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India v/s China
India v/s China

India v/s China

Which is the next SUPERPOWER?

Can India continue to rise chaotically from

below?

Can China’s state continue to sponsor its rise

from above?

Can India fix its governance and politics?

Can China’s hyper-investment be sustained or will it result in a Japan style deflation or US style stagflation?

Earlier 50-150mln countries like US,

Historical Background

Japan got rich very rapidly

With China and India , billions will get rich very gradually

The ascent of more than a third of humanity is a fascinating

enterprise…. while China’s rise is scripted by an amazing state from

above, India is climbing chaotically from below

-Gurcharan

China’s J-curve of growth

High Growth Rate : >9% for the last three decades

The Dragon’s Flight

Socialist structure of economy, with the state

providing the impetus.

China’s strategy : high investment in

infrastructure.

The persistent production of capital goods has

led to exponential production over the decades.

CHINA: Defying Conventional Theories?

Investing 46.2% of GDP

Spends a billion USD everyday on infrastructure.

China adds, each year, the entire electricity generating capacity of India to its repertoire.

Excessive Manufacturing in CHINA

China offered labor arbitrage to foreign

capital. Cheap land, labor and capital.

Most of the products “Made in China” are manufactured by companies owned by

Americans.

India’s History

Persisted with democracy albeit imperfect.

Initial phase after independence: insular economy

High tariff rates

Pegged exchange rates

Crippling entry barriers.

And of course, a MASSIVE black economy.

India’s bold and shocking move@ 91

Abolished industrial licensing

Currency made convertible

Gates for foreign capital opened

Incredible India : the present

Percentage contribution to GDP(2009-10)

32% 52% 6% 10%
32%
52%
6%
10%

ConsumptionIncredible India : the present Percentage contribution to GDP(2009-10) 32% 52% 6% 10% Government Net Imports

GovernmentIncredible India : the present Percentage contribution to GDP(2009-10) 32% 52% 6% 10% Consumption Net Imports

Net ImportsIncredible India : the present Percentage contribution to GDP(2009-10) 32% 52% 6% 10% Consumption Government Investment

InvestmentIncredible India : the present Percentage contribution to GDP(2009-10) 32% 52% 6% 10% Consumption Government Net

Promising Economy

Foreign reserves not uncomfortably

high nor too low, $0.25 bln

40% of the economy is exposed to

global trade

Unique Demographic dividend: 0.5 bln

of Indians below 25 years

Sector wise comparison

50 45 40 35 30 25 20 15 10 5 0 Agriculture Industry Services
50
45
40
35
30
25
20
15
10
5
0
Agriculture
Industry
Services

IndiaSector wise comparison 50 45 40 35 30 25 20 15 10 5 0 Agriculture Industry

ChinaSector wise comparison 50 45 40 35 30 25 20 15 10 5 0 Agriculture Industry

Will China grow old before getting rich?

One child policy started

in 1970’s

Labour force estimated to stagnate in 2030.

Dependency ratio could hit seventy percent.

started in 1970’s • Labour force estimated to stagnate in 2030. • Dependency ratio could hit
India’s Demographic Dividend Whilst India will have 47 million surplus people in the labor force.

India’s Demographic

Dividend

Whilst India will have 47

million surplus people in the

labor force.

It would have the youngest, highest saving and

consuming population which would also be the least

indebted

China: The future

Excess capacity built on excess capacity.

Really? China’s capital stock per capita is

5% of the corresponding stocks of US,

Japan etc.

Can the Chinese pay back their debts?

Shadow Banking in China

Entrepreneurship??

Average size of a private

firm has been

under30

employees for 2 decades

Entrepreneurship v\s Communism

India has 95%

of 6000 companies in

private hands.

China has 2000

companies 80%

of which are in

state hands.

Stifled Voices, Hopeful Slums

Can this growth be sustained?

Consumption of massive capacity

Chaotic, but democratic India

But the ultimate outcome,

Only time will tell

At a glance

Figures comparison (China-India)

Investment: 46.2% - 30%

Public debt : 18.9% - 5%

Credit : 8.8 1.2 (billion USD)

Export : 1.5 0.225 (trillion USD)

Import : 1.3 0.36 (trillion USD)

Foreign reserves and gold : 2.87 0.287 (trillion USD)