indian economy review

7/29/2019 indian economy review

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A R T I N A N A V A T IP R O F . O F E C O N O M I C S

D I R E C T O R , C E N T R E F O R C A N A D I A NS T U D I E S

M A H A R A J A S A Y A J I R A O U N I V E R S I T Y O FB A R O D A

V A D O D A R A - 3 9 0 0 0 2 G U J A R A T - I N D I A

D E P T . O F E C O N O M I C S , S I M O N F R A S E RU N I V E R S I T Y B U R N A B Y , B C , C A N A D A

1 8 J U N E , 2 0 0 9

Indian Economy :A Comparative Overview with China


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Some General Facts

India is the worlds second most populous country of over 1 billion peopleafter 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 GDPof $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


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The contribution of Agriculture, industrial and service sector (2007-8) inGDP has been 21,24 and 55%. ( In China the corresponding percentagesare 11.3, 48.6 and 40 % in GDP 2008)

Agriculture is the predominant occupation in India, accounting for about60% of employment ( China 43%) . The service sector makes up a further28% (China 32%) , and industrial sector around 12% (China 25%).

Organized sector employs 8% of workforce (two thirds of which are inpublic sector), and produces about 40% of GDP. Rest in informal sector --

with predominance of women. Urban informal sector is a fast growingsector.

30% of total labour is constituted by casual labour and only 10% are inregular employment.

Major problem not of open unemployment but of underemployment anddisguised unemployment.

Unemployment rate 6.8% (2008 est., in China 4.3% is official and 17%unofficial UR).


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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 Indianeconomy. India is an imp. back office destination for globaloutsourcing 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, tourismand retailing.


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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 15.302.2 Construction 05.81

3) Services 50.30 54.743.1 Trade, hotel, Restaurants 14.34 26.80**3.2 Transport, storage & communica. 07.96

3.2 Finance, insurance, etc 13.04 14.323.3 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

2007-8Source:EPW June14,2008


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India- Structural Transformation-?

Economic policy: Approach

i) Since independence (1947) till almost late eighties

followed a socialist inspired approach- strict govt. controlover -private sector participation, foreign trade and FDI(Approach-import substituting rather than exportpromoting) .

ii) Indias low average growth rate ( 3%) from 1947-80 wasreferred as Hindu rate of growth, because of theunfavorable comparison with the other Asia countries,especially the East Asian Tigers.


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A period of import tariff, export taxes, quantitativerestrictions , approvals needed for 60% of new FDIin 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 ofnon resident Indians.

Largely and intentionally isolated from worldmarkets.


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Late eighties: the govt. led by Rajiv Gandhi eased restrictionson capacity expansion for incumbents, removed price controland reduced corporate taxes.

Phase of high growth with high fiscal deficit and worseningcurrent account

Collapse of soviet union a major trading partner, first Gulfwar causing spike in oil prices led to major balance ofpayment crisis with the prospects of defaulting on its loan.

Prime Minister Narasimha Rao with Finance MinisterManmohan Singh initiated the economic liberalization of1991.

Reforms did away with license Raj in investment, industrialand import licensing-ended many public monopolies,introduced automatic approvals of FDI in many sectors.


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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 thehighest 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 cattlepopulation (193 million).

It is the second largest producer of wheat rice sugar groundnutand inlandfishIt is the third largest producer of tobacco India accounts for 10% of the

world fruit production with first rank in the production of banana andsapota.


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Industry

India ranks 14th in the world in factory output.

Industry accounts for 27.6% of the GDP and employs 17% of thework 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 employmentafter agriculture and accounts for 26% of manufacturing output

One third of industrial labour force is engaged in simple householdmanufacturing only.

Economic reforms led to more private sector participation, anexpansion in the production of consumer goods and both domesticand foreign competition.


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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, informationtechnology enabled services, business process outsourcingcontributing about one third of total output of services in 2000.

Indias IT industry an important contributor to BOP, accounts foronly about 1% of total GDP and 1/50th of the total services.

India leads the market in offshored back-office services, but as amanufacturing center it lags behind China, Thailand, and the rest ofAsia.


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External Sector

Exports $175.7 billion f.o.b (2008 est.)

Export goods petroleum products, textile goods, gems andjewelry, engineering goods, chemicals, leathermanufactures

Main exportpartners

US 15%, the People's Republic of China 8.7%, UAE8.7%, UK 4.4% (2007)

Imports $287.5 billion f.o.b. (2008 est.)

Import goods crude oil, machinery, gems, fertilizer, chemicals

Main importpartners

People's Republic of China 10.6%, US 7.8%,Germany 4.4%, Singapore 4.4%


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Almost stagnant export for the first 15 years after independence.Dominated by products like tea, jute and cotton manufacturers havinggenerally 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% incase of India and 30% in case of China.

FDI in India has reached 2% of GDP (China 3%, 2006), compared with0.1% 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%).


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Sectoral Employment Shareby 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 4.61Finance, insurance, real estate and 1.08 2.00business services

Social, community and personal services 10.50 9.24

Source: Economic Survey of India 2007-08

E i A ti A t ti %


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Economica y Active A u t popu ation %2004-2005

1993 2005

-----------------------------------------------------------------------------------------------Agriculture 74.8 68.5

Labour 34.4 30.3

Cultivator 39.3 37.3Farm regular 1.1 0.9

Non Farm Sector 25.2 31.5Casual 6.3 7.3

Regular 7.0 9.3Self employed 11.9 14.9

-----------------------------------------------------------------------------------------------100 100

Source: NSSO, 62th Round


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Structure of Employment

Proportion of workers in the workforce (2005-06)

Self-employed

55.0%

Workers

45.0%

Proportion of workers in the workforce (2005-06)

Self-employed

55.0%

Workers

45.0%


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Growth of working class

142.26

168.69

194.10206.39

0

50

100

150

200

250

1987-88 1993-94 2001-02 2005-06

Worker population (in millions)


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Rural workers

19.45

83.06

18.39

103.20

20.32

114.85

27.46

116.54

0.0

50.0

100.0

150.0

1987-88 1993-94 2001-02 2005-06

Rural workers (in millions)

Regular Casual

Workers in the countryside have also increased in numbers. There were144 million rural workers in 2005-06. There is a high proportion of

casualisation in rural areas.


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Urban workers

There were nearly 63 million urban workers in 2005-06.Proportion of regular workers is more among urban workers whencompared to rural areas

28.03

11.72

32.11

14.98

40.87

18.06

45.16

17.24

0

1020

30

40

50

60

70

1987-88 1993-94 2001-02 2005-06

Urban workers (in millions)

Regular Casual


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Wages

Wage rates defer between rural and urban areas and between

males and females


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Working age population

A big majority of Indias population is in theworking age group.

Share of working age population (15-59) willincrease from 58% in 2001 to 63% in 2011.

In 2005-06, about 60% of the population was in theworking 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%) wereregular/casual workers.


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Youth workers

India has among the largest number of youthworkers 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.


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Rate of growth of employment in Organized Sector(% per annum)

1983-1994 1994-2005

Public Sector 1.53 -0.70Private Sector 0.44 0.58

Total Organized 1.20 -0.31

Source: Eleventh Plan Document.


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Public-Private organized sector

Total no. of public and private sector workers stagnated between1991-2001 and slightly decreased in recent times.

05

10

15

20

25

30

1981 1991 2001 2004

Year

Employment in organised sector (in millions)Source: DGET

Public Private


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Public sector workers

Public sector workers by Industry - 2004

Manufacturing

Electricity, gas,

water

Construction

Community,

social services

Agriculture Mining

Trade,

restaurants

Transport,

storageFinancing,

insurance


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Private sector workers

Private sector workers by Industry - 2004

Agriculture

Manufacturing

Community,

social services

MiningTransport,

storage

Financing,

insurance

Trade,

restaurants

Construction

Electricity, gas,

water


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Is development inclusive?


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Labour Market

Growing employment but poor in qualitative terms with low regularemployment, underemployment and mismatch between educationand employment.

A huge section of the working class lives in rural areas, is unskilledand 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 ofwork.

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 microenterprises(


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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 ofemployment 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 ininformal sector with no social security. (2007 Report onNational Commission for Enterprises in the unorganizedsector)

S R ti i P l ti ith R l U b b k


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Year Sex Ratio

Rural Urban Total

1901 979 910 972

1911 975 872 964

1921 970 846 955

1931 966 838 9501941 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

Sex Ratio in Population with Rural-Urban break up

Source : Office of the Registrar

General, IndiaSex Ratio 1901-91 (Total, Rural and

Urban) from Brief Analysis of PCA

paper-2 of 1992

1961 Population from PCA 19611971 Population from Social and

Cultural Tables

1981 figures from Series Part-II A(I),

General Population TablesCensus

of India 1981.

Figures of 1991 (including interpolated

data for JK-1991 based on 2001census) and 2001 from PCA census

of India -2001


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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-FemaleLR

disparity is on

decline.

1961 40.4 15.3 0.45

1971 39.5 18.4 0.381981 56.3 29.7 0.35

1991 63.8 39.4 0.28

2001 75.8 54.1 0.21

A d G d b d L b d


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Area and Gender based Labor andWork Force Participation Rate (%)

Labor force Work forceparticipation 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


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Area and Gender based Structure of Employment 2004-2005

Particulars Rural UrbanMale 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

Gender based Distribution of Occupation in


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Gender based Distribution of Occupation inRural India (%) 2004

Sector Male Female-------------------------------------------------------------------------------------------------------Agriculture 54.7 30.4

Casual 21.8 15.5Cultivators 31.8 14.7Regular 1.1 0.2

Non Farm 31.3 7.7Casual 9.6 2.0Self empl. 14.4 4.1Regular 7.3 1.6

-------------------------------------------------------------------------------------------------------------Total 86.0 38.1-------------------------------------------------------------------------------------------------------------

Not working 14.3 62.0-------------------------------------------------------------------------------------------------------------

Casual 31.4 17.5Self emp/cultivators 46.2 18.8

Regular 8.4 1.4---------------------------------------------------------------------------------------------------------------


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Year % of women inPublic sector % of women inPrivate sector % of womenin 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

Share of women employment out of total employmentin organized sector in India

Source : Quarterly Employment Review, Directorate General of Employment &Training, Ministry of Labor


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Women wage lower than men by 33-40 points.Women-men wage differential is 0.75:1.

The gender based wage differential though hasnarrowed down with increase in education level. Itis still high.

Urban wage differential persists but narrower thanin rural area.


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INDIA AND CHINA

India China2007

GDP (currentUS$billion) 1176.9 3205.5

GNP PC

(current US$) 950 2370.0

GDP growthAnnual % 9.1% 13%

Populationgrowth rate(annual %) 1.3 0.6

Mobile and cellular subscriptionPer ooo population 21 42

Internet user per 000 population 7 16

Source: World Bank: World Development Indicators: Country Profile April 2009


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Situating India and China in World Trade (2007)

Particulars Unit China India

Share in Merchandise

Exports (%) 8.71 1.05Rank 2 26

Imports (%) 6.70 1.52Rank 3 18

Share in Commercial Services

Exports (%) 3.63 2.74Rank 7 10

Imports (%) 4.14 2.49Rank 6 13

Source: WTO- World Trade Statistics, April 2009


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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


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China- Merchandise Trade 2007

Breakdown in economy's in total exports: total imports

By main commodity group (ITS)(%) (%)

1.Agricultural products 3.2 6.82.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 14.02. United States 19.1 2. European Union (27) 11.63. Hong Kong, China 15.1 3. Korea, Rep. of 10.94. Japan 8.4 4. Taipei,Chinese 10.65. Korea, Republic of 4.6 5. China 9.0


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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 40.23.Manufactures: 63.6 46.3

By main destination By main origin

1 European Union (27) 21.7 1. European Union (27) 14.82. United States 13.8 2. China 11.23. United Arab Emirates 9.9 3. Saudi Arabia 7.64. China 6.5 4. USA 6.55. Singapore 4.4 5. United Arab Emi. 5.4


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Trade in Commercial Services-2007

Breakdown in economy's total exports total imports(%) (%)

China:

1. Transportation 25.7 33.52. 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

Cross Country Comparison


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Cross Country Comparison

Share of Manufacturing Sector (2004)

24.07 24.00

16.10

39.41

28.34 28.74

31.40

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

Argentina Brazil India China Indonesia Korea Malaysia

Countries

ShareinGDP


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Composition of Manufacturing Sector Across Countries

12.37

20.39

9.50 8.24

15.22

13.27

8.10 8.83

32.35 20.59

44.9840.90

28.0634.75

29.60 38.24

11.99 11.007.82

3.80

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CHN IND KOR MYS

Countries

Share(Percen

tage)

Chemicals FBT Mach & Transp Others Textiles

Manufacturing Exports: Cross Country Comparison


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Manufacturing Exports: Cross Country Comparison

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Years

Share(Percentage)

China Argentina Brazil India Korea Indonesia

Levels of Manufactured Exports Across Countries


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p

9.94

52.19

542.20

55.0540.55

233.99

95.80

0.00

100.00

200.00

300.00

400.00

500.00

Argentina Brazil China India Indonesia Korea Malaysia

Countries

US$Billion

Size of Labor Force in Manufacturing Sector


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Size of Labor Force in Manufacturing Sector

1.36

11.72

160.00

53.06

11.65

4.232.02

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00


Countries

NumberofWorkers(Million)

Spending on R & D as a percentage of GDP (2003)


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Spending on R & D as a percentage of GDP (2003)

0.42

1.03

1.3

0.77

0.2

2.5

0.7

0

0.5

1

1.5

2

2.5

3


Countries

R

&DExpenditureasaPercentageofGDP

HUMAN DEVELOPMENT INDICATORS


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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 68.7ratio

GDP PC($PPP) 126 2489 104 4682----------------------------------------------------------------------------------------------------------------------------

Source: Human Development Report 2008

HUMAN POVERTY INDEX (HPI 1) 2006


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HUMAN POVERTY INDEX (HPI-1) -2006

Particulars India ChinaRank Value(%) Rank Value(%)

HPI-1 87 28.5 35 7.9

Probability ofNot surviving to

Age 40 (% ofcohort) 2000-05 16.8 6.8

Adult Illiteracy Rate

1999-2001 34.8 7.8

contd.


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HUMAN POVERTY INDEX (HPI-1) -2006

Particulars India ChinaRank Value(%) Rank Value(%)

Children UnderWeight for age(% aged under6, 2005-6) 46 7

Population belowIncome 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

incomePoverty Rank -11 -19

Source: Human Development Report-2008


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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 FemaleLife 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 grossEnrol. Ratio (%)

2006 63.3 57.4 68.9 68.5

Estimated EarnedIncome (PPP US$) 3698 1185 5646 3644-------------------------------------------------------------------------------------------------------HDI rank minusGDI -1 1


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Gender Empowerment Measure (GEM) 2007

Particulars India ChinaGEM - Rank 72----------------------------------------------------------------------------------------------------------Ratio of estimatedFemale to maleearnings 0.32 0.65----------------------------------------------------------------------------------------------------------

% to total

Seats in parliamentheld by women 9.2 21.3

Female legislatures,Senior officials &

Managers - 17

Female professionalAnd tech. workers - 52


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India-Chinacomparative Business Scenario-2007

Particulars India China--------------------------------------------------------------------------------------------------------------------------------------------

(Rank out of 183 countries-2008)

--------------------------------------------------------------------------------------------------------------------------------------------

1) Corruption perception index 85 72-------------------------------------------------------------------------------------------------------------------------------------------

Procedure (no) duration cost (% GNP) Procd. Duration Cost

2) Starting a business 13 30 days 70.1 14 40 days 7.5------------------------------------------------------------------------------------------------------------------------------------------

duration cost (as % of estate) Recovery rate duration cost recovery rate(cents per dollar)

3) Closing a business 10 yrs 9 10.4 1.7yrs 22 35.3--------------------------------------------------------------------------------------------------------------------------------------------

Source: Transparency international 2008

GLOBAL COMPETITIVENESS RANKING 2008-9: India and


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9China

(Rank out of 134 countries)

Pillars Components India China------------------------------------------------------------------------------------------------------------------------GCI Global Competitiveness Index 50 30------------------------------------------------------------------------------------------------------------------------

Basic requirements 80 421 Institutions 53 562 Infrastructure 72 473 Macroeconomic stability 109 114 Health and primary education 100 50

Efficiency Enhancer 33 405 Higher education and training 63 646 Goods market efficiency 47 517 Labour market efficiency 89 517 Financial market sophistication 34 109

8 Technological readiness 69 779 Market Size 5 2

Innovation and Sophistication factors 27 3211 Business sophistication 27 4312 Innovation 32 28

Source: Global Competitiveness Report 2008


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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 SSINeed for Bankruptcy lawDispersion of tariff ratesEasing of Service sector FDI restrictionsMore privatization of public sector enterprises.

Financial sector: More liberalizationPrivatization of public sector banks

Infrastructure : Electricity reforms to be speeded uptransport: 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


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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 socialwelfare at regional level compared to China.


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Differencing Relative strengths

India China

i) Agriculture reforms

ii) Industrial growth

iii) FDI IV) Open to externaltrade

v) National market vi) Service sector vii) Infrastructure - viii) Capital efficiency viii) Corporate governance ix) Democratic accountability x) Foreign portfolio capital


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Two divergent development Paths:

India China

i) Increasingly building ground up Top down approach

ii) Service sector led growth Manufacturing sector and foreign trade

iii) Private sector led growth State led modernization (late 1970s)(early nineties)

iv) Consumption driven Investment driven

v) Knowledge based sector-labor Cheap- assembly line workers

vi) Worlds back office Factory of the world


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India China

vii) Domestic Private Companies FDI inflow

State owned enterprises

VIII) Young work force Aging workforce

VIII) Cheaper labour Rural reform


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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 butcapitalism is more comfortable in democracy which fosters entrepreneurs.

Indias growth may be more enduring as people have scripted its growthwhereas in China it is state crafted.

India-A country with Potentials for sustaining development!!


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Because the Indian state is inefficient, millions ofentrepreneurs have stepped in to vacuum. Whengovernment schools fail, people start private

schools in the slums, and the result is millions ofslumdog millionaires .

You cannot do this in China!!

GurucharandasTimes of India, 10 May 2009


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THANK YOU

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