India vs China economy

Presented By : Pinaki Gupta

Roll No : 07
XMBA – 11
ITMEEC – Vashi
Date : 22nd August 2010
 Overview
Introduction

Emerging markets compared viz:

Power sector
Education system
Oil and gas sector
Port and shipping
Agriculture
 infrastructure
Service industry
Role of FDI
Trade patterns
Trade policies
conclusion
 Introduction
India and china emerging global players:

 High economic growth rates

Rapid raising share in world
Large inflows of FDI
Engines of demand growth in commodities
The first is look at china with infrastructure where is China and
where is India

China and India together account for about 37.5% of world

population and 6.4% of the value of world output and income at
current prices and exchange rates

If China opened up in 1978, India did so in 1991 i.e 14 yrs after
China therefore any comparison of India of today should be made
with china as it was more than a decade ago as emerging global
powers now

Since the two countries have similar labor endowments and

development lags due to government controls and protected
nature of their economies , they can be expressed to follow
similar growth paths on opening up…
Emerging markets compared
PRE-CONDITIONS FOR A PEACEFUL GLOBAL
POWER TRANSITION

 Much of china’s dazzling infrastructure was been

built in the late 1990’s and India is gearing upto the
repeat that performance in the latter part of this
decade.
 Foreign inflows into china jumped substantially in
the early 1990’s and those into India have jumped in
the mid -2000’s.
 Good education and health facilities are necessary
for inclusive development they are state subjects in
India and in China also, local government has the
large share of the responsibility for their provision

 The Chinese culture is more homogeneous and

Indian culture is great diversified

 Indian greater expertise with market also shows in

the financial sector, which is more deeper and more
robust than Chinese counterpart.
 China – Economic Fact Sheet
GDP – real growth rate:  
9.8% (2008) country comparison to the world:
13% (2007)
11.6% (2006)

GDP-Per capita (PPP-Purchasing power parity):

$6,000 (2008)country comparison to the world:
$5,500 (2007)
$4,900 (2006)
note: data are in 2008 US dollars

GDP – composition by sector:

agriculture: 10.6%
industry: 49.2%
services: 40.2% (2008)
 India – Economic Fact Sheet
GDP- real growth rate:
6.6% (2008)
9% (2007)
9.6% (2006)

GDP – per capita (PPP – Purchasing power parity)

$2,800 (2008)
$2,700 (2007)
$2,500 (2006)
note: data are in 2008 US dollars

GDP – Composition by sector:

agriculture: 17.2%
industry: 29.1%
services: 53.7% (2008)
 Comparing India and China’s Growth Stories
Indicators India China
Political System Multi-party One-party
Democracy authoritarian rule
Speed of Growth Economic reforms Economic reforms
started in 1991. started in 1978.
Average 6% growth Average 9.5%
rate in past two growth rate in past
decades. two decades.
Areas of Rising power in Dominant in mass
Specialization software, design, manufacturing,
services, and electronics and
precision industry. heavy industrial
plants
Comparing India and China’s Growth Stories
Indicators India China
Gini index 47.0 (up 10 points
(standard 36.8 from 15 yrs ago)
measure of
inequality)
Foreign Direct 6.8% (up from 17.8%
Investment 0.3% in 2004)
Future Areas of R&D, bio- IT business, services
growth technology, high- and continued
value IT enabled manufacturing
services (legal,
medical,
engineering
architecture),
manufacturing,
 Comparison…
 India lags behind china in infrastructure.

 China has a weak banking and legal system.

 India has the advantage of the English language which has

made it easier to participate in the global economy.

 What holds India back are bureaucratic red tape, corruption

and its inability to build infrastructure fast enough.

 According to Peter Drucker, India has managed rural to urban

transition in a relatively smooth and peaceful manner, which
China is still struggling to do.
 “GDP Growth 2000 to 2050”
[2003 bn US Dollars]
45000

40000

35000

30000

25000

20000

15000

10000 Japan
Russia
5000
Brazil
Germany
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

-8-
Source: Goldmann Sachs: The Path to 2050
 “SECTOR-WISE BREAK-UP OF ECONOMIES
CHINA & INDIA”

100%

50% Services
Industry
Agriculture

0%
Sectorwise Sectorwise Sectorwise Sectorwise
Break up of Break up of Break up of Break up of
China GDP China India GDP India
Population Population

India’s 54% of population is engaged in Agriculture but only accounts for 17% of GDP

-12-
 “GROSS DOMESTIC SAVINGS
CHINA & INDIA”

• China & India: Gross Domestic Saving as a % of GDP

70
China India
60

50

40

30

20

10

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-14-
 India - Low penetration and underserved market

Per Capita Consumption of Electricity Comparison with China

22000

18,408

India China
14,240

Installed capacity in 2006

(Kwh/year)

132 622
(GW)
8,459
8,231

7,442

6,756

Per capita consumption

6,425 (per kWh)
618 1,684

2,340

1,684
Capacity growth rate over
4.4% 11.8%

618
the past 6 years
0

Capacity addition in past 6

30 303
Brazil
Germany
France
Canada

United

Japan

Federation

China

India
States

Kingdom

years (GW)
United

Russian

• Low penetration providing significant opportunities for future growth Over 400
million people without appropriate access to electricity

Large investment required to achieve Govt. target of per capita consumption of 1,000 KWh by 2012

Source: World Energy Outlook, 2006; Human Development Report 2007-08, Source: China Electricity Council, China
Power Year Book, Government of India, Ministry of Statistics & Programme Implementation 16
 “INFRASTRUCTURE * INVESTMENTS”

* Transport, Communication & Power

Source: China Statistical Yearbook, RBI, Morgan Stanley Research

-15-
 Education system

Growth rate-India@17%, China@13%

Primary, secondary education, vocational education trainning

in china results in 99.1% literacy rate.
Where as in India it is 50 to 60 %

Adult literacy India -61%

China-91%
Expenditure on education India- 10.7%
China -12.8%

But coming to quality education India is far more better than

china
OIL AND GAS

bl
 Port and shipping
Indian exports $13.94 billion in august 2009 where as china is $ 95.41 billion.

Indian imports amounted to $130.36 billion where as china is 424.59 billion

 The largest container vessel calling at Chinese Port is more than 13,000 teus where
as at Indian container terminal (JNPT) is 6,000 teus.

The draft at Shanghai is 19+ m where as at JNPT it is 11.5m and at Mundra it is 17.5
m.

The berth length at Shanghai is 13,800 m and that at hong kong is 4,426 m whereas
total container berth length at JNPT is 2000 m and at 1280 m at Mundra
 Rates of investment
 The investment rate in China (investment as a share of GDP)
has fluctuated between 35 and 44 per cent over the past 25
years, compared to 20 to 26 per cent in India.

 Infrastructure investment from the early 1990s has averaged

19 per cent of GDP in China, compared to 2 per cent in India.
 Role of FDI in China
 China can afford to have such a high investment rate because
it has attracted so much foreign direct investment (FDI.

 But FDI has accounted for only 3-5 per cent of GDP in China
since 1990, and at its peak was 8 per cent. In the period after
2000, FDI was only 6 per cent of domestic investment.
Where as India is only 4%.

 Recent inflows of capital have not added to the domestic

investment rate at all, macro economically speaking, but have
led to the further accumulation of international reserves, now
increasing by more than $120 billion per year.
 Structural change
 China: “classic” pattern, moving from primary to
manufacturing sector, which has doubled its share of
workforce and tripled its share of output.

 India: Move has been mainly from agriculture to services in

share of output, with no substantial increase in
manufacturing, and the structure of employment has not
changed much. Share of the primary sector in GDP fell from
60 per cent to 25 per cent in four decades, but share in
employment still more than 60 per cent.
 Trade patterns
 China: Rapid export growth involving aggressive
increases on world market shares, based on
relocative capital attracted by cheap labour and
heavily subsidised infrastructure.

 India: Lower rate of export growth, with cheap

labour due to low absolute wages rather than public
provision and poor infrastructure development. So
exports have not yet become engine of growth,
except in services.
 Trade policies
 China: export employment was net addition to
domestic employment, since until 2002 China had
undertaken much less trade liberalization than most
other developing countries.

 India: increases in export employment were

outweighed by employment losses especially in small
enterprises because of import competition.
 Poverty reduction
 China: Officially 4 per cent of the population now lives under
the poverty line, unofficially around 12 per cent. (Reflects
earlier asset redistribution and basic need provision in China
under communism, plus larger mass market and role of
agricultural prices.)

 India: poverty ratio much higher and persistent, between 26

per cent and 34 per cent depending upon how one interprets
the NSS data.
DATA SOURCE : DEAREST INTERNET