METU/SFL Spring 2024

DBE Why India is not the New China

EPE READING PRACTICE (Instructor’s Copy)

A China’s economy is struggling, but another Asian giant, neighboring India, is suddenly on investors’ and
manufacturers’ radar. The first two decades of the 21st century were largely the story of China’s rise. Will the
next two be the story of India’s? There are plenty of reasons for optimism. The country’s population
surpassed China’s last year. More than half of Indians are under 25. And at current growth rates, it could
become the world’s third-largest economy in less than a decade. India’s equity market has now seen eight
straight years of gains. Worsening trade relations between the West and China helps its case. But India’s
path forward is likely to look very different—and more challenging—than China’s.
B While its labor resources are, in theory, plentiful, various barriers still make it difficult to connect workers
with employers. That makes it hard for households and companies to build up the savings that are needed
for investment booms. One such barrier is related to female workers. India has struggled to smooth the path
into the labor force—especially for women. Only a third of India’s female working-age population was in the
labor force in the year 2022, according to figures from India’s Ministry of Labour and Employment. That is up
by about 10 percentage points since 2018, but still below the global average for low-middle income
countries of around 50%, and far below China’s 71%.
C Another issue is that much of the improvement since 2018 is in rural, rather than urban workforce
participation. This does little help to provide labor force for labor-hungry urban factories. Large agricultural
subsidies (i.e., government’s financial support) and rural food aid may be one reason for the rural
improvement. A lower tolerance for traveling away from home to live and work in cities may be another,
compared with China, where many workers accept to live in dormitories. 45% of the Indian women surveyed
by the government last year said that child care and homemaking duties kept them out of the workforce.
D All these problems don’t mean that the recent progress in the country has been slow or that it won’t
continue. Big electronics assemblers, such as Foxconn and Pegatron, have invested hundreds of millions of
dollars in the country, and its share of global exports has risen. Demographically, India is where China was
when its growth was taking off in the 1990s. According to the U.N., almost one-fifth of the world’s 15- to 64-
year-olds will be Indian by 2030. India’s age-dependency ratio, the measure of the burden of child and
elderly care on households, has fallen to 47 in 2022 from 82 in 1967, according to the World Bank. Low
dependency ratios often help raise savings and investment. People can invest excess income rather than
spending it on children or elderly parents.
E India has been investing heavily in infrastructure in recent years, and the nation’s transport network has
improved. There are obvious improvements in these areas. (I) For example, the average speed of freight
trains has increased by over 50% in the past two years. Also, wait time at ports has fallen by 80% since 2015.
(II) India has a transportation system that is reminiscent of its time of colonisation. But the government is
already in debt, which may make continued progress difficult if a big private-sector boom doesn’t lift tax
revenues. (III) India’s public debt load stands at about 85% of Gross Domestic Product (GDP). It is second
only to Brazil among emerging economies. Central government capital expenditures will rise to 3.3% of GDP
by the end of this financial year. Paying for that level of infrastructure build will require higher revenues or a
lot more involvement from the private sector.
F This all makes it crucial for India to do everything it can to attract foreign direct investment, especially in
manufacturing. In order for India to keep its geopolitical weight, it needs outside investment to help push
the manufacturing sector’s share of GDP up from below 15% to somewhere near the official 25% target.
Recent signals are mixed. Foreign direct investment dipped in 2022 and 2023 after hitting record levels in
2020. Part of this decline is easy to explain: the collapse of the global technology bubble, of which India was
an important part. But foreign direct investment in sectors like computers, which was equal to about 0.5% of
 GDP in 2021, has also dropped back markedly. That is worrying because India desperately needs those labor-
intensive assembly jobs. Electronics giants like Foxconn are investing heavily, but are also dealing with
inflexible labor laws in the country, among other issues.
G For now, at least, India remains a primarily consumption and services driven economy. Unless it can truly
increase manufacturing investment from foreign countries, it may struggle to match the fast growth rates of
countries such as Taiwan and South Korea.
(Adapted from Wall Street Journal: https://www.wsj.com/economy/global/why-india-isnt-the-new-china-e61f4699?mod=india_more_article_pos3)

Mark the alternative that best answers the questions or completes the statements about the texts.
1. What does the writer imply by asking “Will the next two be the story of India’s?”
a)India will develop faster than China did in the first 20 years of the 21 st century.
b)The improvement in India’s economy could be impressive in the next two decades.
c) India will outperform many other countries in the region in trade in the near future.

2. Which of the following is TRUE about female workforce according to paragraph B?

a)In low-middle income countries, half of working-age women are employed.
b)The rate of women in workforce in India has remained steady since 2018.
c) China has fallen behind similar countries in its rate of working women.

3. Which one can be inferred about rural workforce in paragraph C?

a)Before 2018, urban workforce improved more rapidly than rural workforce did.
b)Chinese female workers don’t think their wages are worth leaving their rural home.
c) It might not have improved that much if farming was not supported by the state.

4. Statistical data in paragraph D clearly show that ____.

a)Indians are now spending less money on family members requiring assistance
b)the progress rate of India’s economy will surpass that of China in the next decade
c) the population growth in India is in correlation with its age-dependency ratio

5. Which sentence does NOT belong in paragraph E?

a)I b) II c) III

6. Which of the following best summarizes India’s situation explained in paragraph F?

a)Foreign direct investment in India has recently stopped increasing because of the collapses in
technology and computer sectors.
b)Outside investment in India, which has fluctuated due to various reasons, is crucial for the country’s
growth.
c) The foreign companies that invest in India are having difficulties, and this is one reason for their leaving
the country.

7. The word “revenues” in paragraph E means ___.

a) earnings b) taxes c) prices

8. The word “manufacturing” in paragraph G means ____.

a) construction, large-structure building b) corporate, business corporation c) industrial production