

Less integrated to Global market (including East Asia)

Dissimilar trade pattern

Lagging behind in FDI and infrastructure

Weak link between economic development and social

welfare at regional level compared to China.

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Differencing Relative strengths

India China

i) Agriculture √ reforms ii) Industrial growth √ iii) FDI √ IV) Open to external trade √ v) National market √ vi) Service sector √ √ vii) Infrastructure - √ viii) Capital efficiency √ viii) Corporate governance √ ix) Democratic accountability √ x) Foreign portfolio capital √

Page 59: Indian Economy :  A Comparative Overview with China

Two divergent development Paths:

India China

i) Increasingly building ground up Top down approach

ii) Service sector led growth Manufacturing sector and foreign trade

iii) Private sector led growth State led modernization (late 1970’s) (early nineties) iv) Consumption driven Investment

driven

v) Knowledge based sector-labor Cheap- assembly line workers

vi) World’s back office Factory of the world

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India China

vii) Domestic Private Companies FDI inflow

State owned enterprises

VIII) Young work force Aging workforce

VIII) Cheaper labour Rural reform

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India’s hope!!!!

No Trade off to democracy for 2% higher growth!

Accumulated diversity not assimilated.

Both India and China have accepted the capitalist road to prosperity but capitalism is more comfortable in democracy which fosters entrepreneurs.

India’s growth may be more enduring as people have scripted its growth whereas in China it is state crafted.

India- A country with Potentials for ‘sustaining’ development!!

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“Because the Indian state is inefficient, millions

of entrepreneurs have stepped in to vacuum. When government schools fail, people start private schools in the slums, and the result is millions of ‘slumdog millionaires’ .”

You cannot do this in China!!

Gurucharandas Times of India, 10

May 2009

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