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India v/s China

Which is the next SUPERPOWER?


Can India continue to rise chaotically from below? Can Chinas state continue to sponsor its rise from above? Can India fix its governance and politics? Can Chinas 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 Chinas rise is scripted by an amazing state from above, India is climbing chaotically from below -Gurcharan D

Chinas J-curve of growth


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

The Dragons Flight


Socialist structure of economy, with the state providing the impetus. Chinas 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.

Indias 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.

Indias 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%

Consumption Government 52% Net Imports Investment

6% 10%

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

India China

15 10
5 0 Agriculture Industry Services

Will China grow old before getting rich?


One child policy started in 1970s Labour force estimated to stagnate in 2030. Dependency ratio could hit seventy percent.

Indias 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? Chinas 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)