Comparison between India and China is the most hotly debated topic (at least) among Indians after Pakistan-India debate lost the steam few years back. I did a comparison almost a year back in this blog [2010 July posts] and quite coincidentally Amartya Sen wrote in many papers in about a week or two after that, as a clarification of his standpoint on this issue. Obviously he was being asked the same question in many forums around the globe.
After almost a year, we still have reasons for revisiting this topic. In my mind the reasons are 1. both China and India published their provisional census data, 2. we have latest business data coming out of China and 3. Amartya Sen wrote again on the topic in NY times! [look at the bottom of this post for the link.]
Comparisons are always made on certain parameters and choice of those parameters are crucial; the parameters have to be relevant, objective and useful. There is no point in comparing culture or happiness quotient here for they do not provide any objective basis of comparison. However, population and its growth, literacy [for it gives an indication of skilled labour strenght], revenue, GDP make good parameters for comparison [Let's skip the defense now]. So let's look at our recent data.
Population:
China: 1,339,724,852 India: 1,210,193,422. India is still around 130 million short
Decade growth rate:
China: 73.9 million (5.84%) India: 181 million (17.64%). China is in much better stage.
Literacy (%)
China: 95.92 India: 74.04
Higher literacy almost always indicates better preparedness for skilled jobs and therefore higher productivity.
Economy
GDP Ranking
As per 2010 data, China ranks 2nd [with around US $5.8 trillion]
and India ranks 10th [with US $1.5 trillion] if you use market currency conversion rate.
A better approach is to use Purchasing Parity Power. However the PPP calculation pulls India a lot closer to China. As per the 2010 PPP-based list, China continues to rank 2nd (with US $10 trillion) but India moves up to 4th rank with US $4 trillion GDP!
Growth
Asian Development Bank's 2011 outlook report projects
China's GDP for 2011 : 9.6% [down from 10.3% in 2010]
Inflation Rate for 2011: 4.6% [up from 3% from 2010]
Compare that with the following projection
India's GDP for 2011: 8.2% [down from 8.6% in 2010]
Inflation rate for 2011: 7.8% [down from estimated average of 9.2% in 2010].
Evidently inflation is eating away many benefits of growth. ADB report suggests that inflation, by impacting the poor section of the country more harshly, in effect is increasing the rich-poor divide in the country. China on the other hand has fared much better in distributing equity [we have covered this in my earlier post]. We all know that China's economy has surplus in almost every aspects with a huge cash reserve and export surplus with almost every other country. Worth noting that India's export deficit to China increased to US $11.4 billion this April although India's export to China increased by 11.7% since last April. China's unequalled growth in manufacturing sector has been one of the strongest drivers for strong export oriented growth. However Chain's domestic market is not too bad either. One of the very recent feats that China achieved is that it became the world's largest market for automobiles this year pushing US aside.
ADB warns that India's largest challenge for the next few years would be containing the inflation. The warning looks very real for many of the banks in developed countries have started questioning the prospect of mid-term growth for investments in many developing countries with rising inflation.
Look at the following chart from Reuters:
http://graphics.thomsonreuters.com/11/05/GLB_EMVAL0511_SB.jpg
http://graphics.thomsonreuters.com/11/05/GLB_MRGDVVL0511_VF.jpg
If the inflation pressure does not ease, there is a high probability that with the recovery of developed economies, funds will fly back to the developed nations even if the return continues to remain low.
The silver line is that growing intolerance to corruption and increased development focus in India are of late, showing some positive result in India's governance story. As many stalwarts have mentioned, only better governance, increased transparency are the key to better financial efficiency. India is a country with diverse interests and diverse equity, only public participation and transparent governance can fill myriads of lacunae in the equity distribution and thereby emergence of India as a powerful nation. Without economic development of socially weak sections, no nation can realistically aspire to become powerful.
If you are looking for more profound analysis, follow this link to read the article from Dr. Amartya Sen.
