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Eco project

  2. 2. DeclarationThe text reported in the project is the outcome of my own efforts and no part of this report hasbeen copied in any unauthorized manner and no part in it has been incorporated without dueacknowledgment.Date:-15/03/2013Roll No. 11BAL094Name & Signature of the Student_____________________________ 2|Page
  3. 3. CertificateThis is to certify that Hardik Sharma(11bal094) a student of IV Semester of Institute of Law,Nirma University has completed this project on the Comparative study of India China Economyfor the subject of Family Law I as a part of their course. This is original work done under myguidance & Supervision.Date:-------------------------Mrs. Lucky MishraAsst. Prof 3|Page
  4. 4. AcknowledgementI take the opportunity, while presenting this project report; to express my deep gratitude to allthose who offered their valuable help to me in completing this project successfully. A number ofpeople provided me with their assistance, encouragement and enthusiasm. Without them thisproject would not have been possible.First of all I am extremely grateful & thankful to the Nirma University, Institute of Law,Ahmadabad, for instilling in us new & lively subjects which are practically observed in theSociety today.I am extremely thankful to Asst. Prof. Lucky Mishra ma‟am for giving the view of thiswonderful topic and helping me in the completion of this project. Sir has always been aperennial source of information for us and has always inspired me to embark upon this venture. 4|Page
  5. 5. Table of ContentsS. no. Topic Page no.1 Introduction 62 Literature Review 73 Research Objective 84 Research Questions 85 Statement of Problem 86 Research Hypothesis 97 Research Methodology 98 Chapter 1- “Economy Overview” 109 Chapter 2- “India-China Trade Relations” 1310 Chapter 3- “Comparison Between India And China” 1511 Chapter 4- “Conclusion” 2012 References 22 5|Page
  6. 6. INTRODUCTIONChina and India are leading the shift in the centre of economic gravity towards Asia, and theeconomic prospects of economies throughout the world have become increasingly dependent onsustained demand in the two Asian giants. Continued success cannot be taken for granted,though. We know from history that growth trajectories are not sustained on autopilot.Both, India and China are the fastest growing and largest emerging markets economies. In fact,according to Economic Times dated 23rd March 2011, in the very recent visit to India, billionaireWarren Buffet has described India as a „large market’ and not an „emerging market’. Thesetwo countries account for almost one third of the total population of the world and in recenttimes, have also contributed to the majority of world GDP growth. For the past two decades,China has been growing at an astounding 9.5% a year, and India by 6%. Given their youngpopulations, high savings, and the sheer amount of catching up they still have to do, mosteconomists figure China and India possess the fundamentals to keep growing in the 7%-to-8%range for decades. As per the estimates of leading economists, within three decades India shouldsurpass Germany as the worlds third-biggest economy. By mid-century, China should haveovertaken the U.S. as No. 1. Going by the trends of manufactures and service outputs, China andIndia could account for half of global output. It has been observed that the two countries arebecoming important and powerful as they complement each others strengths. An acceleratingtrend is, that technical and managerial skills, in both China and India are becoming moreimportant than cheap assembly labour. China will stay dominant in mass manufacturing, and isone of the few nations building multibillion-dollar electronics and heavy industrial plants. Indiais a rising power in software, design, services, and precision industry. World over, every country,developed and developing have realised that both India and China are a force to reckon with as,though the global economy is still recovering after the recent economic shock it is said thatthe economies of India and China were best able to withstand the jolt and were somewhatprepared for the global recession as it hit them last. It was only in these two countries that therate of growth of the economy declined but it not go into negative figures. In both these countriesthe export growth also declined but again the economies could sustain itself because of thegovernment stimulus packages and growth in domestic consumption. 6|Page
  7. 7. China and India have managed a growth rate of 9.6 and 8.9 per cent respectively there by makingthese two countries the top two growing nations of the world. China‟s semi capitalist economyhas already surpassed the economies of France, Germany and Japan to become the second largesteconomy behind USA. India, with the present growth rate is already at the threshold of entry intotop ten economies of the world in terms of nominal GDP and top three in terms of purchasingpower parity.REVIEW OF LITERATURE:International Journal of Computing and Business Research ISSN (Online) : 2229-6166India-China economic comparison:China‟s economy has been growing at an outstanding pace for years which has not escaped theattention of global investors. Needless to say, the country‟s stock market has gained 109 per centsince 2009. India, on the other hand, has not yet forayed into the top ten countries of the world inthis context. The size of Chinese economy is 4.5 times more than that of Indian economy.Further, India‟s per-capita GDP is 1/7th of that of China at this juncture.Why Has China’s Economy Taken Off Faster than India’s? June 2006 -David E. Bloom,David Canning, Linlin Hu, Yuanli Liu, Ajay Mahal, and Winnie Yip1This paper analyzes and compares the acceleration of economic growth in India and China.There are three possible approaches to this task. The first is a simple shift share analysis, whichcan be used to decompose the growth of income per worker into a portion attributable to thereallocation of labor from low to high productivity sectors and a portion attributable to thegrowth in labor productivity within sectors. The second approach is to calibrate a productionfunction, along the lines of Young (1994, 1995), and to apply the growth rate of factor inputs ineach country to estimates of the marginal productivity of each factor (based on microeconomicdata) to find their contribution to overall economic growth. 7|Page
  8. 8. India and China – Global EconomySince the late 1970s China has moved from a closed, centrally planned economic system to amore market-oriented one that plays a major role in the global economy - in 2010 China becamethe worlds largest exporter. India is developing into an open-market economy, yet traces of itspast autarkic policies remain. Economic liberalization, including industrial deregulation,privatization of state-owned enterprises, and reduced controls on foreign trade and investment,began in the early 1990s and has served to accelerate the countrys growth, which has averagedmore than 7% per year since 1997.OBJECTIVES OF RESEARCH: 1. To assess the present status of India and China in the global economy. 2. To know which of the two countries is enjoying an edge over the other on the various fundamentals of the economy.RESEARCH QUESTIONS:1. Has the opening up of Chinese economy much before India‟s played a huge role on its upper hand over India?2. Is manpower and labor development two factors that have created stark differences between the economies?STATEMENT OF PROBLEMThe present study is confined to two fastest growing economies of the world i.e Chinaand India. The comparison of these two economies has been made on key economicvariables only. 8|Page
  9. 9. HYPOTHESIS 1. “Openness” of the economy plays a positive role in economic growth. 2. Manpower, labor development and health care facilities are important factors that have created stark differences between the two economies.RESEARCH METHODOLOGYIn order to carry out an extensive Research, the Researcher has espoused the Doctrinal Methodof carrying out the Research. Doctrinal Research which provides a systematic exposition of therules governing a particular legal category, analyses the relationship between rules, explainsareas of difficulty and, perhaps, may even predict future developments. The researcher has triedto include rules or provisions or statistics available and applicable in the present scenario. TheResearcher has used various sources of which Articles, websites, database are a major role toplay. The Researcher has also used various Articles and cases on the aforementioned issue. 9|Page
  10. 10. Chapter 1 Economy OverviewChina Economy Overview:Since the late 1970s China has moved from a closed, centrally planned economic system to amore market-oriented one that plays a major role in the global economy - in 2010 China becamethe worlds largest exporter. Reforms began with the phasing out of collectivized agriculture, andexpanded to include the gradual liberalization of prices, fiscal decentralization, increasedautonomy for state enterprises, creation of a diversified banking system, development of stockmarkets, rapid growth of the private sector, and opening to foreign trade and investment. Chinagenerally has implemented reforms in a gradualist fashion. In recent years, China has renewed itssupport for state-owned enterprises in sectors it considers important to "economic security,"explicitly looking to foster globally competitive national champions. After keeping its currencytightly linked to the US dollar for years, in July 2005 China revalued its currency by 2.1%against the US dollar and moved to an exchange rate system that references a basket ofcurrencies1.In the period 1978-1984, a reform in the agricultural sector introduced a new form of collectivefirm and allowed distribution to households of the revenues deriving from production exceedingthe planned level. This reform favoured an increase in the production and productivity of theprimary sector. In the second period (1985- 88), the reforms mainly concerned the industrialsector and consisted of prices and wages liberalisation, accompanied by the possibility of firmskeeping the profits for selffinancing. The increase in productivity and wages in this sectorattracted labour force underemployed in the agricultural sector, contributing to the overallproductivity growth. It was during this period that the “open door policy” started, thussupporting the beginning of integration of China in the world economy through both trade andFDI. Foreign firms were initially attracted by fiscal incentives in four “special economic areas”and later by international trade and FDI liberalisations in 14 large cities and coastal regions. Thegradual openness and extension of strong incentives to FDI was, however, accompanied bypersisting rigid conditions for admitting FDI.12 In the third and fourth periods (1988-91 and1992-97), reforms involved all economic sectors.13 The last period, before the 2009 world1 International Journal of Computing and Business Research ISSN (Online) : 2229-6166 10 | P a g e
  11. 11. recession and trade decline (1998-2008), was characterised by a growing openness of theChinese economy, especially after 2001 with admission to the WTO. It should be noted that acrucial role in favouring the recent Chinese economic "miracle" is usually attributed to theincreasing degree of trade openness, especially regarding exports, while the liberalisation ofimports has been more gradual. In addition, huge FDI inflows, mainly attracted by much lowerlabour costs, probably engendered spillover effects and contributed to transformation of theproduction specialization model.From mid 2005 to late 2008 cumulative appreciation of the Renminbi against the US dollar wasmore than 20%, but the exchange rate remained virtually pegged to the dollar from the onset ofthe global financial crisis until June 2010, when Beijing allowed resumption of a gradualappreciation. The restructuring of the economy and resulting efficiency gains have contributed toa more than tenfold increase in GDP since 1978. Measured on a purchasing power parity (PPP)basis that adjusts for price differences, China in 2010 stood as the second-largest economy in theworld after the US, having surpassed Japan. The dollar values of Chinas agricultural andindustrial output each exceeded those of the US; China was second to the US in the value ofservices it produced. But per capita income is below the world average.India Economy - overview:India is developing into an open-market economy, yet traces of its past autarkic policies remain.Economic liberalization, including industrial deregulation, privatization of state-ownedenterprises, and reduced controls on foreign trade and investment, began in the early 1990s andhas served to accelerate the countrys growth, which has averaged more than 7% per year since1997.Indias diverse economy encompasses traditional village farming, modern agriculture,handicrafts, a wide range of modern industries, and a multitude of services. Slightly more thanhalf of the work force is in agriculture, but services are the major source of economic growth,accounting for more than half of Indias output, with only one-third of its labour force. India hascapitalized on its large educated English-speaking population to become a major exporter ofinformation technology services and software workers.The Indian transition has also been "gradual", but quite different. First of all, the Indianinstitutional change and the reform policies began later, contributing to a significant delay in 11 | P a g e
  12. 12. integration of this country in the global economy with respect to China. Some reforms, forexample the partial liberalisation of imports (especially of intermediate and investment goods)were introduced in the 80s14 and were followed by progressive privatisations, but it was onlyafter 1992 that the institutional change and the reform policies gradually accelerated, includingreforms of the fiscal system and the creation of “special economic zones”. Secondly, in additionto persisting rigidities and weaknesses, the integration of India in the world economy is muchless intense than that of China.2In 2010, the Indian economy rebounded robustly from the global financial crisis - in large partbecause of strong domestic demand – and growth exceeded 8% year-on-year in real terms.Merchandise exports, which account for about 15% of GDP, returned to pre-financial crisislevels. An industrial expansion and high food prices, resulting from the combined effects of theweak 2009 monsoon and inefficiencies in the governments food distribution system, fuelledinflation which peaked at about 11% in the first half of 2010, but has gradually decreased tosingle digits following a series of central bank interest rate hikes. In 2010 reduced subsidies infuel and fertilizers, sold a small percentage of its shares in some state-owned enterprises andauctioned off rights to radio bandwidth for 3G telecommunications in part to lower thegovernments deficit. The Indian Government seeks to reduce its deficit to 5.5% of GDP in FY2010-11, down from 6.8% in the previous fiscal year. Indias long term challenges includewidespread poverty, inadequate physical and social infrastructure, limited non-agriculturalemployment opportunities, insufficient access to quality basic and higher education,andaccommodating rural-to-urban migration.2 ibid 12 | P a g e
  13. 13. Chapter-2 India-China Trade RelationsAmong the most encouraging recent developments in India China Economy and India-China tiesis the rapid increase in bilateral trade. China and India established diplomatic relations on April1, 1950. India was the second country to establish diplomatic relations with China among thenon-socialist countries.In 1954, Chinese Premier Zhou Enlai and Indian Prime Minister Nehru exchanged visits andjointly initiated the famous Five Principles of Peaceful Coexistence. Relations soured because oftwo sudden invasions of China in India in the 1960s and it was only after a gap of 15 years, in1976, that the two countries decided to restore ambassadoriallevel diplomatic ties .The next major step was foreign minister Vajpayees visit to China in February 1979 which laidthe foundation for today‟s trade relation. In 1984 India & China signed a Trade Agreement,providing for Most Favoured Nation Treatment. In 1994 the two countries signed the agreementson avoiding double taxation. Agreements for cooperation on health and medical science, MOUson simplifying the procedure for visa application and on banking cooperation between the twocountries have also been signed.In December 1988, Indian Prime Minister, Rajiv Gandhis visit to China, facilitated a warmingtrend in relations. The two sides issued a joint statement that stressed the need to restore friendlyrelations on the basis of the Panch Sheel and noted the importance of the first visit by an Indianprime minister to China since Nehrus 1954 visit.India China Economy agreed to broaden bilateral ties in various areas, working to achieve a "fairand reasonable settlement while seeking a mutually acceptable solution" to the border dispute.Border trade resumed in July 1992 after a hiatus of more than thirty years, consulates reopenedin Mumbai and Shanghai in December 1992. Top-level dialogue continued with the December1991 visit of Chinese premier Li Peng to India and the May 1992 visit to China of IndianPresident Ramaswami Venkataraman and, in June 1993, the two sides agreed to open anadditional border trading post. Rajiv Gandhi signed bilateral agreements on science andtechnology cooperation, on civil aviation to establish direct air links, and on cultural exchanges.The two sides also agreed to hold annual diplomatic consultations between foreign ministers, andto set up a joint ministerial committee on economic and scientific cooperation and a jointworking group on the boundary issue. The latter group was to be led by the Indian foreign 13 | P a g e
  14. 14. secretary and the Chinese vice minister of foreign affairs. As the mid-1990s approached, slowbut steady improvement in relations with China was visible.3Recently Chinese Premier Wen Jiabao visited India, where he said that India and China musttake their trade to $30 billion level by 2010. Seeing the whopping growth in Sino-Indian trade,China outlined a five-point agenda, including reducing trade barriers and enhancing multilateralcooperation to boost bilateral trade.Chinese Premier Wen Jiabao said "We have set an objective (in the joint statement) to increasethe two-way trade volume from 13.6 billion doll r at present to 20 billion dollar by 2008.....weplan to take it to 30 billion dollar by 2010." Addressing Indian business leaders at New Delhi, hesaid that the two countries agreed for a joint feasibility study for a bilateral Free TradeAgreement.India China Economy have also agreed to work together in energy security and at the multilaterallevel at the WTO to support an "open, fair, equitable and transparent rule-based multilateral tradesystem", the joint statement signed by Prime Minister Manmohan Singh and Wen said. Wen alsooffered to cooperate with New Delhi in its infrastructure programme.Indian Commerce Minister Kamal Nath said China was poised to become Indias largest tradepartner in the next two-three years, next only to the US and Singapore.According to a CII study, special focus on investments and trade in services and knowledge-based sectors, besides traditional manufacturing, must be given, in view of the dynamiccomparative advantage of India.Indian companies could enter the $615 billion Chinese domestic market by using it as aproduction base. Presently, Iron ore constitutes about 53% of Indias total exports to China.Among the potential exports to China, marine products, oil seeds, salt, inorganic chemicals,plastic, rubber, optical and medical equipment and dairy products are the important ones. Thestudy said that services and knowledge trade between India and China have significant potentialfor growth in areas like biotechnology, IT and ITES, health, education, tourism and financialsector.4Value added items dominate Chinese exports to India, especiallymachinery, including electricalmachinery, which together constitute about 36% of exports from that country. The top 15Chinese exports to India have recorded growth between 29% (organic chemicals) and 219.89%(iron and steel)3 • Basu, Kaushik. “Asian Century: a Comparative Analysis of Growth in China, India and other AsianEconomies.” Working paper, eSocialSciences, 2010.4 ibid 14 | P a g e
  15. 15. Chapter-3 Comparison Between India and ChinaFacts India ChinaGDP around $1.3123 around 4909.28GDP Growth 8.90% 9.60%Per Capital GDP $1124 $7,518Inflation 7.48 % 5.1%Labor Force 467 million 813.5 millionUnemployment 9.4 % 4.20 %Fiscal Deficit 5.5% 21.5%Foreign Direct Investment $12.40 $9.7 billionGold Reserves 15% 11%Foreign Exchange $2.41 billion $2.65 trillionWorld Prosperity Index 88th Position 58th PositionMobile users 842 million 687.71 millionInternet users 123.16 million 81 millionChina‟s economy has been growing at an outstanding pace for years which has not escaped theattention of global investors. Needless to say, the country‟s stock market has gained 109 per centsince 2009. India, on the other hand, has not yet forayed into the top ten countries of the world inthis context. The size of Chinese economy is 4.5 times more than that of Indian economy.Further, India‟s per-capita GDP is 1/7th of that of China at this juncture. China has donemiraculously well to reduce its poverty to the level of 8 per cent. Not long back, like India, it wasstruggling on this front with a 30 plus per cent poverty. However, urgency in this regard has leadto a situation that its poverty rate has come down to one digit. The country is optimistic to bringthe same to zero in near future.India, on the other hand, inspite of all hype has failed to curtail its poverty rate and the samestands at 37 per cent at this point of time. This obviously does not argue well for it. The 15 | P a g e
  16. 16. difference perhaps lies in the attitude and policies of the two countries. One of the majorindicators of poverty is rate of unemployment. On this front too, India has failed to match itscounterpart. An unemployment rate of 9.4 per cent in comparison to 4.6 per cent of China provesIndia‟s apathy on this front as well. There is no denying the fact that steps such asimplementation of MNREGA may prove fruitful in reducing unemployment but to make anysignificant improvement on this front, the country will have to adopt a more proactive approach.China has outshined India on Foreign Direct Investment (FDI) front as well. Estimated annualFDI inflow in China is $108 a year against $34.6 billion a year of India. More importantly, Indiahas failed to attract desired kind of FDI. China has been getting FDI in labour intensiveindustries while India, on account of its poor policies has to content with capital intensive FDI.Needless to say, FDI in China has generated huge employment and has surged its exports aswell. India, on the other hand has been made to wonder as to why inspite of attracting FDI,unemployment and poverty rate are not coming down.5Although foreign exchange reserves of India looks healthy at $2.41 billion, the same arenegligible in front of China‟s $2.65 Trillion.Inflation, especially food inflation has also rattled India in the recent past. The food inflation inIndia, for instance is persisting at 15 % plus level for some time now. The Government, on itspart, is coming out rather funny arguments such as Indians consuming more or account ofenhanced prosperity to justify such a hefty price increase of food items. In reality, however,ignorance of agricultural sector, cuts in subsidies and price hikes of inputs like diesel andfertilisers, hoarding and growing penetration of big corporates in the food economy are thereasons behind it. The comparative position of China is much better in this regard as well.All this has culminated into rather sorry ranking of India on the various socio-economic healthindicators. India‟s ranking in global exports is 20th. This is inspite of the fact that India is theseventh largest country of the world and nature has showered all kind of blessings on it. China isat the top on this front as well. On overall world prosperity index, the country‟s 88th rankingcertainly creates lot of doubts about its future.65 China and India: Openness, Trade and Effects on Economic Growth. The European Journal of ComparativeEconomics Vol. 8, n. 1, pp. 129-154 ISSN 1824-29796 Bosworth, Barry, and Susan Collins. “Accounting for Growth: Comparing China and India.” Working paper,International Finance and Macroeconomics, The National Beareau of Economic Research, 2007. 16 | P a g e
  17. 17. It is however, heartening to note that India is not far behind China when it comes to the growthrate these two countries are likely to achieve in the coming years and the way it has recoveredover recent recession. A projected growth rate of 9 percent (second fastest) and that too onsustained basis for some years is likely to place India in the proximity of developed nations. Thisargument also sounds authentic keeping in view the growth projections of the advancedcountries. All these countries are likely to witness negative or very low economic growth rates inthe coming years. India‟s recovery over recession also was swifter in comparison to most of theother economies of the world.The recent recession shattered the economies of many might countries. However, its impact onIndia was marginal and short lived. Whatever negative impact was witnessed, that wasmarginalized by a very swift and smooth recovery - the recovery, which has not been replicatedby even very strong economies of the world. Indian corporates, for instance, experienced someerosion in both gross and net profit margins in third quarter.If we make the analysis of the India vs. China economy, we can see that there are a number offactors that has made China a better economy than India. Here it is very relevant to mention that,India was under the colonial rule of the British for around 190 years. This drained the countrysresources to a great extent and led to huge economic loss. On the other hand, there was no suchinstance of colonization in China. As such, from the very beginning, the country enjoyed aplanned economic model which made it stronger. The other major indicators which may becompared are as follows:Agriculture :Agriculture is another factor of economic comparison of India and China. It forms a majoreconomic sector in both the countries. However, the agricultural sector of China is moredeveloped than that of India. Unlike India, where farmers still use the traditional and oldmethods of cultivation, the agricultural techniques used in China are very much developed. Thisleads to better quality and high yield of crops which can be exported. 17 | P a g e
  18. 18. IT/BPO:One of the sectors where India enjoys an upper hand over China is the IT/BPO industry. Indiasearnings from the BPO sector alone in 2010 is $49.7 billion while China earned $35.76 billion.Seven Indian cites are ranked as the worlds top ten BPOs while only one city from Chinafeatures on the list.Liberalization of the market :In spite of being a Socialist country, China started towards the liberalization of its marketeconomy 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 Indiasliberalization policies started in the 1990s, China welcomed foreign direct investment and privateinvestment in the mid 1980s. This made a significant change in its economy and the GDPincreased considerably.Difference in infrastructure and other aspects of economic growth:Compared to India, China has a much well developed infrastructure. Some of the importantfactors that have created a stark difference between the economies of the two countries aremanpower and labor development, water management, health care facilities and services,communication, civic amenities and so on. All these aspects are well developed in China whichhas put a positive impact in its economy to make it one of the best in the world. Although Indiahas become much developed than before, it is still plagued by problems such as poverty,unemployment, lack of civic amenities and so on. In fact unlike India, China is still investing inhuge amounts towards manpower development and strengthening of infrastructure.Company Development:Tax incentives are one area where China is lagging behind India. The Chinese capital marketlags behind the Indian capital market in terms of predictability and transparency. The Indiancapital or stock market is both transparent and predictable. India has Asias oldest stock exchangewhich is the BSE or the Bombay Stock Exchange. Whereas China is home to two stockexchanges, namely the Shenzhen and Shanghai stock exchange.As far as capitalization is concerned the Shanghai Stock Exchange is larger than the BSE sincethe SSE has US$1.7 trillion with 849 listed companies and the BSE has US$1 trillion with 4,833 18 | P a g e
  19. 19. listed companies. But more than the size what makes both these stock exchanges different is thatthe BSE is run on the principles of international guidelines and is more stable due to the qualityof the listed companies.In addition to this the Chinese government is the major stake holder of most of its State-ownedorganizations hence the listed firms have to run according to the rules and regulations laid downby the government. Hence India is ahead of China in matters of financial transparency.Company Management Capabilities:It is said that Indians have great managerial skills. India also leaves China behind as far asmanagement abilities are concerned. As compared to China India has better managed companies.One of the major reasons for this is that management reform training in China began 30 yearsago and sadly the subject has still not picked up as a matter of interest by thecitizens of the country.Another important factor behind China not doing well in the business forefront is that most of thecountries came to China and manufactured their goods. It was not China‟s exports that drove theeconomy instead it was the export products of outsiders. Even in the case of mergers andacquisitions China still has not managed to do too well. On the other hand Indian companies arerapidly expanding mergers and acquisitions. Some of the recent examples include; Tata Steels$13.6 Billion Acquisition of Corus, Tata Teas purchase of a controlling stake in Britains Tetleyfor US$407 million, Indian Pharmaceutical giant Ranbaxys acquisition of Romanias Terapiaetc. 19 | P a g e
  20. 20. Chapter-4 ConclusionIt is an undisputed fact that both China and India are the largest market due to their hugepopulation. The rising middle income and upper income group is swelling. Whats more, Chineseand Indian consumers and companies now demand the latest technologies and features. Studiesshow the attitudes and aspirations of todays young Chinese and Indians resemble those ofAmericans a few decades ago. Surveys of thousands of young adults in both nations bymarketing firm Grey Global Group found they are overwhelmingly optimistic about the future,believe success is in their hands, and view products as status symbols. In China, its fashionablefor the upwardly mobile to switch high-end cell phones every three months, says Josh Li,managing director of Greys Beijing office, because an old model suggests "you are not gettingahead and updated." That means these nations will be huge proving grounds for next-generationmultimedia gizmos, networking equipment, and wireless Web services, and will play a greaterrole in setting global standards. In consumer electronics, "we will see China in a few years goingfrom being a follower to a leader in defining consumer-electronics trends," predicts PhilipsSemiconductors Executive Vice-President Leon Husson.The FDI of China is $ 65 billion in comparison to $3.5 billion that of India. This shows thatinspite of all the foreign investment policies of the Indian Government, they are unable to makeattractive for the FDI inflows.The two countries are also becoming a new and reliable destination for research work not onlybecause Indian and Chinese brains are young, cheap, and plentiful. In many cases, theseengineers combine skills -- mastery of the latest software tools, a knack for complexmathematical algorithms, and fluency in new multimedia technologies -- that often surpass thoseof their American counterparts. As Ciscos Scheinman puts it: "We came to India for the costs,we stayed for the quality, and were now investing for the innovation."But Indias long-term potential may be even higher. Due to its one-child policy, Chinas working-age population will peak at 1 billion in 2015 but then shrink steadily. India has nearly 500million people under age 19 and higher fertility rates. By mid-century, India is expected to have1.6 billion people -- and 220 million more workers than China. That could be a source forinstability, but a great advantage for growth if the government can provide education and 20 | P a g e
  21. 21. opportunity for Indias masses. India is now opening its power, telecom, commercial real estateand retail sectors to foreigners. These industries could lure big capital inflows. India isconsidered efficient in contrast to China, as it had to develop with scarcity. It gets scant foreigninvestment, and has no room to waste fuel and materials like China. India also has Western legalinstitutions, a modern stock market, a sophisticated manufacturing knowhow and private banksand corporations. As a result, it is far more capital-efficient. A study on the top listed companiesin both nations shows Indian corporations have achieved higher returns on equity and investedcapital in the past five years in industries from autos to food products. Export manufacturing isone of Indias best hopes of generating millions of new jobs.A few years ago, Indian markets were under the threat of being swamped by Chinese imports.Today, India enjoys a positive balance of trade with China. Major industry players orindustrialist realised in India that giving the Chinese a free ride into the domestic market so earlywould have hampered India‟s domestic manufacturing base. The Indian have become more costand quality conscious. The Indian customer prefers Indian to Chinese products and ourmanufacturing base is again gearing up.The above research proves both my hypothesis right that is:- 1. “Openness” of the economy plays a positive role in economic growth. 2. Manpower, labor development and health care facilities are important factors that have created stark differences between the two economies. 21 | P a g e
  22. 22. ReferencesIndia And China In The Global Economy- Comparative Evaluation. International Journalof Computing and Business Research ISSN (Online) : 2229-6166 Volume 2 Issue 2 May2011.China and India: Openness, Trade and Effects on Economic Growth. The EuropeanJournal of Comparative Economics Vol. 8, n. 1, pp. 129-154 ISSN 1824-2979Economic Growth Patterns and Strategies in China and India: Past and Future. LouisKuijs, September 2012Basu, Kaushik. “Asian Century: a Comparative Analysis of Growth in China, India andother Asian Economies.” Working paper, eSocialSciences, 2010.Bosworth, Barry, and Susan Collins. “Accounting for Growth: Comparing China andIndia.” Working paper, International Finance and Macroeconomics, The NationalBeareau of Economic Research, 2007.Organisation for Economic Cooperation and Development. “Economic Survey India.”Survey, Organisation for Economic Cooperation and Development, June 2011. 22 | P a g e