§
  


   

a China and India, as the fastest-growing of the µBRIC¶

economies, occupy a special place in the world

a Despite their low incomes, their sheer size combined with

rapid growth means that they make a substantial and rapidly
growing contribution to world output.

a The success or failure of each country to maintain their rapid

growth into the future will have a tremendous impact not only
on their own economies but on the world economy as a whole.
3The  §
 is the twelfth largest economy in the world
by nominal value and the fourth largest by purchasing power parity
(PPP)
3 In the 1990s, following economic reform from the socialist-
inspired economy of post-independence India, the country began to
experience rapid economic growth, as markets opened for
international competition and investment.
3 In the 21st century, India is an emerging economic power with
vast human and natural resources, and a huge knowledge base.
3 Economists predict that by 2020, India will be among the leading
economies of the world.
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3÷arket liberalization in the Chinese Economy has brought its huge
economy forward by leaps and bounds - but rural China still remains poor,
even as its cities increase in affluence. China's economy is huge and
expanding rapidly. In the last 30 years the rate of Chinese economic growth
has been almost miraculous, averaging 8% growth in Gross Domestic Product
(GDP) per annum.
3There are still inequalities in the income of the Chinese people, and this
income disparity has increased in the recent times, in part due to a
liberalization of markets within the country.
3In per capita income terms, China stands at a lowly 107th out of 179
countries. The Purchasing Power Parity of China ranks 82nd out of 179
countries.
a|ith populations of 1.3 and 1.1 billion, respectively, their rapid
growth has the potential to raise living standards
aSignificantly for a third of the world¶s population, bringing
hundreds of millions of people out of poverty and creating a middle
class that rivals the EU and US in both size and income.
aIn both countries, growth has accelerated in recent decades as
trade liberalization and market-oriented structural reforms have
deepened.
aThe start of liberalization of India¶s economy in 1991, it
has been going through an epochal transformation into one
of the world¶s fast growing economies.
a It opened up the country for free flow of international
finance.
aIts gross domestic product rate was picked up from 1.3 %
in 1191 to 1992 to 7.8 % in 119-1997 and despite a global
slowdown, moved up from 4.4% in 2000-01 to 5.6% in
2001-2002. Its GDP for 2002-2007 is currently targeted at
8%.
aiberalization strategy of the Chinese government can be broadly
classified into two stages:
a1.Restructuring State Owned Enterprises (SOE) rather than
privatizing them. 2. Attracting FDI & liberalized FDI controls.
a The 'Town and Village Enterprises (TVEs) phenomenon led to
worldwide spread of China's standard and cheap products .
aBy the 1980s the SOE were losing steam. This led to
displacement of many skilled workers. About the same time the
Non-Resident Chinese became wealthy and were willing to play
venture capitalists. They provided funds to the homeland's
businesses, which promised a good return.
d The service sector has been growing rapidly over the last
decade and the trend is likely to continue. This has become
the main contributor to the GDP

d India made the transition from an agricultural economy to

a service economy in 1979.In 1985, the service sector
accounted for 47 per cent of GDP( 7% from 1980-85).

d The share of service sector in the real GDP in India has

surpassed that of agriculture and industry at a relatively
faster pace as compared to other industrialized nations.
a In India, the service sector contributes to more than 54 per cent
of GDP while its GDP share in China is much smaller (below
41 per cent in 2004)
a China is just showing a gradual growth in the field of service
sector.
a India will grow faster than China by 2014
China's service activity remained
broadly unchanged in February;
India's service P÷I shows sharp
growth in sector
  §

  
  
a India's manufacturing is only 22-25% of the GDP, which is
about $ 100 to $ 110 billion out of a GDP of $440 billion

a China's manufacturing is nearly 50% of GDP, at about $ 650

billion per year, nearly 6 times the size of India's
÷anufacturing Sector.

a China¶s emphasis on manufacturing is confirmed by the fact

that among the three sectors in China, manufacturing takes
the largest slice of the pie, while in India, it is third
behind services and agriculture.
a Chinese are so competitive on global basis because of its
strong hold on manufacturing sector . It¶s the result of not
only significant investment, foreign and domestic.

a But by a sharp increase in labor productivity, growing export

based on FDI, strong domestic demand fed by low prices and
improved quality of products.

a China's businesses seem to operate on the principle of

sales maximization which helps in setting very low price to
capture the market at an unmatched level.
a åIndia has underinvested in infrastructure for 60 years, and
we're behind what we need by 10 to 12 years,å

a China¶s infrastructure is paving a good way for their

development

a The authoritarian government of China gets faster results.

³To build a road in China, just a handful of people need to
make a decision,³

a Figures GDP growth would run 2 percentage points higher if

the country had decent roads, railways, and power.
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a China±÷anufacturing-led±GDP shares: industry 46%, services
41% (2005 National Economic Census)±East Asian ÷odel

a India±Services-driven±GDP shares: industry 27%, services

52% (leapfrog industrialization stage)
a Aigh savings curtails consumption±Reliance on investment
expansion
a increased growth volatility±Diminishing returns
a misallocation of capital
a non-performing loans±Excess capacity
a deflation‡Insufficient domestic absorption±Reliance on export
expansion±Trade disputes incite protectionism in major export
markets
a ack of investment funds led to neglect of infrastructure±Aigh
production costs
a stunted manufacturing sector
a will eventually constrain the growth of high-tech centres‡IT
and IT-enabled services are skill-intensive, rather than labour-
intensive±Jobless growth: rural unemployment and poverty±
ack of progress in urbanization
 3
a India seems to have a brighter future prospect compared to China
with a population that is growing younger and will continue to
supply young work force for a long time compared with the aging
Chinese population, the result of the Chinese government¶s planning
strategies and rapid rise in life expectancy of the Chinese people.
a By 2028 India is expected to be fifth largest consumer economy
due to sustained growth.
a |e can make India the super power country of the world if we work
together by making it a corruption free country
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