Kh.

Rebita Chanu
 Introduction
India and china emerging global players:

 High economic growth rates

Rapid raising share in world
Large inflows of FDI
Engines of demand growth in commodities
Positive demographics
 Overview
The first is look at china with infrastructure where is China and
where is 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

If China opened up in 1978, India did so in 1991 i.e 14 yrs after
China therefore any comparison of India of today should be made
with china as it was more than a decade ago as emerging global
powers now

Foreign inflows into china jumped substantially in the early

1990’s and those into India have jumped in the mid -2000’s.
 Economic Fact Sheet
China India
GDP- real growth rate:
9.8% (2008) 6.6% (2008)
13% (2007) 9% (2007)
11.6% (2006) 9.6% (2006)

GDP – per capita (PPP – Purchasing power parity)

$6,000 (2008) $2,800 (2008)
$5,500 (2007) $2,700 (2007)
$4,900 (2006) $2,500 (2006)
note: data are in 2008 US dollars

GDP – Composition by sector:

agriculture: 10.6% agriculture: 17.2%
industry: 49.2% industry: 29.1%
services: 40.2% (2008) services: 53.7% (2008)
 Comparing India and China’s Growth
Stories
Indicators India China
Political System Multi-party One-party
Democracy authoritarian rule
Speed of Growth Economic reforms Economic reforms
started in 1991. started in 1978.
Average 6% growth Average 9.5%
rate in past two growth rate in past
decades. two decades.
Areas of Rising power in Dominant in mass
Specialization software, design, manufacturing,
services, and electronics and
precision industry. heavy industrial
plants
Comparing India and China’s Growth Stories
Indicators India China
Foreign Direct 6.8% (up from 17.8%
Investment 0.3% in 2004)

Future Areas of R&D, bio- IT business, services

growth technology, high- and continued
value IT enabled manufacturing
services (legal,
medical,
engineering
architecture),
manufacturing,
agro-based industry
 Comparison…
 India lags behind china in infrastructure.

 China has a weak banking and legal system.

 India has the advantage of the English language which has

made it easier to participate in the global economy.

 What holds India back are bureaucratic red tape, corruption

and its inability to build infrastructure fast enough.

 According to Peter Drucker, India has managed rural to urban

transition in a relatively smooth and peaceful manner, which
China is still struggling to do.
 “GDP Growth 2000 to 2050”
[2003 bn US Dollars]
45000

40000

35000

30000

25000

20000

15000

10000 Japan
Russia
5000
Brazil
Germany
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Source: Goldmann Sachs: The Path to 2050

 “SECTOR-WISE BREAK-UP OF ECONOMIES
CHINA & INDIA”

100%

50% Services
Industry
Agriculture

0%
Sectorwise Sectorwise Sectorwise Sectorwise
Break up of Break up of Break up of Break up of
China GDP China India GDP India
Population Population

India’s 54% of population is engaged in Agriculture but only accounts for 17% of GDP
“GROSS DOMESTIC SAVINGS
CHINA & INDIA”

• China & India: Gross Domestic Saving as a % of GDP

 India - Low penetration and underserved market

Per Capita Consumption of Electricity Comparison with China

22000

18,408

India China
14,240
(Kwh/year)

Installed capacity in 2006

132 622
(GW)
8,459
8,231

7,442

6,756

6,425
Per capita consumption
618 1,684
(per kWh)
2,340

1,684
Capacity growth rate over
4.4% 11.8%

618
the past 6 years
0

Capacity addition in past 6

30 303
Brazil
Germany
United

France

Japan

Federation

China

India
Canada

States

Kingdom

years (GW)
United

Russian

• Low penetration providing significant opportunities for future growth Over 400
million people without appropriate access to electricity

Large investment required to achieve Govt. target of per capita consumption of 1,000 KWh by 2012

Source: World Energy Outlook, 2006; Human Development Report 2007-08, Source: China Electricity Council, China
Power Year Book, Government of India, Ministry of Statistics & Programme Implementation
 “INFRASTRUCTURE * INVESTMENTS”

* Transport, Communication & Power

Source: China Statistical Yearbook, RBI, Morgan Stanley Research

 Education system
Growth rate-India@17%, China@13%

Primary, secondary education, vocational education trainning

in china results in 99.1% literacy rate.
Where as in India it is 50 to 60 %

Adult literacy India -61%

China-91%
Expenditure on education India- 10.7%
China -12.8%

But coming to quality education India is far more better than

china
OIL AND GAS

bl
 Foreign Trade
Indian exports $13.94 billion in august 2009 where as china is
$ 95.41 billion.

Indian imports amounted to $130.36 billion where as china is

424.59 billion

China: Rapid export growth involving aggressive increases on

world market shares, based on relocative capital attracted by
cheap labour and heavily subsidised infrastructure.

India: Lower rate of export growth, with cheap labour due to

low absolute wages rather than public provision and poor
infrastructure development. So exports have not yet become
engine of growth, except in services.
 Rates of investment
 The investment rate in China (investment as a share of GDP)
has fluctuated between 35 and 44 per cent over the past 25
years, compared to 20 to 26 per cent in India.

 Infrastructure investment from the early 1990s has averaged

19 per cent of GDP in China, compared to 2 per cent in India.
 Role of FDI in China
 China can afford to have such a high investment rate because
it has attracted so much foreign direct investment (FDI.

 But FDI has accounted for only 3-5 per cent of GDP in China
since 1990, and at its peak was 8 per cent. In the period after
2000, FDI was only 6 per cent of domestic investment.
Where as India is only 4%.

 Recent inflows of capital have not added to the domestic

investment rate at all, macro economically speaking, but have
led to the further accumulation of international reserves, now
increasing by more than $120 billion per year.
 Poverty reduction
 China: Officially 4 per cent of the population now lives under
the poverty line, unofficially around 12 per cent. (Reflects
earlier asset redistribution and basic need provision in China
under communism, plus larger mass market and role of
agricultural prices.)

 India: poverty ratio much higher and persistent, between 26

per cent and 34 per cent depending upon how one interprets
the NSS data.