India and China: An Economic Comparison

India and China are the world`s next major powers. And in a global economy, aIIected by the
Iinancial crisis, where most advanced countries are slumped into recession, India and China
are growing.
Both the countries have an important role to play in the world economy, with China
embracing private entrepreneurship and India Iacilitating globalization within its economy.
Going by the basic Iacts, the economy oI China is more developed than that oI India. While
India is the 11th largest economy in terms oI the exchange rates, China occupies the second
position surpassing Japan. Compared to the estimated $1.3123 trillion GDP oI India, China
has an average GDP oI around $4909.28 billion. In case oI per capital GDP, India lags Iar
behind China with just $1124 compared to $7,518 oI the latter. To make a basic comparison
oI India and China Economy, we need to have an idea oI the economic Iacts oI the countries.


INDIA VS CHINA : A COMPARISON
Facts India China
GDP Around $1.3123 trillion Around 4909.28 billion
GDP growth Around 8 Around 9
Per capital GDP Around $1124 Around $7,518
InIlation Around 9 Around 7
Unemployment Around 9 Around 8
Fiscal DeIicit Around 6 Around 21.5
World Prosperity Index 88Th Position 58th Position


II we make the analysis oI the India vs. China economy, we can see that there are a number
oI Iactors that has made China a better economy than India. First things Iirst, India was under
the colonial rule oI the British Ior around 190 years. This drained the country's resources to a
great extent and led to huge economic loss. On the other hand, there was no such instance oI
colonization in China. As such, Irom the very beginning, the country enjoyed a planned
economic model which made it stronger.
Agriculture
Agriculture is another Iactor oI economic comparison oI India and China. It Iorms a major
economic sector in both the countries. However, the agricultural sector oI China is more
developed than that oI India. Unlike India, where Iarmers still use the traditional and old
methods oI cultivation, the agricultural techniques used in China are very much developed.
This leads to better quality and high yield oI crops which can be exported.

The Manufacturing Hub
Morgan Stanley had reported that China`s rapidly aging population, Iollowed by its one-child
policy, is set to dramatically shrink its workIorce and eIIectively pass the baton to India as
the world`s manuIacturing hub. Moreover, China is becoming a consumer market to sell to,
rather than a global manuIacturing hub.
Also, the World Bank`s prediction that China`s GDP growth will Iall to 7.7 in 2015 and by
6.7 by 2020, highlights the cause oI concerns that could slowdown the dragon`s growth.
Morgan Stanley expects India`s growth to surpass China`s growth two years Irom now.

IT/BPO
One oI the sectors where Indi enjoys an upper hand over China is the IT/BPO industry.
India's earnings Irom the BPO sector alone in 2010 is $49.7 billion while China earned
$35.76 billion. Seven Indian cites are ranked as the world's top ten BPO's while only one city
Irom China Ieatures on the list.

Growth of the Indian and Chinese Economies
Both India and China have registered strong economic growth since 1980 and opening up to
international trade and capital. The Indian and Chinese economies have beneIited Irom FDIs
that have provided new goods and services and thereIore a spurt in industrial growth. The
Chinese and the Indian economies rank number 1 and 2 respectively as the Iastest growing
economies in the world.
But the growth oI the Chinese economy has been more spectacular than India and China
today has surpassed India on the more important economic and welIare indices. China`s per
capita GDP growth has averaged 8 since 1980, which is double that oI India`s per capita
GDP growth rate. The Chinese economy is much larger than the Indian economy and labor-
intensive manuIacture exports contribute almost 40 to the Chinese GDP compared to only
16 in India.

elfare Indicators of India and China
As compared to India, China also scores higher on welIare indicators such as living
standards, poverty ration, Iemale adult literacy and liIe expectancy by a wide margin.
Since 1990, China has tripled per capita income and has eased 300 million out oI poverty.
While India still presents a picture oI extreme poverty, Indians are playing invaluable roles in
the research and development centers oI global tech giants, sprouting all over India. Indian
companies are also excelling in producing high-quality goods and services at very low prices,
competing Ior a global marketshare.

Liberalization of the market
In spite oI being a Socialist country, China started towards the liberalization oI its market
economy much beIore India. This strengthened the economy to a great extent. On the other
hand, India was a little slow in embracing globalization and open market economies. While
India's liberalization policies started in the 1990s, China welcomed Ioreign direct investment
and private investment in the mid 1980s. This made a signiIicant change in its economy and
the GDP increased considerably.

Difference in infrastructure and other aspects of economic growth
Compared to India, China has a much well developed inIrastructure. Some oI the important
Iactors that have created a stark diIIerence between the economies oI the two countries are
manpower and labor development, water management, health care Iacilities and services,
communication, civic amenities and so on. All these aspects are well developed in China
which has put a positive impact in its economy to make it one oI the best in the world.
Although India has become much developed than beIore, it is still plagued by problems such
as poverty, unemployment, lack oI civic amenities and so on. In Iact unlike India, China is
still investing in huge amounts towards manpower development and strengthening oI
inIrastructure.

Company Development
Tax incentives are one area where China is lagging behind India. The Chinese capital market
lags behind the Indian capital market in terms oI predictability and transparency. The Indian
capital or stock market is both transparent and predictable. India has Asia's oldest stock
exchange which is the BSE or the Bombay Stock Exchange. Whereas China is home to two
stock exchanges, namely the Shenzhen and Shanghai stock exchange. As Iar as capitalization
is concerned the Shanghai Stock Exchange is larger than the BSE since the SSE has US$1.7
trillion with 849 listed companies and the BSE has US$1 trillion with 4,833 listed companies.
But more than the size what makes both these stock exchanges diIIerent is that the BSE is run
on the principles oI international guidelines and is more stable due to the quality oI the listed
companies. In addition to this the Chinese government is the major stake holder oI most oI its
State-owned organizations hence the listed Iirms have to run according to the rules and
regulations laid down by the government. Hence India is ahead oI China in matters oI
Iinancial transparency.

Company Management Capabilities
It is said that Indians have great managerial skills. India also leaves China behind as Iar as
management abilities are concerned. As compared to China India has better managed
companies. One oI the major reasons Ior this is that management reIorm training in China
began 30 years ago and sadly the subject has still not picked up as a matter oI interest by the
citizens oI the country. Another important Iactor behind China not doing well in the business
IoreIront is that most oI the countries came to China and manuIactured their goods. It was not
Chinas exports that drove the economy instead it was the export products oI outsiders. Even
in the case oI mergers and acquisitions China still has not managed to do too well. On the
other hand Indian companies are rapidly expanding mergers and acquisitions. Some oI the
recent examples include; Tata Steel's $13.6 Billion Acquisition oI Corus, Tata Tea's purchase
oI a controlling stake in Britain's Tetley Ior US$407 million, Indian Pharmaceutical giant
Ranbaxy's acquisition oI Romania's Terapia etc.

The Government Intervention
While a vast majority oI China`s growth comes Irom state-owned companies, India`s
economic miracle can be largely attributed to its private sector story. Having said this, even
India`s state-owned companies are gradually logging change Irom its conventional business
model hit by red-tapism.
China`s state-owned and subsidized model has led to unIair competition and Irequent
government interventions paving way Ior diIIerence in decision making and executive talent
within the two countries.

Growth Focus for India and China
Technical and Managerial skills in both China and India are becoming more important than
cheap assembly labor. China will continue to dominate mass manuIacturing and is still
investing in building multibillion-dollar electronics and heavy industrial plants. While India
is a leading Iorce in soItware, design, services and the precision industry.
A huge and demanding consumer class is also pushing through innovation in India and
China. Chinese and Indian consumers want the latest technology and Ieatures.
China and India, are set to transIorm the global economy oI the 21st-century, through its
young, dynamic and driven workIorce, powering worldwide growth and change in a range oI
industries.
In a nutshell, both China and India have to gel-up to emerge as two giants that will Iirmly
buttress the world`s economy in the coming century by preparing themselves Ior a second
wave oI growth in aItermath oI the global Iinancial crisis, says a report on China-India
Comparison An examination oI 2011 Direction and Developments.
Key Findings oI the Comparison Report between India and China
India catching up with Chinese economy