India and China in The Global

Economy

Dr Robert Dygas
SGH Warsaw School of Economics, October 2021
 Agenda
• Chosen parameters to compare India with
China
• India and China economies overview
• India and China key figures
• India and China SDG Index Dashboard
• India and China during COVID-19
• India - China conflict
• India and China way forward

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 Chosen parameters to compare India with China (2020)
The bilateral trade between India and China was around USD 92.68 billion
in 2019. The Defence budget of China was US$ 178 billion while the Indian
defense budget is US$ 70 billion in 2020.

China India
Unemployment rate % 4 24
Size of economy GDP 14.72 T USD 2.7 T USD
GDP growth % 2.3 (FY20) 1.2 (4Q20)
GDP structure Agriculture (9.7%), Industry Agriculture (15.8%),
(43.9%) and Services Industry (29.7%) and
(46.4%) Services (54.40%)
External debt 2.4 T USD 570 bln USD
Defence budget 178 bln USD 70 bln USD
Nominal GDP per capita 7333 USD 18 931 USD
(PPP)
https://countryeconomy.com/countries/compare/china/india
Different sources Dr Robert Dygas 3
 India’s economy in one slide
• Today India is ranked the seventh largest
economy, and third largest in terms of
Purchasing Power Parity (PPP). The Indian
economy’s GDP is pegged at $ 2.9 tn. At a
press conference, Finance Minister Arun
Jaitley commented, ‘We keep oscillating
between the fifth and the sixth largest
economy, depending on the dollar rate. As we
look at the years ahead, we will be $ 5 tn by
2024 and $ 10 tn by 2030 or 2031.’
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India by Google search

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China Big Picture - Main messages
• Growth has slowed somewhat but remains
strong.
• China will remain the major driver of global
growth.
• Financial risks from high corporate debt are
rising and need to be addressed urgently.
• Unifying product and labour markets
across the country will boost productivity
and inclusiveness.
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Key data pre-COVID-19

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 Due to pandemic, China’s economy has advanced by 5 years and Indian
economy was pushed back by 5 years. This will create a 10 year gap between
India and China in terms of per capita GDP income

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India/China GDP ratio – Economic gap
The economic gap between India and China has been growing

Reddit.com

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 China - growth will continue to
slow gradually
2017 2018 2019 2020
% change
Real GDP growth 6.8 6.6 6.2 6.0
Exports of goods and services 11.0 5.1 4.5 4.8
Imports of goods and services 6.9 9.5 6.0 4.7

GDP deflator 3.8 2.9 2.2 2.1

Consumer price index 1.6 2.1 3.0 3.0
Terms of trade -6.8 -2.6 -0.8 -0.6
Fiscal balance % of GDP
Overall -3.1 -3.1 -3.3 -3.5
Headline -2.9 -2.9 -3.1 -3.1
Current account balance % of GDP 1.4 0.2 -0.1 -0.2

Source: CEIC database and OECD projections.

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 India – key strategic questions

https://www.scmr.com/ Dr Robert Dygas 11

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 India Key figures 2016-2019
• Population: 1.366 billion (2019) -> 1,02% incr. vs. 2018 ; Urbanization:
34%
• GDP 2,729 trillion USD (2018), GDP p/c 2 016 (2018) ->1,72% increase vs.
2017
• GNI p/c (PPP) $2 020 (2018)
• Cumulative FDI Equity Inflows:US$ 436.35 billion (April 2000 to June 2019)
• Life expectancy: 69 years (average)
• HDI ranking 130/188
• CGI 58/140 (2018) , 63/140 (2017)
• Import 514 B USD, Export 330 B USD (2018)
• Poverty ratio - % living on less than $1.90 a day (PPP) 21%
• Hunger rate - % of population under-nourished: 14,5%
• Successful diversification into manufacturing
• Globally competitive in many service industries
• Exchange Rate Used: INR 1 = US$ 0.014533 as of July 2019
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 India’s Economic Performance in 2019-20
• A jump of 79 positions to 63 in 2019 from 142 in 2014 in World Bank’s Doing
Business rankings.
• The turnaround time of ships in India has almost halved to 2.48 days in 2018-19
from 4.67 days in 2010-11.
• India’s GDP growth is expected to grow in the range of 6.0 to 6.5 per cent in 2020-
21.
• GDP growth moderated to 4.8 per cent in H1 of 2019-20, amidst a weak
environment for global manufacturing, trade and demand.
• In 2019-20, fiscal deficit was budgeted at Rs 7.04 lakh crore (US$ 99.56 billion) (3.3
per cent of GDP), as compared to Rs 6.49 lakh crore (US$ 91.86 billion) (3.4 per
cent of GDP) in 2018-19.
• Inflation increased from 3.3 per cent in H1 of 2019-20 to 7.35 per cent in
December 2019-20 due to temporary increase in food inflation.
• Reforms undertaken during 2019-20 to boost investment, consumption and
exports:
– Speeding up the insolvency resolution process under Insolvency and Bankruptcy Code (IBC).
• Easing of credit, particularly for the stressed real estate and NBFC sectors.
• The National Infrastructure Pipeline for the period FY 2020-2025 launched.

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 India’s fiscal developments
• Revenue Receipts registered a higher growth
during the first eight months of 2019-20,
compared to the same period last year, led by
considerable growth in Non-Tax revenue.
• Gross GST monthly collections have crossed
the mark of Rs 1 lakh crore (US$ 14.15 billion)
for a total of five times during 2019-20 (up to
December 2019).

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Sustainable Development and Climate
Change
• India moving forward on the path of SDG
implementation through well-designed initiatives
• SDG India Index:
– Himachal Pradesh, Kerala, Tamil Nadu, Chandigarh are
front runners.
– Assam, Bihar and Uttar Pradesh come under the
category of Aspirants.
• Forest and tree cover increased and has reached
80.73 million hectares covering 25.56 per cent of
the geographical area of the country.

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 India Service Sector
• Services sector in the Indian economy
contributes:
– About 55 per cent of the total size of the economy
and GVA growth.
– Two-third of total FDI inflows into India.
– About 38 per cent of total exports.
– More than 50 per cent of GVA in 15 out of the 33
states and UTs.

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 India -Major Sectors Attracting Highest FDI
Equity Inflows, April 2000 – June 2020
• Services Sector 18%,
• Telecommunications 8%,
• Computer Software and Hardware 9%,
• Construction Development 6%,
• Automobile 5%,
• Trading 6%,
• Drugs and Pharmaceuticals 4%,
• Chemicals 4%,
• Power 3%,
• Construction Activities 4%

Source:ibef.org
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 India – growth barries
• Infrastructure bottlenecks esp. in energy / transport
• Relatively high inflation
• High import tariffs / low trade to GDP ratio
• Fragmented retail sector – few economies of scale
• Fragile banking sector – high rate of bad loans
• Weaknesses in human capital
• Complex and restrictive labour laws
• Under-developed financial sector / limited competition
• Very low female labour market participation
• Deep-rooted inequalities between caste and gender
• High rates of malnutrition and poor sanitation
• Huge informal economy – low tax yield for government

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 China and India border conflict
• The tensions on the border, as well as the Covid-19
pandemic, have thrown light on India’s economic
dependencies on China.
• India remains reliant on Chinese products in several
critical and strategically sensitive sectors, from
semiconductors and active pharmaceutical
ingredients to the telecom sector, where Chinese
vendors are involved not only in India’s 4G network but
•Length of the in on-going 5G trials as well.
LAC: India considers • In April 2020, the Indian government tightened FDI
the LAC to be 3,488 km norms coming from the countries which share land
long, while the Chinese borders with India. Government approval has been
consider it to be only made mandatory.
around 2,000 km.

https://www.drishtiias.com/images/uploads/1593764472_image1.jpg

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 Future of India’s economy
• To make India a $ 5 tn economy by 2030, and to achieve
consistent 8% growth, NITI Aayog has released a
comprehensive document titled ‘Strategy for New India
@75’. Its main objectives are –
• 1. Doubling farmers’ incomes.
• 2. Creating an all India talent pool for the entre and States
together - such as the All India Services.
• 3. Providing a major boost to the ‘Make in India’
campaign.
• 4. Achieving 22% tax to GDP ratio by 2023 - up from the
current 17%.
• 5. Achieving 36% of investment rate by 2023 - up from the
current 29%.

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 Literature
• https://www.ibef.org/economy/economic-survey-2019-
20
• The relationship between competition, competitiveness
and development, UNCTAD 2009
• T.Siudek, A.Zawojska: „ COMPETITIVENESS IN THE
ECONOMIC CONCEPTS, THEORIES AND EMPIRICAL
RESEARCH” SGGW, 2014
• Data: GUS, FDI Confidence Index 2018-2019 A.T. Kearney,
Eurostat, Narodowy Bank Polski, World Investment
Report 2019 UNCTAD, IMAA, www.ceicdata.com, Raport
Deloitte, The Asian Development Bank, IBEF.org, FAO,
World Bank, IMF, PwC.

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