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China India Growth Industrialisation and Inequality - JG
China India Growth Industrialisation and Inequality - JG
Asian century?
Driven by perceptions of growth prospects of China
and India in particular.
Both China and India have large populations covering
substantial and diverse geographical areas, large
economies with even larger potential size.
Current “success stories” of globalisation: two
economies that have apparently benefited.
Success defined by the high and sustained rates of
growth of aggregate and per capita national income;
the absence of major financial crises; and substantial
reduction in income poverty.
Catching up?
Table 1: Selected economic and productivity indicators for United States, China, and
India: 1998–2007
Productivity growth
(% average annual change) GDP (US$)
Country 1998– 1998– 2003– Per employee Per capita 2009
2007 2002 07 2007 2009
United 1.6 1.8 1.3 100 100 100
States
China 10.3 8.5 9.7 19 22 80
India 4.2 2.8 6.3 11 10 28
NOTES: Productivity growth measured on basis of GDP per employee at 1990
purchasing power parities. GDP per capita at 1990 purchasing power parities.GDP is
U.S. dollars converted at 2005 purchasing power parities.
SOURCE: The Conference Board, Total Economy Database (September 2010),
http://www.conference-board.org/economics, accessed 3 November 2010 and
National Science Board, 2010
India and China Relative to the World
350.00 350.00
60.00 60.00
300.00 Agriculture, 300.00 Agriculture, value
50.00 50.00
value added (% added (% of GDP)
250.00 of GDP) 250.00
40.00 40.00
200.00 200.00
Employment in Employment in
30.00 30.00 agriculture (% of
150.00 agriculture (% of 150.00
total total employment)
20.00 20.00
100.00 employment) 100.00
1968
1972
1964
1976
1980
1996
2000
2004
1988
1992
1984
1960
1965
1970
1975
1995
2000
2005
1980
1985
1990
Structural change in the Indian economy
Primary Seconday Teritiary
1950-51 52.6 14.5 32.9
1960-61 42.8 19.6 37.6
1970-71 42.4 20.8 36.8
1980-81 35.7 24.7 39.6
1990-91 29.3 26.9 43.8
2000-01 23.4 26.2 50.5
2007-08 17.8 29.4 52.8
Occupational distribution
70
60
50
40 Primary
Secondary
Tertiary
30
20
10
0
Chinese characteristics
After 1978, decollectivization, price increases, and the relaxation
of local trade restrictions on most agricultural products
Spurred the takeoff of China's agricultural economy from 1978
to 1984. Grain production increased by 4.7 percent per year, and
fruit, red meat, and fish production grew by 7.2 percent, 9.1
percent, and 7.9 percent respectively.
Agricultural growth decelerated after 1985, but the country still
enjoyed agricultural growth rates that outpaced the rise in
population.
Agriculture contributed more than 30 percent of GDP before
1980, it fell to 16 percent in 2000, and its share of employment
fell from 81 percent in 1970 to 59 percent in 2000.
The share of primary products, especially those from
agriculture, in total exports was over 50 percent in 1980, it fell
to only 10 percent in 2000. Over the same period, the share of
food in total exports fell from 17 percent to 5 percent.
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. This in turn required
suppression of domestic consumption.
45.00
39.08
40.00 38.29
37.08
34.89
33.95
35.00
29.56
30.00
26.18
25.13
25.00 23.07 23.33
22.60
25.40 China
23.51 India
19.04
20.00 21.32
20.59
19.21
17.57
15.00
5.00 7.13
6.39 6.21
5.31
0.00
1978 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Goods in China and Services in India
Chart 2: Exports of goods (% of GDP)
40.0
35.7
34.8
35.0 33.8
31.6
30.7
30.0
26.7
25.0
22.4
20.8
20.1 China
20.0
17.6 India
16.4
14.5
15.0
13.0
12.2 12.5
10.8
10.1 10.2
10.0 9.4 9.4
8.8
8.2
5.8
5.0 4.1
0.0
1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008
India: Not a mercantilist success
44.0 68.0
66.0
42.0
64.0
40.0
62.0
38.0 60.0
36.0 58.0
56.0
34.0
54.0
32.0
52.0
30.0 50.0
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
Investment rate Consumption rate
So what explains Indian GDP growth success?
Boom dependent upon greater global integration, with both
trade and financial liberalisation playing roles.
Financial deregulation encouraged capital inflows, sparked a
retail credit boom and combined with fiscal concessions to spur
consumption among the rich/middles classes especially in urban
areas, leading to rapid increases in aggregate GDP growth.
Constrained fiscal policies, poor employment generation and
persistent agrarian crisis reduced wage shares in national income
and kept mass consumption demand low.
Rise in profit shares and middle class demand generated higher
rates of investment and output over the upswing.
Public spending as principal stimulus for growth was substituted
in the 1990s with debt-financed housing investment and private
consumption of the elite and burgeoning middle classes.
So this Indian growth story is not so different from the
speculative bubble-led expansion of several other developed and
developing countries in the same period.
Employment trends in India
The Chinese case
Elasticity of employment with respect to GDP over
1995-2008 was 0.03. So a 1 percent increase in GDP
was associated with a .03 percent increase in
employment. This includes agriculture where
employment is declining.
In secondary (manufacturing and construction) and
tertiary sectors, output elasticity of employment was
0.13 for both, also very low.
Decreasing Employment Elasticity in China
30000
EMP-CITY-SOE
EMP-STF&WRK
EMP-CITY
25000
20000
15000
10000
5000
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Unorganised and migrant workers in China