India and China: An Economic Comparison

India and China are the worlds next major powers. And in a global economy, affected by the financial 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 facilitating globalization within its economy. Going by the basic facts, the economy of China is more developed than that of India. While India is the 11th largest economy in terms of the exchange rates, China occupies the second position surpassing Japan. Compared to the estimated $1.3123 trillion GDP of India, China has an average GDP of around $4909.28 billion. In case of per capital GDP, India lags far behind China with just $1124 compared to $7,518 of the latter. To make a basic comparison of India and China Economy, we need to have an idea of the economic facts of the countries.

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

If we make the analysis of the India vs. China economy, we can see that there are a number of factors that has made China a better economy than India. First things first, India was under the colonial rule of the British for 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 of colonization in China. As such, from the very beginning, the country enjoyed a planned economic model which made it stronger.

Agriculture Agriculture is another factor of economic comparison of India and China. It forms a major economic sector in both the countries. However, the agricultural sector of China is more developed than that of India. Unlike India, where farmers still use the traditional and old methods of cultivation, the agricultural techniques used in China are very much developed. This leads to better quality and high yield of crops which can be exported.

The Manufacturing Hub Morgan Stanley had reported that Chinas rapidly aging population, followed by its one-child policy, is set to dramatically shrink its workforce and effectively pass the baton to India as the worlds manufacturing hub. Moreover, China is becoming a consumer market to sell to, rather than a global manufacturing hub. Also, the World Banks prediction that Chinas GDP growth will fall to 7.7% in 2015 and by 6.7% by 2020, highlights the cause of concerns that could slowdown the dragons growth. Morgan Stanley expects Indias growth to surpass Chinas growth two years from now.

IT/BPO One of the sectors where Indi enjoys an upper hand over China is the IT/BPO industry. India's earnings from 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 from China features 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 benefited from FDIs that have provided new goods and services and therefore a spurt in industrial growth. The Chinese and the Indian economies rank number 1 and 2 respectively as the fastest growing economies in the world. But the growth of the Chinese economy has been more spectacular than India and China today has surpassed India on the more important economic and welfare indices. Chinas per capita GDP growth has averaged 8% since 1980, which is double that of Indias per capita GDP growth rate. The Chinese economy is much larger than the Indian economy and laborintensive manufacture exports contribute almost 40% to the Chinese GDP compared to only 16% in India.

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

Liberalization of the market In spite of being a Socialist country, China started towards the liberalization of its market economy much before 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 foreign direct investment and private investment in the mid 1980s. This made a significant 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 infrastructure. Some of the important factors that have created a stark difference between the economies of the two countries are manpower and labor development, water management, health care facilities 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 of the best in the world. Although India has become much developed than before, it is still plagued by problems such as poverty, unemployment, lack of civic amenities and so on. In fact unlike India, China is still investing in huge amounts towards manpower development and strengthening of infrastructure. 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 of 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 far 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 different is that the BSE is run on the principles of international guidelines and is more stable due to the quality of the listed companies. In addition to this the Chinese government is the major stake holder of most of its

State-owned organizations hence the listed firms have to run according to the rules and regulations laid down by the government. Hence India is ahead of China in matters of financial transparency. Company Management Capabilities It is said that Indians have great managerial skills. India also leaves China behind as far as management abilities are concerned. As compared to China India has better managed companies. One of the major reasons for this is that management reform training in China began 30 years ago and sadly the subject has still not picked up as a matter of interest by the citizens of the country. Another important factor behind China not doing well in the business forefront is that most of the countries came to China and manufactured their goods. It was not Chinas exports that drove the economy instead it was the export products of outsiders. Even in the case of 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 of the recent examples include; Tata Steel's $13.6 Billion Acquisition of Corus, Tata Tea's purchase of a controlling stake in Britain's Tetley for US$407 million, Indian Pharmaceutical giant Ranbaxy's acquisition of Romania's Terapia etc.

The Government Intervention While a vast majority of Chinas growth comes from state-owned companies, Indias economic miracle can be largely attributed to its private sector story. Having said this, even Indias state-owned companies are gradually logging change from its conventional business model hit by red-tapism. Chinas state-owned and subsidized model has led to unfair competition and frequent government interventions paving way for difference 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 manufacturing and is still investing in building multibillion-dollar electronics and heavy industrial plants. While India is a leading force in software, 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 features. China and India, are set to transform the global economy of the 21st-century, through its young, dynamic and driven workforce, powering worldwide growth and change in a range of industries.

In a nutshell, both China and India have to gel-up to emerge as two giants that will firmly buttress the worlds economy in the coming century by preparing themselves for a second wave of growth in aftermath of the global financial crisis, says a report on China-India Comparison An examination of 2011 Direction and Developments. Key Findings of the Comparison Report between India and China India catching up with Chinese economy