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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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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
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
• 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).
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.
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
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’.
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.
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.
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.
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.
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.
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%
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%).
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
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
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%
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)
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.
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
Wages
Wage rates defer between rural and urban areas and between males and females
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.
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.
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.
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
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
Private sector workers
Private sector workers by Industry - 2004
Agriculture
Manufacturing
Community, social services
MiningTransport,
storage
Financing, insurance
Trade, restaurants
Construction
Electricity, gas, water
Is development inclusive?
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.
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)
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
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
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
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
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 ---------------------------------------------------------------------------------------------------------------
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
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.
INDIA AND CHINA
India China2007
GDP (current US$billion) 1176.9
3205.5
GNP PC (current US$) 950
2370.0
GDP growth Annual % 9.1% 13%
Population growth rate (annual %) 1.3 0.6
Mobile and cellular subscriptionPer ‘ooo population 21 42 Internet user per ‘000 population 7 16
Source: World Bank: World Development Indicators: Country Profile April 2009
Situating India and China in World Trade (2007)
Particulars Unit China India Share in Merchandise
Exports (%) 8.71 1.05 Rank 2 26 Imports (%) 6.70 1.52 Rank 3 18
Share in Commercial Services
Exports (%) 3.63 2.74 Rank 7 10 Imports (%) 4.14 2.49 Rank 6 13
Source: WTO- World Trade Statistics, April 2009
Source: WTO, World Trade Statistics, April 2009
China India world Trade highlights 2007
Particulars China
India
Exports of good & services% of GDP 42
21
Imports of goods & services 32 24% to GDP
Trade per capita($US, 2005-07) 1483
391
Patents granted 67948 4320
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
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
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
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
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
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
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
$B
illio
n
Size of Labor Force in Manufacturing Sector
1.36
11.72
160.00
53.06
11.65
4.23 2.02
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
Argentina Brazil China India Indonesia Korea Malaysia
Countries
Nu
mb
er
of
Wo
rker
s (M
illio
n)
Spending on R & D as a percentage of GDP (2003)
0.42
1.03
1.3
0.77
0.2
2.5
0.7
0
0.5
1
1.5
2
2.5
3
Argentina Brazil China India Indonesia Korea Malaysia
Countries
R &
D E
xpen
dit
ure
as
a P
erce
nta
ge
of
GD
P
HUMAN DEVELOPMENT INDICATORS-(2006)
----------------------------------------------------------------------------------------------------------------------------
Human Development Index ( Position among 179 countries) INDIA CHINA
Particulars Rank Value Rank Value
HDI 132 0.609 94 0.762
Life expectancy at birth( yrs) 127 64.1 69 72.7
Adult literacy rate (%) 118 65.2 53 93
Combined(pri—ter)enrolment 134 61 113 68.7 ratio
GDP PC($PPP) 126 2489 104 4682----------------------------------------------------------------------------------------------------------------------------
Source: Human Development Report 2008
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.
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$2 a day 75.6
36.3
National poverty line 28.6 2.8
HPI-1 rank minusincome Poverty Rank -11 -19
Source: Human Development Report-2008
Gender Related Development Index (GDI)
Particulars India China----------------------------------------------------------------------------------------------------- GDI Rank Value % of HDI Rank Value % of HDI 116 0.591 97.1 79 0.760
99.8------------------------------------------------------------------------------------------------------- Male Female Male
FemaleLife ExpectancyAt birth (2006) 66.5 97.1 71.0 74.5
Adult literate(1999-2006) 76.4 53.4 96.3 89.5
Combined grossEnrol. Ratio (%)2006 63.3 57.4 68.9
68.5
Estimated EarnedIncome (PPP US$) 3698 1185 5646 3644------------------------------------------------------------------------------------------------------- HDI rank minus GDI -1 1
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
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
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
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
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.
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 √
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
India China
vii) Domestic Private Companies FDI inflow
State owned enterprises
VIII) Young work force Aging workforce
VIII) Cheaper labour Rural reform
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!!
“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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