WHY INDIA LAGS BEHIND CHINA?

Presented By
Bishnu Devi Shrestha
Parul Jain
Tarika Gupta
Vandana
INTRODUCTION

India and China emerging global players:

 High economic growth rates

Rapid raising share in world

Large inflows of Foreign Direct Investment (FDI)

Engines of demand growth in commodities

Positive demographics
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.

Since the two countries have similar labor endowments and

development lags due to government controls and protected nature of

their economies , they can be expressed to follow similar growth paths

on opening up…
Emerging markets compared
 PRE-CONDITIONS FOR A PEACEFUL
GLOBAL POWER TRANSITION

 Much of china’s dazzling infrastructure was been built in the late

1990’s and India is gearing upto the repeat that performance in

the latter part of this decade.

 Foreign inflows into china jumped substantially in the early 1990’s

and those into India have jumped in the mid -2000’s.

 Good education and health facilities are necessary
for inclusive development they are state subjects in
India and in China also, local government has the
large share of the responsibility for their provision

 The Chinese culture is more homogeneous and

Indian culture is great diversified

 Indian greater expertise with market also shows in

the financial sector, which is more deeper and more
robust than Chinese counterpart.
ECONOMIC FACT SHEET

Country Comparison to the world:  

GDP – Real Growth Rate: CHINA

1
9.8% (2008)
0.9
13% (2007) 0.8
11.6% (2006) 0.7

0.6

0.5 INDIA
CHINA
GDP- Real Growth Rate: INDIA 0.4

6.6% (2008)
0.3

0.2
9% (2007)
0.1
9.6% (2006) 0
SECTORS AGRICULTURE INDUSTRY SERVICES
ECONOMIC FACT SHEET

CHINA
GDP-Per capita (PPP-Purchasing power parity):
$6,000 (2008)
$5,500 (2007) 0.6

$4,900 (2006)
0.5

0.4
INDIA
GDP – per capita (PPP ) 0.3 CHINA
$2,800 (2008) INDIA

$2,700 (2007) 0.2

$2,500 (2006)
0.1

0
SECTORS AGRICULTURE INDUSTRY SERVICES
Note: Data are in 2008 US dollars
CHINA
GDP – composition by sector:
0.6

• Agriculture: 10.6%
• Industry: 49.2% 0.5

• Services: 40.2% (2008)

0.4

0.3 CHINA
INDIA INDIA

GDP – Composition by sector: 0.2

• Agriculture: 17.2% 0.1

• Industry: 29.1%
• Services: 53.7% (2008) 0
SECTORS AGRICULTURE INDUSTRY SERVICES
COMPARING INDIA AND CHINA’S GROWTH STORIES

Indicators India China

Political System Multi-party Democracy One-party authoritarian
rule

Speed of Growth Economic reforms Economic reforms

started in 1991. Average started in 1978. Average
6% growth rate in past 9.5% growth rate in past
two decades. two decades.

Areas of Rising power in software, Dominant in mass

Specialization design, services, and manufacturing,
precision industry. electronics and heavy
industrial plants
 Indicators India China
Gini index (standard
measure of income 36.8 47.0
inequality)

Foreign Direct 6.8% 17.8%

Investment (FDI)
Future Areas of R&D, bio-technology, IT business, services
Growth high-value IT enabled and continued
services (legal, medical, manufacturing
engineering
architecture),
manufacturing, agro-
based industry
COMPARISION
 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.
 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 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
-8-
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

-12-
GROSS DOMESTIC SAVINGS CHINA & INDIA
China & India: Gross Domestic Saving as a % of GDP

70

China India
60

50

40

30

20

10

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-14-
INFRASTRUCTURE AND INVESTMENTS

* Transport, Communication & Power

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
 PORT AND SHIPPING
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

Installed port capacity in China is 5.6 btpa whereas India’s capacity of ~0.75 btpa
 Container terminal capacity in China is ~100 m teus whereas India’s capacity of
8.6 m teus.

 The largest container vessel calling at Chinese Port is more than 13,000 teus
where as at Indian container terminal (JNPT) is 6,000 teus.

The berth length at Shanghai is 13,800 m and that at hong kong is 4,426 m
whereas total container berth length at JNPT is 2000 m and at 1280 m at Mundra.
 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

 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.
 STRUCTURAL CHANGE
 China: “classic” pattern, moving from primary to manufacturing sector,
which has doubled its share of workforce and tripled its share of output.

 India: Move has been mainly from agriculture to services in share of output,
with no substantial increase in manufacturing, and the structure of
employment has not changed much. Share of the primary sector in GDP fell
from 60 per cent to 25 per cent in four decades, but share in employment
still more than 60 per cent.
 TRADE PATTERNS

 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.
 TRADE POLICIES
 China: export employment was net addition to domestic employment, since
until 2002 China had undertaken much less trade liberalization than most
other developing countries.

 India: increases in export employment were outweighed by employment

losses especially in small enterprises because of import competition.
 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.
CONCLUSION
The two countries can develop similar
position on international negotiations to
counter pressure from lobbies that would
make developing countries bear much of
the cost of moderning the climate change
created by current develop nations.
At the same time, promoting technology
and renewable energy based solutions will
mitigate the need for intense future
competition over energy .
SO IT COULD BE CHINA AND INDIA IN
THE FUTURE, NOT CHINA VERSUS
INIDA.
THANK YOU