INDIAN ECONOMY V/S CHINESE ECONOMY, A Comparative Study

ECONOMICS PROJECT
Indian Economy
V/S
Chinese Economy
A Comparative Study
Submitted To: Dr. Shakira Khan
Submitted By: Ankit Dabral
MBA (13MSM16)

Indian Economy V/S Chinese Economy
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COMPARISON BETWEEN INDIAN AND
CHINESE ECONOMY
India & China, two of the Asian giants have locked horns against one another to
become a world superpower. Historically, inevitable comparison of economies between
the two giants has shown that China usually emerges on top. Both countries are
consistently analyzing their economic strengths and reinforcing their political and
financial systems to sustain and establish themselves as a superpower in the global
economy.
India was under the colonial rule of the British for around 200 years. This drained the
countries resources to a great extent, which lead to huge economic loss.
On the other hand, there was no such instance of colonization in China. As such from
the beginning the country enjoyed a planned economic model which made it stronger.

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Economy Of India
The economy of India is the 10th
largest in the world by Nominal GDP.
The 3rd
largest by Purchasing Power Parity (PPP).
The country is one of the G-20 major economies and a member of BRICS.
On the per capita income basis India is ranked 141st by nominal GDP and 130th
by
GDP (PPP) in 2012.
India is developing into an open-market economy, yet traces of its past autarkic
policies remain. Economic liberalization, including industrial deregulation, privatization
of state-owned enterprises, and reduced controls on foreign trade and investment,
began in the early 1990s(New Economic Policy) and has served to accelerate the
country's growth, which has averaged more than 7% per year since 1997.
India's diverse economy encompasses traditional village farming, modern
agriculture, handicrafts, a wide range of modern industries, and a multitude of
services. Slightly more than half of the work force is in agriculture, but services are the
major source of economic growth, accounting for nearly two-thirds of India's output,
with less than one-third of its labor force.
India has capitalized on its large educated English-speaking population to
become a major exporter of information technology services and software workers.
In 2010, the Indian economy rebounded robustly from the global financial crisis
- in large part because of strong domestic demand - and growth exceeded 8% year-
on-year in real terms.
However, India's economic growth began slowing in 2011 because of a tight
monetary policy, intended to address persistent inflation, and a decline in investment,
caused by investor pessimism about domestic economic reforms and about the global
situation. High international crude prices have exacerbated the government's fuel
subsidy expenditures, contributing to a higher fiscal deficit and a worsening current
account deficit.
In late 2012, the Indian Government announced reforms and deficit reduction
measures to reverse India's slowdown. The outlook India's medium-term growth is
positive due to a young population and corresponding low dependency ratio, healthy
savings and investment rates, and increasing integration into the global economy.

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India has many long-term challenges that it has not yet fully addressed, including
poverty, inadequate physical and social infrastructure, limited non-agricultural
employment opportunities, inadequate availability of quality basic and higher
education, and accommodating rural-to-urban migration.
India Economy Prior 1991:
The independence-era Indian economy (from 1947 to 1991) was based on a
mixed economy combining features of capitalism and socialism, resulting in an inward-
looking, interventionist policies and import-substituting economy that failed to take
advantage of the post-war expansion of trade. This model contributed to widespread
inefficiencies and corruption, and the failings of this system were due largely to its
poor implementation.
In 1991, India adopted liberal and free-market principles and liberalised its
economy to international trade under the guidance of Former Finance Minister
Manmohan Singh under the Prime Ministry of P.V. Narasimha Rao, prime minister from
1991 to 1996, who had eliminated Licence Raj, a pre- and post-British era mechanism
of strict government controls on setting up new industry.
Following these major economic reforms, and a strong focus on
developing national infrastructure such as the Golden Quadrilateral project by former
Prime Minister Atal Bihari Vajpayee, the country's economic growth progressed at a
rapid pace, with relatively large increases in per-capita incomes.

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Economy Of China
The Economy of China is the 2nd
largest in the world by Nominal GDP.
The 2nd
largest by Purchasing Power Parity (PPP).
The country is one of the G-20 major economies and a member of BRICS.
On the per capita income basis China is ranked 87th
by nominal GDP and 92nd
by GDP
(PPP) in 2012.
The Economy of China is the world's fastest-growing major economy, with
growth rates averaging 10% over the past 30 years. China is also the largest exporter
and second largest importer of goods in the world. China is the largest manufacturing
economy in the world, outpacing its world rival in this category, the service-driven
economy of the United States of America. ASEAN–China Free Trade Area came into
effect on 1 January 2010. China-Switzerland FTA is China's first FTA with a major
European economy.
The provinces in the coastal regions of China tend to be more industrialized,
while regions in the hinterland are less developed. As China's economic importance has
grown, so has attention to the structure and health of the economy.
The internationalization of the Chinese economy continues to affect the
standardized economic forecast officially launched in China by the Purchasing
Managers Index in 2005.
At the start of 2010s, China remained as the sole Asian nation to have an
economy above the $10-trillion mark (along with the United States and the European
Union).
Most of China's economic growth is created from Special Economic Zones of the
People's Republic of China that spread successful economic experiences to other areas.
The development progress of China's infrastructure is documented in a 2009 report by
KPMG.
Since the late 1970s China has moved from a closed, centrally planned system
to a more market-oriented one that plays a major global role - in 2010 China became
the world's largest exporter.

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The Chinese government faces numerous economic challenges,
including:
(a) Reducing its high domestic savings rate and correspondingly low domestic
demand;
(b) Sustaining adequate job growth for tens of millions of migrants and new entrants
to the work force;
(c) Reducing corruption and other economic crimes; and
(d) Containing environmental damage.
Economic development has progressed further in coastal provinces than in the
interior, and by 2011 more than 250 million migrant workers and their dependents had
relocated to urban areas to find work. In 2010-11, China faced high inflation resulting
largely from its credit-fueled stimulus program.
Some tightening measures appear to have controlled inflation, but GDP growth
consequently slowed to under 8% for 2012. An economic slowdown in Europe
contributed to China's, and is expected to further drag Chinese growth in 2013.

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THE FACTORS COMPARING ECONOMY OF
CHINA AND INDIA ARE:
I. GDP
II. Trade Patterns
III. Poverty Reduction
IV. Human Development
V. Employment Growth
VI. Rate of investment
I. GDP (Gross Domestic Product) :
CHINA:
The gross domestic product in china expanded 2.20% in the third quarter of 2013 over
the previous quarter. GDP Growth Rate in China is reported by the National Bureau of
Statistics of China. From 2011 until 2013, China GDP Growth Rate averaged 2.0%
reaching an all-time high of 2.5% in June of 2011 and record low of 1.5% in March of
2012.In China the Growth Rate in GDP measures the change in the seasonally
adjusted value of the goods and services produced by the Chinese economy during the
quarter. China’s economy is the 2nd
largest in the world after that of United States.
INDIA:
The Gross Domestic Product in India expanded 4.40% in the second quarter of 2013
over the same quarter of the previous year. GDP Annual Growth Rate in India is
reported by the Ministry of Statistics and Program Implementation. From1951 until
2013, India GDP Growth Rate averaged 5.8% reaching an all-time high of
10.2%december of 1988 and a record low of -5.2% in December of 1979.
In India the Growth Rate in GDP measures the change in the value of goods and
services produced in India without counting government’s involvement. It excludes the
indirect expenses and includes the original value of the product.

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COMPARISON OF G.D.P
GDP China India
GDP
(Purchasing
Power Parity)
$12.38 trillion (2012 est.)
note: data are in 2012 US dollars
GDP
(Real Growth
Rate)
7.8% (2012 est.)
9.2% (2011 est.)
10.4% (2010 est.)
5.4% (2012 est.)
6.8% (2011 est.)
10.1% (2010 est.)
GDP
( Per Capita )
$9,100 (2012 est.)
$8,500 (2011 est.)
$7,800 (2010 est.)
$3,900 (2012 est.)
$3,700 (2011 est.)
$3,500 (2010 est.)
GDP
(Composition By
Sector)
Agriculture: 9.7%
industry: 46.6%
services: 43.7% (2012 est.)
agriculture: 17%
industry: 18%
services: 65% (2011 est.)
Population
(Below Poverty
Line)
13.4%
note: in 2011, China set a new
poverty line at RMB 2300
(approximately US $363; this new
standard is significantly higher than
the line set in 2009, and as a result,
128 million Chinese are now
considered below the poverty line
(2011)
29.8% (2010 est.)
Household
(Income Or
Consumption By
%ageShare)
lowest 10%: 3.5%
highest 10%: 15%
note: data are for urban households
only (2008)
lowest 10%: 3.6%
highest 10%: 31.1% (2005)

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Inflation Rate
(Consumer
Prices)
3.1% (2012 est.)
5.5% (2011 est.)
9.2% (2012 est.)
8.9% (2011 est.)
Labor Force 795.4 million
Note: by the end of 2011, population
at working age (15-64 years) was
1.0024 billion (2012 est.)
498.4 million (2012 est.)
Labor Force
(By Occupation)
Agriculture: 36.7%
industry: 28.7%
services: 34.6% (2008 est.)
Agriculture: 53%
industry: 19%
services: 28% (2011 est.)
Unemployment
Rate
6.4% (2012 est.)
6.5% (2011 est.)
note: registered urban
unemployment, which excludes
private enterprises and migrants was
4.1% in 2010
9.9% (2012 est.)
9.8% (2011 est.)
Distribution Of
Family Income
(Gini index)
48 (2009)
41.5 (2007)
36.8 (2004)
37.8 (1997)
Budget Revenues: $1.838 trillion
expenditures: $2.031 trillion (2012
est.)
revenues: $171.5 billion
expenditures: $281 billion (2012
est.)
Industries world leader in gross value of
industrial output; mining and ore
processing, iron, steel, aluminum,
and other metals, coal; machine
building; armaments; textiles and
apparel; petroleum; cement;
chemicals; fertilizers; consumer
products, including footwear, toys,
and electronics; food processing;
transportation equipment, including
automobiles, rail cars and
locomotives, ships, and aircraft;
telecommunications equipment,
commercial space launch vehicles,
satellites
textiles, chemicals, food
processing, steel, transportation
equipment, cement, mining,
petroleum, machinery, software,
pharmaceuticals

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Industrial
Production
Growth Rate
13.9% (2011 est.) 4.8% (2011 est.)
Agriculture
Products
world leader in gross value of
agricultural output; rice, wheat,
potatoes, corn, peanuts, tea, millet,
barley, apples, cotton, oilseed; pork;
fish
rice, wheat, oilseed, cotton, jute,
tea, sugarcane, lentils, onions,
potatoes; dairy products, sheep,
goats, poultry; fish
Exports $2.021 trillion (2012 est.)
$309.1 billion (2012 est.)
$305 billion (2011 est.)
Exports
Commodities
electrical and other machinery,
including data processing equipment,
apparel, textiles, iron and steel,
optical and medical equipment
petroleum products, precious
stones, machinery, iron and steel,
chemicals, vehicles, apparel
Exports
Partners
US 17.1%, Hong Kong 14.1%, Japan
7.8%, South Korea 4.4%, Germany
4% (2011)
UAE 12.7%, US 10.8%, China
6.2%, Singapore 5.3%, Hong Kong
4.1% (2011)
Imports $1.78 trillion (2012 est.)
$500.3 billion (2012 est.)
$490 billion (2011 est.)
Imports
Commodities
electrical and other machinery, oil
and mineral fuels, optical and medical
equipment, metal ores, plastics,
organic chemicals
crude oil, precious stones,
machinery, fertilizer, iron and steel,
chemicals
Imports
Partners
Japan 11.2%, South Korea 9.3%, US
6.8%, Germany 5.3%, Australia 4.6%
(2011)
China 11.9%, UAE 7.7%,
Switzerland 6.8%, Saudi Arabia
6.1%, US 4.9% (2011)
Debt
External
$710.7 billion (31 December 2012
est.)
est.)
est.)
est.)
Exchange Rates Renminbi Yuan (RMB) per US dollar -
6.311 (2012 est.)
Indian rupees (INR) per US dollar -
53.17 (2012 est.)
46.671 (2011 est.)

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6.4615 (2011 est.)
6.7703 (2010 est.)
6.8314 (2009)
6.9385 (2008)
45.726 (2010 est.)
48.405 (2009)
43.319 (2008)
Fiscal Year calendar year 1 April - 31 March
Investment
(Gross Fixed)
45.9% of GDP (2012 est.) 30% of GDP (2012 est.)
Public Debt 38.5% of GDP (2011)
43.5% of GDP (2010)
note: official data; data cover both
central government debt and local
government debt, which China's
National Audit Office estimated at
RMB 10.72 trillion (approximately
US$1.66 trillion)in 2011; data exclude
policy bank bonds, Ministry of
Railway debt, China Asset
Management Company debt, and
non-performing loans
51.9% of GDP (2012 est.)
50.5% of GDP (2011 est.)
note: data cover central
government debt, and exclude debt
instruments issued (or owned) by
government entities other than the
treasury; the data include treasury
debt held by foreign entities; the
data exclude debt issued by
subnational entities, as well as
intra-governmental debt; intra-
governmental debt consists of
treasury borrowings from surpluses
in the social funds, such as for
retirement, medical care, and
unemployment; debt instruments for
the social funds are not sold at
public auctions
Reserves Of
Foreign
Exchange And
Gold
$3.549 trillion (31 December 2012
est.)
est.)
est.)
est.)
Current Account
Balance
$170.8 billion (2012 est.)
$201.7 billion (2011 est.)
-$80.15 billion (2012 est.)
-$46.91 billion (2011 est.)
GDP (Official
Exchange Rate)
$8.25 trillion
note: because China's exchange rate
is determine by fiat, rather than by
market forces, the official exchange
rate measure of GDP is not an
accurate measure of China's output;
GDP at the official exchange rate

Page | 11
substantially understates the actual
level of China's output vis-a-vis the
rest of the world; in China's situation,
GDP at purchasing power parity
provides the best measure for
comparing output across countries
(2012 est.)
Stock Of Direct
Foreign
Investment At
Home
est.)
est.)
est.)
est.)
Stock Of Direct
Foreign
Investment
Abroad
$465 billion (31 December 2012 est.)
$364 billion (31 December 2011 est.)
est.)
est.)
Market Value Of
Publicly Traded
Shares
est.)
$4.763 trillion (31 December 2010)
est.)
Central Bank
Discount Rate
2.25% (31 December 2011 est.)
3.25% (31 December 2010 est.)
5.5% (31 December 2010 est.)
6% (31 December 2009 est.)
note: the Indian central bank's
policy rate - the repurchase rate -
was 8% during December 2012
Commercial
Bank Prime
Lending Rate
6% (31 December 2012 est.)
6.56% (31 December 2011 est.)
10.8% (31 December 2012 est.)
10.19% (31 December 2011 est.)
Stock Of Money $2.434 trillion (31 December 2008)
$278.8 billion (31 December 2009)
Stock Of
Quasi money
Stock Of
Domestic Credit
est.)
est.)

Page | 12
est.) est.)
Stock Of
Narrow Money
est.)
$4.6 trillion (31 December 2011 est.)
est.)
est.)
Stock Of
Broad Money
est.)
est.)
est.)
est.)
Taxes And Other
Revenues
22.3% of GDP (2012 est.) 8.8% of GDP (2012 est.)
Budget Surplus
(+) Or Deficit (-)
-2.3% of GDP (2012 est.) -5.6% of GDP (2012 est.)

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II. TRADE PATTERNS:
India and China are two most populist countries in the world. India and China
together contain about 37.5% of world’s population. So India and China are huge
markets as these two countries play a massive role in world economy as they have a
significant impact on world economy, but they differ largely in their trading patterns.
China’s economy has grown by increasing investment in the manufacturing
industry and increasing foreign trade, whereas service sector is responsible for the
growth of Indian economy. The economy of China is third largest in the world and still
growing very rapidly. India is also developing with a fast rate.
CONTRASTING TRADE PATTERNS:
China’s trade expansion started in 1978, when the country initiated reforms and
Opening-up policies. For the past decade, its position as a strong player in
international trade has been remarkable. India’s trade expansion has not been as
significant as China’s.
By 2004, China’s share of the world’s manufacturing exports was 8.3%; that of
India was 0.9% their shares of global manufacturing imports were 6.3% and 0.8%
respectively (Winters and Yusuf 2007)
China’s manufacturing sector accounts for more than 41% of gross domestic
product (GDP).
In 2005 manufactured goods constituted 93% of exports or almost a quarter of
the Gross value of industrial output. China is a significant importer and exporter in
Manufacturing, with market shares of 6.2% and 7.7%, respectively, in 2004. India’s
trade in manufacturing has not been remarkable to date, and the sector accounts for a
far Smaller share of GDP – less than 16% (Winters and Yusuf, 2007).

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From the start, the two countries’ trade patterns have been largely dissimilar. In
the case of China, using its vast resources of cheap labour and domestic savings to
initiate Infrastructure building and invite large amounts of FDI to spur the
development of the Manufacturing industry in the coastal areas has been seen as one
of the initial and leading drivers for the country’s economic success. India’s strength,
on the other hand, is based on its knowledge-based sectors such as IT and
pharmaceuticals, its more developed financial markets and more robust private sector.
Besides being the world’s third-largest trader with a 6% share in world trade –
compared with India’s 1% – China is gradually becoming a manufacturing hub in Asia.
It is now Deeply involved in regional production and distribution networks in East
and Southeast Asia (including ten ASEAN countries, plus Japan, China and South
Korea).
The share of China’s exports and imports to East Asian countries in its total trade
is more than twice that of India, showing China’s stronger connection to the region.

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IV. POVERTY REDUCTION:
CHINA
China has maintained a high growth rate for more than 30 years since the
beginning of economic reform in 1978, and thus sustained growth has generated a
huge increase in average living standards.
250 years ago china had many characteristics in common with the rest of
developing Asia: large population, low per capita income, and resource scarcity on a
per capita basis. But in the 15 years from 1990-2005, China averaged per capita
growth of 8.7%.
The whole reform program is often referred to in brief as the open door policy.
This highlights that a key component of Chinese reform has been trade liberalization
and opening up to foreign direct investment but not opening up the capital account.
China improved its human capital, opened up to foreign trade and investment
and created a better investment climate for private sectors.
INDIA
India is widespread, with the nation estimated to have a third of the world’s
poor. In 2010 the World Bank reported that 32.7% of the total Indian people fall below
the International Poverty Line of US$ 1.25 per day.
According to 2013 UN Report stated that a third of the world’s poorest people
live in India. According to a 2011 poverty development goals report, as many as 320
million people in India and China are expected to come out of extreme poverty in the
next four years, while India’s poverty rate is projected to drop to 22% in 2015.

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However only India, where the poverty rate is projected to fall from 51% in 1990
to about 22% in 2015, is on track to cut poverty by half by the 2015 target date.
The picture above clearly depicts the position of India in frount of China nd other
Sounth Asian Countries. In order to go ahead ahead of China, India should firstly focus
on the biggest problem i.e. POVERTY and should reduce it.
The only way it can be done is by Educating the Uneducated and spraeding
awareness with the educated as it has been a major issue prior to the independence.

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V. HUMAN DEVELOPMENT:
HDI is a composite statistic of life expectancy, education, and income indices
used to rank countries in four tiers of human development. Since 2011, the UNDP
report has included an inequality adjusted HDI, also known as IHDI, which attempts to
include the effects of inequality on human development. The IHDI for India this year is
0.392.
Since UNDP produced the first global Human Development Report (HDR) in
1990, HDRs have emerged as its flagship publication and one of UNDP’s most
important policy analysis and advocacy tools. This is the seventh National Human
Development Report (NHDR) produced in China since 1997.
These NHDR exercises have proven to be successful and valuable, playing a
unique role in UNDP’s endeavours to influence China’s development policymaking.
CHINA:
United Nations Development Program (UNDP) placed China 101st in a ranking of
187 countries and regions based on the quality of life enjoyed by their populations
.China measured 0.699 in the UNDP's "human development index" (HDI) in 2012, up
from 0.695 in 2011.
It sees China remain above the average level of regions and the BRICS nations --
Brazil, Russia, India, China and South Africa, according to the 2013 Human
Development Report -- The Rise of the South: Human Progress in a Diverse World.
INDIA:
Over the past three decades, India has made good progress on the human
development index (HDI), says the Human Development Report 2013, released by the
United Nations Development Programme (UNDP). However, India’s rank out of 187
countries is no better than last year’s.
With a HDI value of 0.554 and a rank of 136 among 187 countries, which it
shares with Equatorial Guinea, India is placed in the “medium development” category.
There has been steady improvement in its HDI value, which was 0.345 in 1980.

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India’s HDI Progress Report:
Year HDI value
1980 0.345
1990 0.410
2000 0.463
2010 0.547
2012 0.554
The picture above clearly explains that China is ahead of India in Human Development
Index too. Although India has made a drastic change in HDI but still to beat the
Chinese Economy we need to pull up our socks and rise above the other nations.

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VI. EMPLOYMENT GROWTH:
China:
As China spends less on stimulus and tolerates even less over-spending at the
municipal level, the era of full-employment in the country may be coming to an end.
In 2012, China’s total population (those aged between 15 and 59 years) was 937
million, down 3.45 million from the year before. This was the first time since records
began in th A comparison of employment in India and China.
The resulting employment series for India shows a resilient labor market from
the late 1990s after a period in the mid-1990s when employment had been stagnant.
Between 1998 and 2003, employment is estimated to have grown by 17% after
having been almost stable in the previous five years.
This growth in employment was associated with a marked increase in
employment outside of the agricultural sector – more than 70% of the increase in
employment came in the secondary and tertiary sectors of the economy.
Most notable was the almost 50% increase in employment in the secondary
sector of the economy that appears to have been mainly concentrated in small
manufacturing plants in rural areas. Service sector employment, though still larger
than the industrial sector, increased much less rapidly.
The pace of change in the structure of employment has been slower than in
China despite the strong restrictions on movement of workers and the absence of
landless laborers in the Chinese countryside. Indeed, the speed of the decline in the
share of agriculture inIndia was only half that observed in China in the period 1978 to
2003.
Out of this working-age population, 767 million were employed, according to
Statistics released by the Ministry of Health and Human Resources, an increase of 2.84
million compared with 2011.
There were 371 million people employed in urban areas, an increase of 11.9
million over the previous year, accounting for 48.4% of the overall working population.
From 2008-2012, the number increased while employment in rural areas dropped by
6% over those 5 years.

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India:
A decomposition of the proximate factors behind economic growth requires
knowledge of the movement of factor inputs. The measurement of such inputs and,
indeed, outputs is problematic in many developing countries where much economic
activity takes place in the informal sector of the economy. People are often employed
on a casual basis or are self-employed.
Even a typical four-way split of employment (urban – rural, male – female)
coupled with a three-way split of industries (primary, secondary and tertiary) results in
adequate sample sizes.
Despite the adequacy of the sample size for measuring employment, the National
Sample Survey Organization (NSSO) has never published level data for employment.
Rather it publishes long series of “worker participation rates”. These ratios measure
the proportion of workers in the total population. They are presented for the typical
four-way split described above.
The output from these calculations is a set of twelve time-series showing
employment by three principal industries (agriculture, secondary and tertiary sectors),
two locational variables (rural and urban) and two gender variables.
Given the problems of timing and the non-availability of annual population data,
these series can only be regarded as approximate indicators. However, the only
alternative to using the NSS surveys is to use the census data for employment. T
This data source appears only once every ten years and appears to measure
employment inadequately. In particular, there are large discrepancies between
estimates of economically active women between the
A person in casual, intermittent employment is, on the daily measure, likely to be
counted as unemployed whereas in reality the person may be better classed as under-
employed or employed on a part-time basis.
On the other hand, the annual data counts people as employed even if their
work is only seasonal. This study uses the weekly data series that lie in between these
extremes.

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VII. RATE OF INVESTMENT:
In economics, investment is the accumulation of newly produced physical
entities, such as factories, machinery, houses, and goods inventories. Gross
fixed investment is defined as total business spending on fixed assets, such as
factories, machinery, equipment, dwellings, and inventories of raw materials, which
provide the basis for future production. It is measured gross of the depreciation of the
assets, i.e., it includes investment that merely replaces worn-out or scrapped capital.
Country Investment 2008 (Gross Fixed)
(%age of GDP)
Investment 2012(Gross Fixed)
(%age of GDP)
China 40.20 46.01
India 39.00 29.09
The investment rate in China (investment as a share of GDP) has fluctuated
between 35 – 44% over the past 25 years, compared to 20 – 26% in India.
Infrastructure investment from the early 1990s has averaged 19% of GDP in China,
compared to 2% in India.
China and India together account for about 37.5% of world population and 6.4%
of the value of world output and income at current prices and exchange rates.
As the two countries come to play an increasingly weighty role in the world
economy, their expansion is having a noticeable impact on global growth, through a
number of channels, with trade being arguably the strongest and most direct (Winters
and Yusuf, 2007).
Although the two Asian ‘mega-emergers’ appear to have much in common, they
have in fact been following two different development paths. China initiated its state-
led modernization reform in the late 1970s after many years of operating according to
the Soviet model, whereas India relies largely on the private sector to drive reform.

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While China built up its economic strength by investing heavily in the manufacturing
industry and facilitating foreign trade, the service sector has become the leading driver
behind India’s economic growth, contributing to more than half of its total economic
growth since the 1990s. despite their very different approaches, however, both
countries can learn from each other in many ways. Stronger integration in the global
Economy
Foreign investment:
Foreign direct investment (FDI) is also an area where India appears to lag
behind China. In 2006, China attracted 10 times more FDI than India owing to its
more liberalized policies for foreign investors. Moreover, the Chinese economy is
growing faster and its Infrastructure is better.
Although strict protection policies remain in place in selected Sectors in China,
such as automobiles, India’s restrictive labour laws and limits affecting foreign shares
in ownership restrain foreign investment in general (Urata, 2007). In particular, India’s
inadequate infrastructure development makes it very difficult for multinational
companies to ship products in and out of the country, and even within the country.
China is certainly a star performer in attracting FDI, but India did not perform
Commensurately badly, given the large disparity in performance. China accounts
for 5% of world GDP and India for about 2%, at current exchange rates (World Bank,
2007a). As bigger economies normally attract more investment, China currently tends
to be the 5 preferred destination for foreign investors. But in terms of FDI percentage
of GDP, China’s figure is less stunning – only two and a half times that of India
Summary of Rate and Investment
The fast economic growth of China and India is not unusual in Asia. But size
does matter when it comes to China and India: the sheer size of their markets means
they may influence the whole world in a way that smaller economies did not.
But why did these two ‘mega-emergers’ need so long to take off and why should
they have been so behind the take-off curve? Is this indicative of a fundamental
weakness in these two giants, which may also be an impediment to their future

Page | 23
economic growth? Political constraints are probably one factor. Their immature legal
systems may be another, and it takes time for these to be constructed. And size
matters again.
While smaller economies may have more flexibility to mobilize their resources
and push themselves ahead fairly quickly to OECD standards, this may not be easy to
handle for big economies with huge populations and vast disparities between different
regions.
China achieved productivity growth of 8.7% per year on average between 2000
and 2005 (as opposed to 3.1% per year on average between 1995 and 2000). India’s
productivity growth was lower – 4.1% on average in 2000–04. This corresponded with
a similar phase of modest increase in China during the late 1980s and early 1990s
(Conference Board, 2006).
However, China needs to further improve productivity in manufacturing
industries in order to respond to changing patterns of global production networks.
To some extent, China can still attain global competitiveness or maintain existing
positions thanks to its huge pool of cheap labour for at least 10–15 years, but the
country has to find the ways to move up in the global production chains to sustain its
economic growth in the long run and shift its model from being investment-and-
exports-driven to being consumption-driven.
In recent years, China has been quick in changing sectors to prop its export
growth. Office machinery and equipments are becoming the fastest-growing area for
China’s exports.
The electrical equipment industry gained a bigger share from 5.9% in 1995 to
10.0% in 2004, while textiles lost share, from 26.0% in 1995 to 16.2% in 2004 .
Even if China’s share of office machines and telecommunications equipment in
world exports rapidly rose to 15.2% in 2004, from only 1.0% in 1990 , this is a sector,
unlike 7 footwear and clothing, with few trade disputes with OECD countries because
China does not compete directly with Europe and US in this category.

Page | 24
CONCLUSION:
We conclude by saying that there are various issues where India is ahead of
China and various issues which leads china.
India is ahead of china regarding banking or legal sector. China is far ahead
regarding infrastructure.
These all issues create differences between the two economies but at the same
time by promoting various advanced technologies and renewable energies the
solutions can be found to these problems.
India only exceeds China in its BPO / IT sector, rest among all the sectors it is
China which is ahead whether it is agriculture, trade patterns, employment growth,
human development etc.
Thus in the coming future we can say that it can be India and china together
instead of India V/S China.

Page | 25
Basis China India
GDP(expenditure
approach)
$8.358 trillion (2012) $1.824 trillion
PPP(purchasing
power parity)
$12.406 trillion (2012) $4.684 trillion
GDP Growth 7.8% (2012) 3.9%
GDP per capita $9233 (2012) (PPP) $3829 (2012) (PPP)
GDP by sector
agriculture
10.1% 17.4%
Industry
45.3% 25.8%
Services
44.6% (2012) 56.9% (2012)
Population below
poverty line
13.1% (2008) 29.8% (2010)
Unemployment 4.1% (2012) 3.8% (2011)
Inflation 2.5%(2012) 9.31%(2013)
Labor force 795.5 million(2010) 498.4 million(2012)
Labor force by
occupation
Agriculture 36.7% 51.1%
Industry 28.7% 22.4%
Services 34.6% 26.6%(2012)
External exports $2.021 trillion(2012) 309.1 billion(2012)
Imports $1.78 trillion(2012) $488.6 billion(2012)
Revenues $1.838 trillion(2012) $171.5 billion(2012)
Expenses $2.031 trillion(2012) $281 billion(2012)
Foreign reserves $3.44 trillion(2013) $295.29 billion(2012)

INDIAN ECONOMY V/S CHINESE ECONOMY, A Comparative Study

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