OverviewIntroductionEmerging markets compared viz:Power sectorEducation systemOil and gas sectorPort and shippingAgriculture infrastructureService industryRole of FDITrade patternsTrade policiesconclusion
IntroductionIndia and china emerging global players: High economic growth ratesRapid raising share in worldLarge inflows of FDIEngines of demand growth in commoditiesPositive demographics
The first is look at china with infrastructure where is China andwhere is IndiaChina and India together account for about 37.5% of worldpopulation and 6.4% of the value of world output and income atcurrent prices and exchange ratesIf China opened up in 1978, India did so in 1991 i.e 14 yrs afterChina therefore any comparison of India of today should be madewith china as it was more than a decade ago as emerging globalpowers nowSince the two countries have similar labor endowments anddevelopment lags due to government controls and protectednature of their economies , they can be expressed to followsimilar growth paths on opening up…
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 SheetGDP – 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 dollarsGDP – composition by sector:agriculture: 10.6%industry: 49.2%services: 40.2% (2008)
India – Economic Fact SheetGDP- 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 dollarsGDP – Composition by sector:agriculture: 17.2%industry: 29.1%services: 53.7% (2008)
Comparing India and China’s Growth StoriesIndicators India ChinaPolitical System Multi-party One-party Democracy authoritarian ruleSpeed of Growth Economic reforms Economic reforms started in 1991. started in 1978. Average 6% growth Average 9.5% growth rate in past two rate in past two decades. decades.Areas of Rising power in Dominant in massSpecialization software, design, manufacturing, services, and electronics and heavy precision industry. industrial plants
Comparing India and China’s Growth StoriesIndicators India ChinaGini index 47.0 (up 10 points(standard measure 36.8 from 15 yrs ago)of inequality)Foreign Direct 6.8% (up from 0.3% 17.8%Investment in 2004)Future Areas of R&D, bio- IT business, servicesgrowth technology, high- and continued value IT enabled manufacturing services (legal, medical, engineering architecture), manufacturing, agro- based industry
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]4500040000350003000025000200001500010000 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 PopulationIndia’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 01990 1992 1994 1996 1998 2000 2002 2004 2006 2008 -14-
India - Low penetration and underserved marketPer Capita Consumption of Electricity Comparison with China 22000 18,408 India China 14,240 (Kwh/year) Installed capacity in 2006 132 622 (GW) 8,459 8,231 7,442 6,756 6,425 Per capita consumption 618 1,684 (per kWh) 2,340 1,684 Capacity growth rate over 4.4% 11.8% 618 the past 6 years 0 Capacity addition in past 6 Brazil Germany Canada France Japan China United India Federation 30 303 States Kingdom United Russian years (GW) • 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 & PowerSource: China Statistical Yearbook, RBI, Morgan Stanley Research -15-
Education systemGrowth rate-India@17%, China@13%Primary, secondary education, vocational education trainningin 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 thanchina
Port and shippingIndian 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 billionInstalled port capacity in China is 5.6 btpa vis-à-vis India’s capacity of ~0.75 btpa Container terminal capacity in China is ~100 m teus vis-à-vis India’s capacity of 8.6m teus. The largest container vessel calling at Chinese Port is more than 13,000 teus whereas 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 17.5m.The berth length at Shanghai is 13,800 m and that at hong kong is 4,426 m whereastotal 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.