General Awareness

April 04, 2017 @ 01:15 PM

Economies of India and China

Positively general awareness enthuses confidence in CAT aspirants. Gaining general awareness is a continuous process but will help to achieve mission CAT 2012 
 
Today you will read general awareness topic:  Economies of India and China
 
China and India have many similarities. Both of the two countries have long and respectable histories. Both of them had suffered invasions or colonial. Moreover, China and India are two of the most populous countries and the largest developing countries in the world.The emergence of China as a big economic power has been accompanied by a more relaxed, albeit still important, economic transformation in India. 
 
China and India had similar levels of per capita GDP (at market exchange rates) in 1980, but China grew much faster and had overtaken India by the early 1990s. Since then growth in China has been so fast that its per capita income is now more than three and a half times that of India. 
 
In March 2012, IMF estimated Indian growth rate at 7 percent while that of China at 8.5 percent. Moreover, China had more than 200 billionaires as compare to 70 of India in 2011.  They spend around $192 billion in public health, where as India spent only $65 billion, when the population is now very close. Life expectancy is 75 year in China  but in India it is around 65 only. China’s expenditure on health care system is nearly 5 times that of India. 97 percent of Chinese children are immunized with DPT vaccine, in contrast with India’s meager figure of 66 percent.
 
Agriculture 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.
 
One of the sectors where India enjoys an upper hand over China is the IT/BPO industry. Seven Indian cities are ranked as the world's top ten BPO's while only one city from China features on the list.
 
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.
 
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 the field of research and development, India has not made a dent yet. The fact that in 2011, 12.3% of residential patents registered in the world are from China, a massive increase in its registration, suggests that they are truly emerging as a world leader in innovation. Recently the world has been taken aback with China’s announcement of sending astronauts to the moon and sending a well designed space station after USA is abandoning its own.
 
China became competitive faster than any other countries over the last one decade. This is one reason why companies would like to flock in China. According to the world competitive ranking China is at 31st position as compare to India, which is at 50th position.
 
Another critical negative factor for India’s economy is the inflation and the unemployment rates, which much bigger than China’s. India’s average inflation rate for 2011 was 9%; where as China’s inflation was less than 6%. The Unemployment rate of India was nearly 9%, when China had 4% which is considered negligible according to international standard. India’s credit rating is BBB- where as that of China’s is AA-. This is one reason, why India’s overseas funds withdrew a net $380m in 2011 compared to record inflows of $29bn in 2010.
 
Major factors responsible for divergence in India and China are –
 
•China launched its economic transformation by using abundant, low-wage labor to establish manufacturing for export industries. In contrast, India developed a service export sector focussed on IT and BPO. 
•China encouraged FDI by multinationals looking to set up export-oriented manufacturing operations, and was able to benefit from foreign intellectual property and know-how. In contrast, India followed an import substitution policy and relied on domestic resource mobilisation and domestic firms.
•More importantly, political setup in China ensures faster development as there are private rights. Land acquisition in China is much easier while in India, any acquisition is followed by number of litigations and protests. 
 
Prof. Amartya Sen had once said that the distinctions are important for the emerging economies which are trying to decide where to emerge. India needs no horse race competition with China in relation to the economic growth figure but with the other aspects of social values developments, quality and standard of living developments, democratic values and political liberties.
 
Thus, economically, India may be lagging behind China but importance liberalism, democracy etc to ensure human welfare are second to none. An economic growth at the cost of such virtues should not be acceptable.
 
Stay tuned to MBA Rendezvous and read more general awareness topics to achieve mission CAT 2012 

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