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Indian Economy : A Comparative Overview with China ART

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Indian Economy : A Comparative Overview with China ARTI NANAVATI PROF. OF ECONOMICS DIRECTOR, CENTRE FOR CANADIAN STUDIES MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA – PowerPoint PPT presentation

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Title: Indian Economy : A Comparative Overview with China ART


1
Indian Economy A Comparative Overview with
China
  • ARTI NANAVATIPROF. OF ECONOMICS DIRECTOR,
    CENTRE FOR CANADIAN STUDIES MAHARAJA SAYAJIRAO
    UNIVERSITY OF BARODA
  • VADODARA- 390002 GUJARAT-INDIA
  • DEPT. OF ECONOMICS, SIMON FRASER UNIVERSITY
    BURNABY, BC, CANADA
  • 18 JUNE, 2009

2
Some General Facts
  • India is the worlds second most populous country
    of over 1 billion people after China.
  • Urban population 28 of total. (China 39)
  • More than half of its population is 25 years of
    age. Demographic dividend.
  • Measured in USD exchange rate terms, 12th largest
    in the world, with a GDP of 3.32 trillion (PPP)
    , China ranked 2nd largest with GDP of 7.8
    trillion. (2008)
  • PCI 2,900 at PPP and that of China 6100 (2008)
  • Population below poverty line is 27.5 (2008
    est.) China 10
  • World Bank classifies India as a low income
    economy

3
  • The contribution of Agriculture, industrial and
    service sector (2007-8) in GDP has been 21,24 and
    55. ( In China the corresponding percentages are
    11.3, 48.6 and 40 in GDP 2008)
  • Agriculture is the predominant occupation in
    India, accounting for about 60 of employment (
    China 43) . The service sector makes up a
    further 28 (China 32) , and industrial sector
    around 12 (China 25).
  • Organized sector employs 8 of workforce (two
    thirds of which are in public sector), and
    produces about 40 of GDP. Rest in informal
    sector --with predominance of women. Urban
    informal sector is a fast growing sector.
  • 30 of total labour is constituted by casual
    labour and only 10 are in regular employment.
  • Major problem not of open unemployment but of
    underemployment and disguised unemployment.
  • Unemployment rate 6.8 (2008 est., in China 4.3
    is official and 17 unofficial UR).

4
Why India?
  • GDP growth rate 9 in 2007-2008, slowed down to
    7.3 in 2008-9.
  • Major industries are Textiles, chemicals, food
    processing, steel, transportation equipment,
    cement, mining, petroleum, machinery, software.
  • Services are a growing sector and play an
    important role in Indian economy. India is an
    imp. back office destination for global
    outsourcing of customer services and technical
    support.
  • Major exporter of highly skilled workers in
    financial, software, software eng.
  • Potentials are in , manufacturing,
    pharmaceuticals, biotechnology, nanotechnology,
    telecommunication, shipbuilding, aviation,
    tourism and retailing.

5
Composition of Indias GDP (at Factor Cost by
Economic Activity at 1999-2000 prices, in)

  • 2000-01 2007-08

  • 1)Agriculture etc
    23.89 20.55
  • 2)Industry
    25.80 24.71
  • 2.1 Manufacturing
    15.30
  • 2.2 Construction
    05.81
  • 3) Services
    50.30 54.74
  • 3.1 Trade, hotel, Restaurants
    14.34 26.80
  • 3.2 Transport, storage communica.
    07.96
  • 3.2 Finance, insurance, etc
    13.04 14.32
  • 3.3 Community, social and per.
    14.98 13.62
  • service
  • Inclusive of2.1, 2.2, of 3.2. Source EPW
    14TH June , 2008 and Economic Survey of India
    2007-8
  • Source EPW June 14, 2008

6
India- Structural Transformation-?
  • Economic policy Approach
  • i) Since independence (1947) till almost
    late eighties followed a socialist inspired
    approach- strict govt. control over -private
    sector participation, foreign trade and FDI
    (Approach-import substituting rather than export
    promoting) .
  • ii) Indias low average growth rate ( 3) from
    1947-80 was referred as Hindu rate of growth,
    because of the unfavorable comparison with the
    other Asia countries, especially the East Asian
    Tigers.

7
  • A period of import tariff, export taxes,
    quantitative restrictions , approvals needed for
    60 of new FDI in the industrial sector.
  • FDI averaged only 200M between 1985-1991.
  • In 2004, net FDI inflow was about 7-8 USD bn. (
    China, 52 USD bn)
  • A large percentage of the capital flows consisted
    of foreign aid, commercial borrowing and deposits
    of non resident Indians.
  • Largely and intentionally isolated from world
    markets.

8
  • Late eighties the govt. led by Rajiv Gandhi
    eased restrictions on capacity expansion for
    incumbents, removed price control and reduced
    corporate taxes.
  • Phase of high growth with high fiscal deficit and
    worsening current account
  • Collapse of soviet union a major trading
    partner, first Gulf war causing spike in oil
    prices led to major balance of payment crisis
    with the prospects of defaulting on its loan.
  • Prime Minister Narasimha Rao with Finance
    Minister Manmohan Singh initiated the economic
    liberalization of 1991.
  • Reforms did away with license Raj in investment,
    industrial and import licensing-ended many public
    monopolies, introduced automatic approvals of FDI
    in many sectors.

9
Agriculture
  • India ranks second world wide in farm output.
  • In 2007, accounted for 17 in GDP employing 60
    of the total workforce.
  • After having growth rate of 2 for many years-
    now the growth rate is about 4.5.
  • Two thirds of Indias workforce still earn their
    livelihood directly or indirectly through
    agriculture.
  • High level of disguised unemployment.
  • Despite improvements, average yield in India
    ranges from 30-50 of the highest average yield
    in the world.
  • Major agricultural products include rice, wheat,
    oilseed, cotton jute, tea, sugarcane, potatoes,
    cattle, water buffalo, sheep goats, poultry and
    fish.
  • India is the largest producer in the world of
    milk cashew nuts coconuts tea, gingerturmericand
    black pepper.It also has the world's largest
    cattle population (193 million).
  • It is the second largest producer of wheat rice
    sugar groundnutand inland fishIt is the third
    largest producer of tobacco India accounts for
    10 of the world fruit production with first rank
    in the production of banana and sapota.

10
Industry
  • India ranks 14th in the world in factory output.
  • Industry accounts for 27.6 of the GDP and
    employs 17 of the work force.
  • Manufacturing growth rate 8.4.
  • high-skill sectors account for almost 40 percent
    of the manufacturing output of India.
  • Textile manufacturing is the second largest
    source for employment after agriculture and
    accounts for 26 of manufacturing output
  • One third of industrial labour force is engaged
    in simple household manufacturing only.
  • Economic reforms led to more private sector
    participation, an expansion in the production of
    consumer goods and both domestic and foreign
    competition.

11
Services
  • India is fifteenth in services output.
  • With largest share in GDP of 55, it employs 23
    of workforce.
  • The growth rate which was 4.5 in 1951-80
    increased to 7.5 in 1991-2000. Recent growth
    rate 10.7.
  • Fastest growing services are business services,
    information technology enabled services, business
    process outsourcing contributing about one third
    of total output of services in 2000.
  • Indias IT industry an important contributor to
    BOP, accounts for only about 1 of total GDP and
    1/50th of the total services.
  • India leads the market in offshored back-office
    services, but as a manufacturing center it lags
    behind China, Thailand, and the rest of Asia.

12
External Sector
Exports 175.7 billion f.o.b (2008 est.)
Export goods petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures
Main export partners US 15, the People's Republic of China 8.7, UAE 8.7, UK 4.4 (2007)
Imports 287.5 billion f.o.b. (2008 est.)
Import goods crude oil, machinery, gems, fertilizer, chemicals
Main import partners People's Republic of China 10.6, US 7.8, Germany 4.4, Singapore 4.4
13
  • Almost stagnant export for the first 15 years
    after independence. Dominated by products like
    tea, jute and cotton manufacturers having
    generally inelastic demand.
  • Since liberalization ex-im have become much broad
    based.
  • Indias exports are consistently rising, covering
    about 80 of its imports.
  • Merchandise trade of India about 31 of GDP in
    2007 (China 68)
  • High technology exports as of total
    manufacturing exports are 5 in case of India and
    30 in case of China.
  • FDI in India has reached 2 of GDP (China 3,
    2006), compared with 0.1 in 1990
  • The top five countries in FDI inflows (2000-2007)
    are Mauritius (44),United States(9.4), UK( 8),
    Netherlands(6)and Singapore(5).

14
Sectoral Employment Share by Current Daily Status
  • Industry Division
    1993-4
    2004-5
  • Agriculture and allied activities
    61.03
    52.06
  • Mining Quarrying
    0.78
    0.63
  • Manufacturing
    11.10
    12.90
  • Electricity, gas and water supply
    0.41
    0.35
  • Construction
    3.63
    5.57
  • Trade , hotels and restaurants
    8.26
    12.62
  • Transport, Storage communication
    3.22 4.61
  • Finance, insurance, real estate and
    1.08
    2.00
  • business services

15
Employment Share Economically Active Adult
population ()
2004-2005
  • 1993
    2005
  • --------------------------------------------------
    ---------------------------------------------
  • Agriculture 74.8
    68.5
  • Labour
    34.4 30.3
  • Cultivator
    39.3 37.3
  • Farm regular
    1.1 0.9
  • Non Farm Sector 25.2
    31.5
  • Casual
    6.3
    7.3
  • Regular
    7.0
    9.3
  • Self employed
    11.9 14.9
  • --------------------------------------------------
    ---------------------------------------------
  • 100
    100
  • Source NSSO, 62th Round

16
Structure of Employment
17
Growth of working class
18
Rural workers
Workers in the countryside have also increased in
numbers. There were 144 million rural workers in
2005-06. There is a high proportion of
casualisation in rural areas.
19
Urban workers
  • There were nearly 63 million urban workers in
    2005-06. Proportion of regular workers is more
    among urban workers when compared to rural areas

20
Wages
Wage rates defer between rural and urban areas
and between males and females
21
Working age population
  • A big majority of Indias population is in the
    working age group.
  • Share of working age population (15-59) will
    increase from 58 in 2001 to 63 in 2011.
  • In 2005-06, about 60 of the population was in
    the working age group.
  • Of the working age group population, roughly 460
    million people were in the workforce in 2005-06.
  • Of these about 206 million (45) were
    regular/casual workers.

22
Youth workers
  • India has among the largest number of youth
    workers in the world.
  • In 2005-06, in the 15-34 age group there were 390
    million youth (35 of population)
  • Of these 40.4 were engaged in gainful activity
    i.e, nearly 160 million.
  • Nearly half of them were workers.

23
Rate of growth of employment in Organized
Sector( per annum)
  • 1983-1994
    1994-2005
  • Public Sector 1.53
    -0.70
  • Private Sector 0.44
    0.58
  • Total Organized 1.20 -0.31
  • Source Eleventh Plan Document.

24
Public-Private organized sector
  • Total no. of public and private sector workers
    stagnated between 1991-2001 and slightly
    decreased in recent times.

25
Public sector workers
26
Private sector workers
27
  • Is development inclusive?

28
Labour Market
  • Growing employment but poor in qualitative terms
    with low regular employment, underemployment and
    mismatch between education and employment.
  • A huge section of the working class lives in
    rural areas, is unskilled and condemned to low
    wages. In non-agriculture sector growth in
    employment is in informal sector.
  • Even in the urban areas there is a high degree of
    casualisation, contract labour working in
    deplorable conditions with no security of work.
  • Although regular employment has risen, its growth
    has been almost exclusively in the smaller, least
    productive enterprises.
  • About 87 of manufacturing employment taking
    place in micro enterprises(lt10 persons) producing
    just a third of manufacturing output.

29
  • Employment in firms with more than ten employees
    accounts for only around 3.75 per cent of total
    employment (one quarter of regular employment)
    and has been falling. Indeed, India has a much
    smaller proportion of employment in enterprises
    with ten or more employees than any OECD country.
  • 70 of Indians(800million), lived on less than 20
    rupees( slightly less than C50 cents) per day
    with most working in informal sector with no
    social security. (2007 Report on National
    Commission for Enterprises in the unorganized
    sector)

30
Sex Ratio in Population with Rural-Urban break up
Year Sex Ratio Sex Ratio Sex Ratio
Year Rural Urban Total
1901 979 910 972
1911 975 872 964
1921 970 846 955
1931 966 838 950
1941 965 831 945
1951 965 860 946
1961 963 845 941
1971 949 858 930
1981 951 879 934
1991 938 894 927
2001 946 901 933
Source Office of the Registrar General,
India Sex Ratio 1901-91 (Total, Rural and Urban)
from Brief Analysis of PCA paper-2 of 1992 1961
Population from PCA 1961 1971 Population from
Social and Cultural Tables 1981 figures from
Series Part-II A(I), General Population Tables
Census of India 1981. Figures of 1991 (including
interpolated data for JK-1991 based on 2001
census) and 2001 from PCA census of India -2001
31
Trends in Gender Disparity in Literacy Rate
Year Male Female Male/Female Literacy rate disparity Slightly more than half of total women are literate. Male-Female LR disparity is on decline.
1961 40.4 15.3 0.45 Slightly more than half of total women are literate. Male-Female LR disparity is on decline.
1971 39.5 18.4 0.38 Slightly more than half of total women are literate. Male-Female LR disparity is on decline.
1981 56.3 29.7 0.35 Slightly more than half of total women are literate. Male-Female LR disparity is on decline.
1991 63.8 39.4 0.28 Slightly more than half of total women are literate. Male-Female LR disparity is on decline.
2001 75.8 54.1 0.21 Slightly more than half of total women are literate. Male-Female LR disparity is on decline.
Source Census of India various years
32
Area and Gender based Labor and Work Force
Participation Rate ()
  • Labor force
    Work force
  • participation rates
    participation rates
  • 1993-94 2004-05
    1993-94 2004-05
  • Rural male 53.4 53.1
    50.4 48.8
  • Rural female 23.2 23.7
    21.9 21.6
  • Urban male 53.2 56.1
    49.6 51.9
  • Urban female 13.2 15.0
    12.0 13.3
  • Source Economic Survey of India 2007-08

33
Area and Gender based Structure of Employment
2004-2005
  • Particulars Rural
    Urban
  • Male
    Female Male Female
  • Labour
  • Force 56 31
    57 15
  • Self empl. 57 62
    42 44
  • Regular
  • Wage and
  • Salaried 10 4
    42 40
  • Unempl.
  • Rate 3 2
    5 8
  • Source NSSO 62 Round

34
Gender based Distribution of Occupation in Rural
India () 2004
  • Sector
    Male
    Female
  • --------------------------------------------------
    --------------------------------------------------
    ---
  • Agriculture 54.7
    30.4
  • Casual
    21.8
    15.5
  • Cultivators
    31.8
    14.7
  • Regular
    1.1
    0.2
  • Non Farm 31.3
    7.7
  • Casual
    9.6
    2.0
  • Self empl.
    14.4
    4.1
  • Regular
    7.3
    1.6
  • --------------------------------------------------
    --------------------------------------------------
    ---------
  • Total
    86.0
    38.1
  • --------------------------------------------------
    --------------------------------------------------
    ---------
  • Not working
    14.3
    62.0
  • --------------------------------------------------
    --------------------------------------------------
    ---------
  • Casual
    31.4
    17.5
  • Self emp/cultivators 46.2
    18.8
  • Regular
    8.4
    1.4

35
Share of women employment out of total employment
in organized sector in India
Year of women in Public sector of women in Private sector of women in Total
1995 13.4 20.2 15.4
2000 14.8 23.9 17.6
2001 14.9 24.2 17.8
2002 15.4 24.3 18.1
2003 15.6 24.5 18.4
2004 15.9 24.8 18.7
2005 16.2 24.8 18.9
Source Quarterly Employment Review, Directorate
General of Employment Training, Ministry of
Labor
36
  • Women wage lower than men by 33-40 points.
    Women-men wage differential is 0.751.
  • The gender based wage differential though has
    narrowed down with increase in education level.
    It is still high.
  • Urban wage differential persists but narrower
    than in rural area.

37
INDIA AND CHINA

  • India China
  • 2007
  • GDP (current
  • USbillion)
    1176.9
    3205.5
  • GNP PC
  • (current US)
    950
    2370.0
  • GDP growth
  • Annual
    9.1
    13
  • Population
  • growth rate
  • (annual )
    1.3
    0.6
  • Mobile and cellular subscription
  • Per ooo population
    21
    42

38
Situating India and China in World Trade (2007)
  • Particulars Unit
    China India
  • Share in Merchandise
  • Exports ()
    8.71 1.05
  • Rank
    2
    26
  • Imports ()
    6.70 1.52
  • Rank
    3
    18
  • Share in Commercial Services
  • Exports ()
    3.63 2.74
  • Rank
    7
    10
  • Imports ()
    4.14 2.49
  • Rank
    6
    13
  • Source WTO- World Trade Statistics, April 2009

39
China India world Trade highlights 2007
  • Particulars
    China
    India
  • Exports of good services
  • of GDP
    42
    21
  • Imports of goods services 32
    24
  • to GDP

  • Trade per capita
  • (US, 2005-07)
    1483 391
  • Patents granted
    67948 4320

40
China- Merchandise Trade 2007
  • Breakdown in economy's in total
    exports
    total imports
  • By main commodity group (ITS)

  • ()

    ()
  • 1.Agricultural products
    3.2
    6.8
  • 2.Fuels and mining products
    3.4
    22.0
  • 3.Manufactures
    93.2
    70.9
  • By main destination
    By main origin
  • 1 European Union (27)
    20.1 1. Japan
    14.0
  • 2. United States
    19.1 2. European Union (27)
    11.6
  • 3. Hong Kong, China
    15.1 3. Korea, Rep. of
    10.9
  • 4. Japan
    8.4 4.
    Taipei,Chinese 10.6
  • 5. Korea, Republic of
    4.6 5. China
    9.0

41
Indias- Merchandise Trade 2007
  • Breakdown in economy's in total
    exports
    total imports
  • --------------------------------------------------
    --------------------------------------------------
    -----------------------
  • By main commodity group (ITS)

  • ()

    ()
  • 1.Agricultural products
    11.0
    4.4
  • 2.Fuels and mining products 24.3

    40.2
  • 3.Manufactures
    63.6
    46.3
  • By main destination
    By main origin
  • 1 European Union (27)
    21.7 1. European Union (27)
    14.8
  • 2. United States
    13.8 2. China
    11.2
  • 3. United Arab Emirates
    9.9 3. Saudi Arabia
    7.6
  • 4. China
    6.5 4. USA
    6.5
  • 5. Singapore
    4.4 5. United
    Arab Emi. 5.4

42
Trade in Commercial Services-2007
  • Breakdown in economy's total exports
    total imports

  • ()
    ()
  • China
  • 1. Transportation
    25.7 33.5
  • 2. Travel
    30.6 23.0
  • 3. Other commercial services 43.6
    43.5
  • India
  • 1. Transportation
    9.7 40.1
  • 2. Travel
    12.1 11.3
  • 3. Other commercial services 78.2
    48.6

43
Cross Country Comparison
44
Composition of Manufacturing Sector Across
Countries
45
Manufacturing Exports Cross Country Comparison
46
Levels of Manufactured Exports Across Countries
47
Size of Labor Force in Manufacturing Sector
48
Spending on R D as a percentage of GDP (2003)
49
HUMAN DEVELOPMENT INDICATORS-(2006)
  • --------------------------------------------------
    --------------------------------------------------
    ------------------------
  • Human Development Index
  • ( Position among 179 countries)
    INDIA
    CHINA
  • Particulars
    Rank Value Rank
    Value
  • HDI
    132
    0.609 94 0.762
  • Life expectancy at birth( yrs)
    127 64.1 69
    72.7
  • Adult literacy rate ()
    118 65.2
    53 93
  • Combined(priter)enrolment
    134 61 113
    68.7
  • ratio

50
HUMAN POVERTY INDEX (HPI-1) -2006
  • Particulars India
    China
  • Rank
    Value() Rank
    Value()
  • HPI-1 87
    28.5 35
    7.9
  • Probability of
  • Not surviving to
  • Age 40 ( of
  • cohort) 2000-05
    16.8
    6.8
  • Adult Illiteracy Rate
  • 1999-2001
    34.8
    7.8


  • contd.

51
HUMAN POVERTY INDEX (HPI-1) -2006
  • Particulars
    India
    China

  • Rank Value()
    Rank Value()
  • Children Under
  • Weight for age
  • ( aged under
  • 6, 2005-6) 46

    7
  • Population below
  • Income Poverty line
  • 1.25 a day
    41.6
    15.9
  • 2 a day
    75.6
    36.3
  • National poverty line
    28.6
    2.8
  • HPI-1 rank minus
  • income
  • Poverty Rank -11

    -19

52
Gender Related Development Index (GDI)
  • Particulars India

    China
  • --------------------------------------------------
    --------------------------------------------------
    -
  • GDI Rank Value
    of HDI Rank Value of
    HDI
  • 116
    0.591 97.1 79
    0.760 99.8
  • --------------------------------------------------
    --------------------------------------------------
    ---

  • Male Female
    Male Female
  • Life Expectancy
  • At birth (2006) 66.5
    97.1 71.0
    74.5
  • Adult literate
  • (1999-2006) 76.4
    53.4
    96.3 89.5
  • Combined gross
  • Enrol. Ratio ()
  • 2006 63.3
    57.4
    68.9 68.5
  • Estimated Earned
  • Income (PPP US) 3698
    1185 5646
    3644

53
Gender Empowerment Measure (GEM) 2007
  • Particulars
    India
    China
  • GEM
    -
    Rank 72
  • --------------------------------------------------
    --------------------------------------------------
    ------
  • Ratio of estimated
  • Female to male
  • earnings
    0.32
    0.65
  • --------------------------------------------------
    --------------------------------------------------
    ------
  • to total
  • Seats in parliament
  • held by women 9.2

    21.3
  • Female legislatures,
  • Senior officials
  • Managers
    -
    17
  • Female professional
  • And tech. workers -

    52

54
India-China comparative Business Scenario-2007
  • Particulars
    India
    China
  • --------------------------------------------------
    --------------------------------------------------
    ----------------------------------------
  • (Rank out of 183 countries-2008)
  • --------------------------------------------------
    --------------------------------------------------
    ----------------------------------------
  • Corruption perception index 85

    72
  • --------------------------------------------------
    --------------------------------------------------
    ---------------------------------------
  • Procedure
    (no) duration cost ( GNP)
    Procd. Duration Cost
  • Starting a business 13 30
    days 70.1
    14 40 days 7.5
  • --------------------------------------------------
    --------------------------------------------------
    --------------------------------------

55
GLOBAL COMPETITIVENESS RANKING 2008-9 India and
China(Rank out of 134 countries)
  • Pillars Components
    India
    China
  • --------------------------------------------------
    --------------------------------------------------
    --------------------
  • GCI Global Competitiveness Index
    50
    30
  • --------------------------------------------------
    --------------------------------------------------
    --------------------
  • Basic requirements
    80
    42
  • 1 Institutions
    53
    56
  • 2 Infrastructure
    72
    47
  • 3 Macroeconomic stability
    109
    11
  • 4 Health and primary education
    100
    50
  • Efficiency Enhancer
    33
    40
  • 5 Higher education and training
    63
    64
  • Goods market efficiency
    47
    51
  • Labour market efficiency
    89
    51
  • Financial market sophistication
    34
    109
  • Technological readiness
    69
    77
  • Market Size
    5
    2
  • Innovation and Sophistication
    factors 27
    32
  • Business sophistication
    27
    43

56
Major Areas of Reforms Needed
  • Labour market Stringent labour laws should be
    relaxed
  • Business environment Lowering the barriers to
    entrepreneurship
  • Ending
    reservation of products fro SSI
  • Need
    for Bankruptcy law

  • Dispersion of tariff rates
  • Easing
    of Service sector FDI restrictions
  • More
    privatization of public sector enterprises.
  • Financial sector More liberalization

  • Privatization of public sector banks
  • Infrastructure Electricity reforms to be
    speeded up

  • transport More private sector involvement
  • Public Finances Better targeting of
    subsidies, GST
  • Education Higher public
    expenditure on primary and

  • education, Addressing financing of higher edu.
  • India can learn from China in

  • Social and Physical Infrastructure
  • Improving
    manufacturing sectors productivity

57
In Conclusion
  • India and China non comparable
  • India-- Democracy (messy)
  • Highly diverse social
    structure
  • Reforms reactionary in
    nature- a late starter
  • Less integrated to
    Global market (including East Asia)
  • Dissimilar trade
    pattern
  • Lagging behind in FDI
    and infrastructure
  • Weak link between
    economic development and social
  • welfare at regional
    level compared to China.


58
Differencing Relative strengths


  • India
    China


  • i) Agriculture
    v
  • reforms
  • ii) Industrial growth
    v
  • iii) FDI
    v
  • IV) Open to external
  • trade
    v
  • v) National market
    v
  • vi) Service sector v
    v
  • vii) Infrastructure -
    v
  • viii) Capital efficiency v
  • viii) Corporate governance v
  • ix) Democratic accountability v
  • x) Foreign portfolio capital v

59
  • Two divergent development Paths
  • India

    China
  • Increasingly building ground up
    Top down approach
  • Service sector led growth Manufacturing
    sector and foreign trade
  • Private sector led growth State led
    modernization (late 1970s)
  • (early nineties)
  • Consumption driven
    Investment driven
  • v) Knowledge based sector-labor
    Cheap- assembly line workers
  • vi) Worlds back office
    Factory of the
    world

60
  • India
    China
  • Domestic Private Companies
    FDI inflow

  • State owned
    enterprises
  • Young work force
    Aging workforce
  • Cheaper labour
    Rural reform

61
Indias hope!!!!
  • No Trade off to democracy for 2 higher growth!
  • Accumulated diversity not assimilated.
  • Both India and China have accepted the capitalist
    road to prosperity but capitalism is more
    comfortable in democracy which fosters
    entrepreneurs.
  • Indias growth may be more enduring as people
    have scripted its growth whereas in China it is
    state crafted.
  • India- A country with Potentials for sustaining
    development!!

62
  • Because the Indian state is inefficient,
    millions of entrepreneurs have stepped in to
    vacuum. When government schools fail, people
    start private schools in the slums, and the
    result is millions of slumdog millionaires .
  • You cannot do this in China!!

  • Gurucharandas
  • Times
    of India, 10 May 2009

63
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