A Comparative Analysis of The Economic Growth of China and India

Social Science Review [The Dhaka University Studies, Part-D], Vol. 30, No.
2, December 2013
A Comparative Analysis of the Economic Growth of China and India
Rezuanul Hasan Rana1
Suborna Barua2
ABSTRACT
Indian and Chinese economies are growing rapidly among the Asian countries due to economic reforms.
The prime objective of this study was to compare and analyze the economic status (in terms of economic
growth, FDI inflows, export and import, remittance, labor force, tax and tariff) of both the countries. This
comparative study was conducted using a descriptive method from the secondary sources of data of
UNCTAD Stat and Morgan Stanley Research from the period of 1980 to 2009. The study showed that
China put greater focus towards infrastructure development, removing tariff and non tariff barriers,
development of skilled labors, cost effectiveness and speedy decision making ability. On the other hand
India’s focal point was the service sector like IT-sector. The study also indicated that India had better
financial, political and legal practices as compared to China.
Keywords: India, China, Reform, FDI, GDP
JEL Classification: E60, E61, O10, O11, O2, O4
1
Lecturer, Department of Economics, Faculty of Arts and Social Sciences, American International University-
Bangladesh (AIUB), Bangladesh. e-mail: rezwanul_54@yahoo.com, phone: + 88-01912131579
2
Lecturer, Department of International Business, University of Dhaka, Dhaka, Bangladesh. e-mail:
subornobarua@gmail.com ; phone: + 88-01911448162
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Social Science Review [The Dhaka University Studies, Part-D], Vol. 30, No. 2, December 2013
I. INTORDUCTION
1.1 Overview of the Economic Status of India and China
India and China are the home of world’s 40% of the population and their total output is almost
20% of the global economy on the basis of Purchasing Power Parity (PPP), which was only 10%
in the year 1990 (Ahya and Gupta, 2010). They are increasingly becoming the economic giants
of the world. These two countries has a lot of things in common such as their size, their
enormous supply of cheap labor and both are transitioning from being a heavily state controlled
and regulated economies to somewhere close to open market economy. Both the countries have
made significant economic reforms to expedite the economic growth. The failure of the then
economic policies triggered the internal and external reforms in the late nineteen seventy’s. Since
the reform China’s economy has seen some amazing growth rates, scoring more then 9.4% per
annum Gross Domestic Product (GDP) growth for the last 25 years (Figure 1). On the other hand
India commenced its restructuring of economic policy in the early 1990’s. And since the reform
took place its average annual GDP growth rate from then is 7% or 8% (Figure 1). China’s higher
rate of savings has contributed to the domestic investment of 35%-40% of its GDP and this rate
is which is almost double of that of India (Ahya and Gupta, 2010).
Economic reforms at and the fast rate of globalization helped the two countries to achieve high
economic growth in the past two decades. China’s fast track growth model was developed by the
improvement of human capital, high rate of domestic savings, rising Foreign Direct Investment
(FDI) and positive growth of demography. On the other hand, India developed a well organized
institutional framework including establishing democracy, rile of law, transparency of the
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financial system, protection of property, relaxation of restrictions on the foreign investment. If
similar patterns of growth are to be seen in the next 25 years, China and India will be part of the
major industrialized countries of the world and thus would be examples for the other least
developed countries of the world.
The study will analyze and compare various reforms, development, remittance inflow and
changes in attitude that both these countries pursued to successfully get on to the track of
economic progress.
1.2 Financial Sector of India and China
Another key asset in strong financial growth is a strong financial system. A sound financial
system can encourage saving and capital investment. In the Chinese banking system the biggest
players are the four sate-owned banks (Table 1). Chinese banks are more open to credit risk
because of a faulty credit appraisal system. They have huge number of nonperforming credit due
to low asset quality. Government bureaucrats and politicians have a strong influence on the state
owned banks (Ahya and Xie, 2004). Their influence often adversely affects the credit risk
assessment of the banks. Until 2007 Chain’s banks had to face very low competition. Newly
introduced foreign banks in 2007 did bring some challenges like product innovation, risk based
capital pricing and a market oriented focus for the Chinese banks. Compared to China, India’s
banking system is much more organized and follows financial practices of the international
market (Ahya and Xie, 2004). The private and foreign banks working in India established an IT
based solution for a centralized risk assessment system. Thus the credit appraisal system in India
is more solid than in China.
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1.3 Problem Statement
China and India are the two Asian giants who are gradually becoming major super powers of
world economy. The successes stories of both the countries are amazing considering the fact that
their economic condition even 30 years ago was pitiable. They carried out noticeable structural
and economic reforms to fast pace their growth. There are some astonishing similarities among
the two countries. They are large countries by geographical measure and the two most populous
countries in the world with almost 2.5 billion people (UCTAD Stat 2010). Both the countries
possess strong socialist view. They still have lots of government controls, restrictions, rules and
regulation for the outsiders to invest and operate business in various sectors of their economy.
Corruption, income inequality and political influence are familiar terms for both the economies.
The tale of their economic growth is even more interesting. China started its economic reforms
during 1980’s and with in 30 years it has established it self as the second biggest economy of the
world recently. In the last 10 years they have witnessed average GDP growth of 10% per year
(Figure 1). India started its economic reform almost a decade after China and quickly
concentrated on the service and knowledge based industry. Until the year 2004 their GDP growth
propelled by the service industry saw the growth rate around 6.5% or more for the last 15 years
(Ahya and Xie, 2004). Their astounding economic growth and absolute radical approaches for
the economic development is second to none. It has prompted many economists to study the
growth model they pursued and to comment on the sustainability of the two economies. Why
Chinese economy is so far ahead of India at the moment? Is it because, they started the economic
reforms early or their less restriction on FDI. Or is it because of their centralized decision

making process which is quick and effective. Should China focus more on the IT sector or
should India open up more, to welcome high volume of FDI? Should India spend more for their
infrastructure development or how much China needs to restructure its faulty financial system?
Researchers are trying to find the answers. This study will compare some of the key factors of
economic growth of China and India and answer the questions above. The paper will give us an
overview of the level of infrastructure development, tax system, FDI, education, remittance,
institutional frame work, financial and political system of the two countries. The study also
focused on the different dimensions to the economic approach they have taken.
1.4 Objectives of the Study
(i) To compare the economic growth model of the two countries.
(ii) To analyze the trade situation focusing the various economic factors of the two countries.
(iii) To compare and analyze the financial and economic reforms of the two countries.
II. LITERATURE REVIEW
In a study of competitiveness between China and India’s economic transformation it has been
establish that there are significant differences in the structural transformation and economic
development of India and China. China’s growth almost touched the double digit while India’s
growth was around 6% annually during 1990 to 2006 (Figure 1). This high growth rate helped
china to double its GDP in seven years (Przemyslaw and Kowalski, 2008). A study conducted by
Ahya and Xie (2004) predicted that over the next three to four years China and India will
continue to be highly attractive destinations in the global business environment. China is
establishing itself as the global manufacturing leader and India the service workshop to the

world. Holz, 2006 commented that Chinese economy is growing so rapidly that by the end of
2008 China will be the 4th largest economy of the world shy of only USA, Japan and Germany.
This prediction has been proved right by fast pace economic growth of China which is only
second to USA in 2010. According to the research conducted by Tong (2008) foreign direct
investments, especially those from neighboring economies, played and important role China’s
trade expansion and subsequent structural upgrading.
In their follow up report of the competitiveness of China and India, Ahya and Gupta, (2010)
showed that massive number of working age population will play an important role in making
these two countries globally competitive. Multinational companies have already planned them to
their global business plan and these countries are predicted to be the drivers of global
productivity. Ahya and Gupta, (2010) forecasted that, by 2020 china’s GDP will surplus US
GDP only if China can continuously produce low cost skilled labor and carry out some key
structural reforms, for example the financial sector. They expect China and India to become two
dominant economic powers in the next 20 years. Gupta and Raju (2006) carried out a study on
the pattern of economic growth of India and China. Their study shows that while China had 10%
economic growth for the last 15 years India averaged round 6% a year. They also commented
that like many other researchers that the IT industry was the main driving force of Indian growth.
India also has a competitive advantage over China with its larger pool of English speaking labor
force. Thus a large number of literatures have discussed the growth of these two countries.
Researches have been done on the effect of the enormous FDI inflow in the real growth of GDP
in China and India. Again, the main factor responsible for the FDI flow is the change of trade
related policy of these two countries through relative openness of the economy.

Basu (2007) quoted from Klein (2004), analyzed political character of these two countries.
According to them one of the biggest advantages of India over China is that it is the largest
democratic country of the world. They also said that though these two countries pursue two
different political views the story of their economic growth have some great similarities This
view was echoed by Sen (2005) quoted by Basu (2007), both of them argued that India has a lot
to learn form China to imitate the past paced economic growth of the new economic power. But
china should also learn the democratic practice of India. The authors believe that having a good
democratic society, independent judiciary system and practice is key to sustainable economic
growth.
A complete analysis of all the researches conducted to study the economic growth of China India
shows that the author’s have highly praised the efforts of both China and India. Extensive
economic, structural, social reforms, key infrastructure development and low cost skilled labors
are the inputs of their success. China focused on the manufacturing to excel in the global
business and India still largely relies on the service sector to propel the economic wheel.
III. DATA COLLECTION AND METHODOLOGY
Secondary data was collected from various sources to compare the economic indicators of the
two countries. The main sources of data were from two special economic research report
published by Morgan Stanley Research conducted in the year 2004 and 2010. Secondary data
were also collected form the United Nations Conference on Trade and Development (UNCTAD
Stat 2010) which contains the full time series data on the following key economic indicators such

as GDP growth rate, export-import, FDI, tax system, demographic situation and financial system
from the period of 1980 to 2009.
In this study, a descriptive method was used to compare the various aspects of the two
economies. Assessments were made on the different types of economic reforms. Indicators like
the amount of FDI received, GDP growth, growth in export and import, age dependency ratio
were primarily considered to compare the two countries. Similar methodology was applied by
the various authors and organizations for comparing the growth of different countries of South
East Asia and BRIC (Brazil, Russia, India, and China) countries. For instant, financial
organization such as Morgan Stanley used descriptive method in the year 2004, 2006 and 2010 to
compare the economic reform of India and China and Betina, Elina and Will (2006) used GTAP
along with descriptive analysis to compare the implication of rapid growth and structural
changes of China and India.
VI. RESULTS AND DISCUSSIONS
China and India have taken different paths to the economic growth and development. China’s
growth strategy has involved the expansion of labour –intensive manufacturing sectors, such as
the textiles and consumer goods, to take the advantage of its abundant supply of labour, raw
materials and technical knowledge in these sectors. On the other hand India’s emphasis was on
less regulated service sector as the growth engine of the economy. The service sector of India has
now accounts for 50% of the India’s total output (Ahya and Gupta, 2010). The information
technology sector has been the most successful sector for Indian economy. It has been a
successful one only because of the economic reforms and it’s abundant of English speaking,
strong technical education system, and professional talent in the technological sector with

programming and managerial experience is the driving force of India in this sector (Ahya and
Xie 2004). In this study comparison was made on several indicators such as economic growth,
FDI, remittance, export and import which are presented below.
4.1 Economic Growth
In comparison to China, India followed a very unique model of growth which was a slow and
gradual process with strong economic base. They have made sure a well developed institutional
frame work and establishment of democracy. Now they have strong macro stability and reduced
volatility in output. Before going for fast track growth India reformed their market regulations,
rule of law business investment taxes and foreign capital investment. Figure 1 shows the GDP
growth rate of both the countries. India achieved GDP growth rate of 8% for the last 10 years
while China pursued fast track growth model was and achieved an average of 9.4% GDP growth
for the 25 years after initiating reforms from 1980’s to 2004. This high paced economic growth
has been accomplished through major structural reforms like improving the human capital and
implementing aggressive labor reforms high level of domestic savings, coupled with positive
demographic changes and by attracting soaring amount of FDI (Ahya and Xie 2004). The
government focused on building infrastructure and improving the cost effectiveness of the
country’s businesses.
4.2 Export and Import Scenario
Our analysis of the export‘s of China and India shows us that India is currently biased towards
higher labor intensive sectors. India’s main export products include textiles, IT services,
agricultural products, gems and Jewelry (Figure 2). On the other hand China’s showed grate

potential in manufacturing segments as it has been a successful force in exporting electric and
electronic products, computer and telecommunications equipment, machinery and high quality
and fashionable garments. India achieved major success in exporting software and iron and steel
for the last 10 years. But in almost all other areas China’s export represents huge multiple of
India’s export (Figure 2).
Over the next 15 -20 years we can see India and china converging as major economic powers.
Their combined export may rise up to 30% of the total global export by 2030.If India and China
maintain their current growth rate the nominal dollar GDP of the two countries may reach up to
$1.3 trillion and 3.9 trillion respectively (Ahya and Gupta 2010).
Figure 1 and 2 shows the export and import trend of merchandise and service of China and India.
It is evident form the data that up until 1990 India was very close to China in terms of the
volume of Export and Import. Post 1990 China started to widen the gap and after the year 2000
the gap between Export and Import volume started the increase at a increasing rate.
4.3 Tariff Rate
China openness of China towards international trade was much faster and earlier then India.
During 1980’s China considerably reduced its tariff. Its weighted import tariff rate in relation to
dropped from 10% in 1985 to 3% today. But India has been slow to cut the tariff. Its weighted
tariff cost was still above 20% in the year 2000 (Figure 5). China’s import tariff averaged
around 50% during 1980’s, which has been reduced to less than 10% in 2009 on the other hand
India also lowered its import tariff rate to almost 6%-7% in 2009 compared to its tariff of 47.8%
during 1991 (Ahya and Gupta 2010).
4.4 Remittance
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Remittance of a country has huge impact not only on the reserve of the foreign currency but also
on the development of the society and the income of the mass people. The data of inward
remittance flow (Figure 6) shows that China and India had very poor amount of remittance
collection until 1995 compared to the huge population of both the countries. But after 1996 the
high volume of remittance inflow has aided China and India to develop their economy. The data
also shows that the amount of migrant remittance received has remained are almost level since
the year 2000 to 2008.
4.5 FDI Inflows
India is way behind if we measure the equity capital flow which helps a country to accelerate
production growth. India’s fraction of global FDI is roughly around 1% where as China’s
percentage is more than 12% in the year 2004, even countries like Brazil and Mexico receives
more FDI annually than India (Ahya and Xie 2004). But India has taken some key steps like
allowing multiband retail distribution and India’s FDI inflow to its percentage of GDP increased
from 0.75% in 2000 to 3.0% in 2009 (Figure 7). China started internal and external reforms in
1979 to attract FDI. Establishment of Special Economic Zones (SEZ’s), reducing fees for labor
and land, extending the duration of joint venture agreement, huge investment to build up world
class infrastructure, stable political situation, skilled but low cost labor, reduction of corporate &
income tax and joining the World Trade Organization (WTO) all contributed to the heavy inflow
of foreign capital in China. India started liberalizing FDI policy in early nineties (Ahya and Gupta
2010). But the flow of FDI in India is not satisfactory due to corruption, delay in making key
government reforms, red tapes at every level, under developed infrastructure, higher tax and
tariff compared to other developing nations and inefficient law related laws.
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4.6 Labor Force
One of the growing importance of China and India in the world economy is that they have more
than 40% of the world’s total working age population (UNCTAD Stat 2010). The surplus of
working people in these two countries helps them to contribute low cost labors for their
respective economy. But the countries have witnessed sharp reduction in their age dependency
ration for the last 30 years. China has focused on improving their human capital by dramatically
increasing the literacy level. They have also managed to create enough employment for the
growing working class which aided in higher savings, investment and more growth. Although
India falls behind in basic education, the country has better availability in English speaking
workforce and IT graduates. This helped them to capture the billion dollar global IT service
business. It has been found from the research that from the year 2025 the age dependency ratio of
China will increase again and the availability of cheap labor will go down (Ahya and Gupta 2010).
India on the other hand possesses a surplus stock of tertiary educated people who meets the
current and future economic demand. Another important advantage of India is that the medium
of education is English in urban areas. But productivity wise India lags behind. According to the
recent study by Confederation of Indian Industry (CII) quoted by (Ahya and Gupta 2004) labor
productivity in Chinese manufacturing sector is 10% to 300% more than India. India’s labor law
is a restrictive one compared to the laws of China. It’s much harder to fire of hire a worker in
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India. To get the competitiveness over china India has to ensure some structural changes along
with a flexible labor law.
4.7 Indirect Tax
India’s indirect tax rate is much higher than China which made its products comparatively more
costly. At the inception of the millennium the collection from custom duty in India is 15% of the
total import. For China it was only 3% (Ahya and Xie 2004). India’s tax system is more complex
which makes it difficult to efficiently allocate the resources and higher production. Inefficient tax
collection system, lack of awareness from the tax payers and undue exemptions in India results
in a squat rate of tax collection. But it is difficult for a country like India with very high fiscal
deficit to reduce tax rate. A single national Value Added Tax (VAT) system will solve the
problem which will eventually improve the tax to GDP ratio. At the beginning of the millennium
the value added tax in China was 17% and the base corporate tax rate is 33%, after 6th year for
the joint venture and foreign enterprises. But at the same period the corporate tax for foreign
companies in India was 41% (Ahya and Xie 2004). Recently the corporate and personal tax rate
came down to 30% and country is reforming its multi rate sales tax system into a single rate
system (Ahya and Gupta 2010).
4.8 Infrastructure Development
China spends six times more than India in building physical infrastructure (Figure 8). After
initiating reform in 1980’s Chinese policy makers realized that sustainable economic growth can
only be possible with world class infrastructure. India’s investment in infrastructure is increasing
as well, but the spending is not enough to stimulate China’s level of economic growth. China’s
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highway networks almost seven times higher than India. According to Ahya and Xie (2004) the
lead time in Chinese ports are 2-3 weeks compared to 6-12 weeks in India. China enjoyed
surplus of electricity in the 2010 where as India still electricity shortage in the pick hours. Lack
of quality infrastructure in the electricity sector increases system loss and inefficient distribution.
But India has en edge over China in the telecom infrastructure. Increased involvement and
competition from the private sector make the Indian telecom industry more competitive in the
between the two. India’s success in IT service sector has been achieved on the availability of low
cost telecom infrastructure and highly skilled labor. The same strategy is applicable of if they
want to succeed in the manufacturing industry.
India has to develop good investment environment for the private sector so that the private
investors are encouraged to form a joint-venture partnership with the government to build up the
key physical infrastructure of the country.
4.9 Cost Effectiveness
If we compare the cost effectiveness of the two countries in setting up and doing business, China
gets the upper hand. The cost of using most infrastructures like transport cost, port handling fee,
electricity cost are 50% to 80% cheaper in China (Ahya and Xie 2004). India is one of the
highest among the developing countries in cost of doing trade, as percentage of landed cost. The
tariff charged for electricity is one of the highest in the world.
4.10 Fiscal Deficit
The government of India has to face the dual problem of cutting fiscal deficit and increasing
infrastructure development. India needs to reforms its income tax collection to reduce any kind
of fiscal deficit. They need to make some heavy investment on infrastructure development. If the
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government can’t increase the tax collection (especially income tax) then they will never be able
to tag along the level of infrastructure development of China. A good fiscal balance will help the
country to build a highly skilled working population and also to increase the countries human
development index. This will also facilitate agricultural GDP. China managed its fiscal deficit far
better than India. While India’s fiscal deficit is on an average more than 6% of GDP between the
periods of 1980 to 2000 the deficit of China for the same period was very close to zero (Figure
9). The figure gives us a clear idea of the high fiscal deficit of India compared to China.
V. CONCLUSIONS
The basis of a strong, sustainable economic growth is directly related to high level of
productivity in the economy. It can be in the manufacturing or service sector. The role of the
government is to facilitate the industry with favorable policies and required infrastructures. They
also have to remove all the barriers to trade. As the numbers of investments grow up, it creates
competition. Higher competition reduces cost and increases productivity.
India still has a lot to prove in the manufacturing sector. They need to make substantial
investment to build up a world class infrastructure which will attract foreign investments. Which
is a appalling need for as the country has low level of capital accumulation. Higher investment in
the manufacturing sector will also ensure productive employment opportunity for the less skilled
labor force of India. India still has power shortage which they need to address very quickly. The
government should encourage foreign investment in the power sector. Their tax structure has to
be reformed very quickly and the decision making at the government level has to be very swift.
On the other hand, financial sector reforms and implementing market oriented institutional
framework are the two major responsibilities to address of the Chinese government. China has a
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huge potential in the IT service and outsourcing business, if they can build up skilled labors with
English speaking abilities. China also needs to lessen government control and encourage more
private competition, which will improve productivity in some key sectors like banking.
In the concluding remarks, it can be said that both China and India are nicely poised to become
economic super powers with in the next 20 years. They will continue to do well in the labor
intensive sectors. If these countries can take the necessary steps discussed in this paper they will
be able to move in to the next step of the ladder and produce quality capital intensive and
resources based products and increase their share of global export. Though China is well ahead
of India in the manufacturing sector India has great potentiality in IT service sector. With the
improvement of the demography, globalization and key structural reforms India has the potential
to outpace China’s GDP growth rate with in the next 10 years.
VII. IMPLICATIONS OF THE STUDY
To build up a society with sustainable growth equal participation by all the members of the
society is very important. Creating income generating activities for the lower income class is
key, to sustainable economic growth. Investment in infrastructure and manufacturing activities,
employment generation for the mass, capital accumulation, creating a suitable environment for
the small entrepreneurs will help a populous country like India to achieve higher growth.
According to statistics (UNCTAD Stat 2010), in India about 5.5 million students drop out of the
school at primary level. Thus the government has to increase efforts to primary level education.
Apart from having a highly skilled workforce level in the IT and Engineering sector India needs
to build highly skilled administrators, efficient factory workers, doctors, social workers and
leaders to achieve the level of China’s economic growth. The flexibility and availability of
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skilled labor will help India to attract investment both local and foreign. These investments will
produce more jobs and incomes for the country.
India should also target to improve the public savings. Higher public saving means greater
amount of capital and the government can turnaround these resources to create productive
employment spawning in the country. Through building up infrastructures, ensuring transparency
in doing business, industrial reforms and bringing up positive tax reforms India can augment its
capital accumulation. By ensuring all these changes India can boost their FDI and private local
investment which is much lower compared to China for the last 20 years.
For vast country like India it is difficult to develop economic infrastructure all over the country.
To deal with the problem India have to develop more special economic zones in strategic areas
of the country. But Indian government has already addressed this issue and their trend in
infrastructure spending has gone up from 4% of the GDP in 2000 to 6.5% of GDP in 2008. We
believe India specially needs sustained investment in highways and power sector (Ahya and
Gupta 2010).
India complies on high tax rate for collecting higher tax. Although there were some reforms and
reduction of indirect tax rate in India, more reforms are necessary. They have to focus on direct
tax (Like Income Tax) to tackle the problem of increasing fiscal deficit, because indirect taxes
have a negative effect on investment and growth.
One of the key advantages China has on India is that it can make important economic decisions
much quicker than the later. Chinese states are encouraged to compete with each other in
attracting investment and make economic decisions for them. The decentralization process of the
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decision making will help fast pace the economic growth. Where, government’s role will be to
support the less developed states to keep the income inequality at an acceptable level.
China’s institutional structure lags behind India considerably. Chinese financial system is
dominated by four the state owned banks who face very little competition. Theses banks
accumulated a high amount of non-performing investments over the years. The state owned
banks in China are often used by the high level of government officials to invest in risky and
unsuccessful businesses. The central bank of China was also inapt to deal with frequent
overheating of the economy. A major financial sector modification is needed as a high
performing financial sector one of the key conditions of sustainable economic growth.
Transparency in the legal system and more focused development of human rights are biggest
challenges in front of China. Though, China succeeded in some major macro economic reforms
they have to work on building up there weak legal system and deal with the human right
allegations often raised against them by the rest of the world.
India is well ahead of China in the service industry. China should start looking at the
opportunities in the service sector (especially IT service). China needs to develop the number of
skilled labors in the IT service and improve the English speaking ability of the educated mass.
Increased focus on the higher education in case of China is absolutely necessary to be benefited
form the next wave if service sector globalization.
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Figure 1: Percentage GDP Growth Rate of China and India from 1971-2009
Source : Rana and Mahmud (2011)
Note: Authors used UNCTAD data of China and India from the year 1971 to 2009 to produce the figure.
21

Figure 2: China’s manufacturing products.
Source : Ahya, C. and Xie, A. (2004), Morgan Stanley Research. Pg- 39.
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Figure 3: India’s manufacturing products.
23

Figure 4: Exports of merchandise and services, China and India, annual, 1990-2009,
(Amounts in Millions).
Note: Authors used UNCTAD data of China and India from the year 1990 to 2009 to produce the figure .
24

Table 5: Imports of merchandise and services, China and India, annual, 1990-2009,
25

Figure 6: Tariff Rate and Custom Duty of China, Korea and India form 1985 to 2000.
Source : Ahya, C. and Xie, A. (2004), Morgan Stanley Research. Pg-27.
26

Figure 7: Custom duty collection as percentage of imports.
27

Figure 8 : Migrants' remittances, annual, 1980-2009.
28

Figure 9: Inward foreign direct investment flows, annual, 1986-2009 (Amounts in

Millions).
29

Figure 10: Spending on Infrastructure Investment
30

Figure 11: Fiscal deficit as percentage of the Gross Domestic Product.
31

Figure 12 : Labor Force of China, all sectors and agricultural sector, form 1980 – 2006
32

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Social Science Review [The Dhaka University Studies, Part-D], Vol. 30, No.

A Comparative Analysis of the Economic Growth of China and India

Rezuanul Hasan Rana1

Keywords: India, China, Reform, FDI, GDP

JEL Classification: E60, E61, O10, O11, O2, O4

1.1 Overview of the Economic Status of India and China

is which is almost double of that of India (Ahya and Gupta, 2010).

institutional framework including establishing democracy, rile of law, transparency of the

financial system, protection of property, relaxation of restrictions on the foreign investment. If

developed countries of the world.

1.2 Financial Sector of India and China

is more solid than in China.

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1.3 Problem Statement

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1.4 Objectives of the Study

(i) To compare the economic growth model of the two countries.

II. LITERATURE REVIEW

continue to be highly attractive destinations in the global business environment. China is

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trade expansion and subsequent structural upgrading.

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III. DATA COLLECTION AND METHODOLOGY

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from the period of 1980 to 2009.

changes of China and India.

VI. RESULTS AND DISCUSSIONS

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FDI, remittance, export and import which are presented below.

4.1 Economic Growth

4.2 Export and Import Scenario

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India’s export (Figure 2).

4.3 Tariff Rate

during 1991 (Ahya and Gupta 2010).

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the year 2000 to 2008.

4.5 FDI Inflows

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4.6 Labor Force

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with a flexible labor law.

4.7 Indirect Tax

system (Ahya and Gupta 2010).

4.8 Infrastructure Development

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want to succeed in the manufacturing industry.

key physical infrastructure of the country.

4.9 Cost Effectiveness

tariff charged for electricity is one of the highest in the world.

4.10 Fiscal Deficit

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competition. Higher competition reduces cost and increases productivity.

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to outpace China’s GDP growth rate with in the next 10 years.

VII. IMPLICATIONS OF THE STUDY

key, to sustainable economic growth. Investment in infrastructure and manufacturing activities,