Abhishek randev

10902226

Do a comparative study of India and China as economies. Make a list of the factors
which favour and resist the growth of these economies in coming years. On the basis of
the study conducted, conclude which economy, according to you has the capacity and
signs of becoming future superpower…?

Plus points of both the economies

• Both China and India have large populations covering substantial and diverse
geographical areas, large economies with even larger potential size.

• Current “success stories” of globalisation: two economies that have apparently

benefited.

• Success defined by the high and sustained rates of growth of aggregate and per
capita national income; the absence of major financial crises; and substantial
reduction in income poverty.
Institutional conditions
• India was “mixed economy” with large private sector, so essentially capitalist
market economy with the associated tendency to involuntary unemployment.

• China mostly a command economy, which until recently had a very small private
sector; still substantial state control over macroeconomic processes that have
differed from more conventional capitalist macroeconomic policy
The financial sector
• India: financial sector was typical of the “mixed economy” without
comprehensive government control over the financial system; financial
liberalisation since early 1990s meant further loss of control over financial
allocations by the state.

• China: financial system still under the control of the state, despite recent
liberalisation. Four public sector banks handle the bulk of the transactions in the
economy, and can regulate the volume of credit to manage the economic cycle,
and direct credit to priority sectors.
Rates of GDP growth
• The Chinese economy has grown at an average annual rate of 9.8 per cent for two
and a half decades, showing volatility around high trend.
• India’s economy has grown at around 5-6 per cent per year over the same period,
breaking from “Hindu” rate of 3 per cent. But very recently the average growth
rate for the last six years is 8 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
The future expectation
1)Goods (Intra-Industry trade and Value added agriculture)
2)Services and Knowledge Industries (IT, ITES, Professional services,
Biotech, Tourism)
3)Foreign Direct Investment:
4)Technology: Moving up the value chain in the global production
process
• Goods: Strive to be a part of the global supply chain in manufacturing
and agriculture.
• Services and Knowledge Industry: Main markets will be in the US
and EU.
• Foreign Direct Investment: Main source of FDI will be high-income
OECD countries, especially the G-7 countries.
• Technology: Cutting edge will be in US and some extent from EU and
Japan. Need to build synergies with US and EU to leverage vast pool
of human resources in cutting edge research
India-China bilateral trade: Future strategy
• Holds great prospects for both countries:
• India and China share complimentarity in many areas of services like
IT Enabled Services, IT, Biotech.
• India can be the lowest cost producer to China in several areas like
education, professional services and financial services.
• Chinese location, culture and human resources can provide India a A
pragmatic, yet proactive target will be to achieve 20 billion USD in
bilateral trade of goods by 2012, bilateral trade growing at 20%
annual average.
• A target of USD 5 billion in bilateral trade in services and knowledge
industries is possible, given the rapid development and
complimentarity between India and China in this segment.
 Services and Knowledge Industries
• springboard to enter the Japanese and Korean market for services
• 1/3 rd of humanity: Demanding goods and services from the world
• 1/4 th of high-skilled manpower: Providing goods and services to the
world
• In 2025, the combined GDP of India and China will be roughly equal
to that of G-7 minus US (i.e. Japan, Germany, France, UK, Canada
and Italy).
conclusion
Both countries have great future in the coming 3decades,but china as a
more powerfull and large economy will b more successful econmy but
we still cant ignore India as it is also expected to grow in good numbers.it
is expected that china will surpass usa in 2015 as an economy.china is
growing at a preety good growth rate at 9-10%.where as India growth
rate vary from 7-9.both countries were not effected as badly as the other
around the wprld by ressission.