abhishreshthaa
Abhijeet S
CHINA Vs. INDIA
A COMPARATIVE STUDY
China and India each have a population of over 1 billion people. Their collective population amounts to more than 33% of the world population. Their countries are geographically large and their population is composed of a wide range of ethnicity, each speaking their own language or dialect.
Yet, over the last 20 years, China's GDP growth, GDP per capita growth and labour productivity have been significantly higher than that of India. Why is this? What should India do to compete with China and establish itself as the world's workshop, factory and supplier of quality goods and services?
Although India has the major human resource, it has failed to utilise its potential to create a vibrant manufacturing sector like that of China There was not much difference in the economic performance roughly until 1980, when the per capita incomes were also similar. Over the last quarter century, both instituted economic reforms and economic growth accelerated.
As the history goes, in 1947 India achieved independence and it is in the year 1949 that in China communists assumed power. Both the economies made modest beginning toward industrialization. In the early 1950s, China was better placed than India to extract resources from agriculture to finance the planned industrialization program. India didn't pay attention to agriculture until the food crisis of the 1966-67.
China's current account balance stands at a huge plus, at nearly $30 billions, while for India it has been a minus throughout the last four decades.
China's FDI strength stands apart. Over 75 percent of FDI that China received, went to new enterprises. In India, about 65 percent of the little FDI went into M&A.
Another area where India failed and China achieved immensely is the area of labor reform. India succeeded in overprotecting the interests of workmen making the restructuring of the industry impossible
China embraced globalization and trade enthusiastically, welcoming foreign direct investment with no inhibitions, and gradually gaining control of world markets for low-tech labor-intensive manufactures.
China initiated reforms a decade earlier than India's reform. China's economy grew at double the rate of India's during the '80s and early '90s. While successive Indian governments restricted the import of technology from the West and Japan, the Chinese governments encouraged them.
As a result, the gap widened considerably. While reforms in India are supposed to have been initiated in 1991, the doctrinaire socialist policy had begun to be diluted in the second innings of Indira Gandhi.
The process of liberalization continued under Rajiv Gandhi, and more dramatically after 1991. The growth rate doubled from the previous rate, but still lagged that of China.
The result has been that starting with more or less the same per capita incomes 25 years back, Chinese incomes today are double that of India's -- a result not only of faster GDP growth, but also of a lower population increase.
Today, apart from higher incomes and lower poverty, the areas in which China is far ahead of us are literacy, FDI, labor rationalization in the public sector and infrastructure investments.
Thus, the post-reform China has successfully created manufacturing conditions that have redefined the concept of productivity. With interest rates being relatively low at around 4-6 percent, high productivity of labor, enabling infrastructure, lower input costs, Chinese private firms have evolved themselves into mighty price warriors.
A COMPARATIVE STUDY
China and India each have a population of over 1 billion people. Their collective population amounts to more than 33% of the world population. Their countries are geographically large and their population is composed of a wide range of ethnicity, each speaking their own language or dialect.
Yet, over the last 20 years, China's GDP growth, GDP per capita growth and labour productivity have been significantly higher than that of India. Why is this? What should India do to compete with China and establish itself as the world's workshop, factory and supplier of quality goods and services?
Although India has the major human resource, it has failed to utilise its potential to create a vibrant manufacturing sector like that of China There was not much difference in the economic performance roughly until 1980, when the per capita incomes were also similar. Over the last quarter century, both instituted economic reforms and economic growth accelerated.
As the history goes, in 1947 India achieved independence and it is in the year 1949 that in China communists assumed power. Both the economies made modest beginning toward industrialization. In the early 1950s, China was better placed than India to extract resources from agriculture to finance the planned industrialization program. India didn't pay attention to agriculture until the food crisis of the 1966-67.
China's current account balance stands at a huge plus, at nearly $30 billions, while for India it has been a minus throughout the last four decades.
China's FDI strength stands apart. Over 75 percent of FDI that China received, went to new enterprises. In India, about 65 percent of the little FDI went into M&A.
Another area where India failed and China achieved immensely is the area of labor reform. India succeeded in overprotecting the interests of workmen making the restructuring of the industry impossible
China embraced globalization and trade enthusiastically, welcoming foreign direct investment with no inhibitions, and gradually gaining control of world markets for low-tech labor-intensive manufactures.
China initiated reforms a decade earlier than India's reform. China's economy grew at double the rate of India's during the '80s and early '90s. While successive Indian governments restricted the import of technology from the West and Japan, the Chinese governments encouraged them.
As a result, the gap widened considerably. While reforms in India are supposed to have been initiated in 1991, the doctrinaire socialist policy had begun to be diluted in the second innings of Indira Gandhi.
The process of liberalization continued under Rajiv Gandhi, and more dramatically after 1991. The growth rate doubled from the previous rate, but still lagged that of China.
The result has been that starting with more or less the same per capita incomes 25 years back, Chinese incomes today are double that of India's -- a result not only of faster GDP growth, but also of a lower population increase.
Today, apart from higher incomes and lower poverty, the areas in which China is far ahead of us are literacy, FDI, labor rationalization in the public sector and infrastructure investments.
Thus, the post-reform China has successfully created manufacturing conditions that have redefined the concept of productivity. With interest rates being relatively low at around 4-6 percent, high productivity of labor, enabling infrastructure, lower input costs, Chinese private firms have evolved themselves into mighty price warriors.