This presentation provides a comparison of Indian and Chinese economy in context to Key Growth Drivers and Fiscal Challenges. Happy reading and Thanks!

1. KEY GROWTH DRIVERS IN INDIAN AND CHINESE
ECONOMY AND THE FISCAL CHALLENGES
Group Presentation by:
• Amithavikrama A V
• Charvi Singh
• Dibyajyoti Saikia
• Shefali Naval 1

2. ECONOMIC GROWTH
Increase in the inflation-adjusted
market value of the goods and
services produced by an
economy over time.
Conventionally measured as the
percent rate of increase in real
GDP.
ECONOMIC
GROWTH
FACTORS
NATURAL
RESOURCE
PHYSICAL
CAPITAL
POPULATION
HUMAN
CAPITAL
TECHNOLOGY
LAW
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3. SCENARIO AS OF 2016 BY WORLD BANK
Year 2016 [YR2016] China India
GDP (current US$) $11,199,145,157,649.20 $2,263,522,518,124.03
GDP growth (annual %) 6.70 7.11
Foreign direct investment, net inflows (% of GDP) 1.52 1.96
GDP per capita (current US$) 8,123.18 1,709.39
Inflation, GDP deflator (annual %) 1.21 3.61
Population density (people per sq. km of land area) 146.85 445.37
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4. STATE INVESTMENT AS A KEY GROWTH FACTOR
Common pattern of
development which
differs sharply from the
slowly growing Western
economies shows how
rapidly rising state
investment is associated
with high economic
growth (China and India):
reliance solely on private
investment is associated
with low growth (US, EU
and Japan)
Made clear by both the
Chinese and Indian
government that they
have deliberately taken
the decision to increase
state investment in order
to stimulate economic
growth
China, in the early part of
this year, deliberately
stepped up its level of state
investment in several
programmes – particularly
in infrastructure. By May the
infrastructure investment
action plan included 303
projects covering railways,
highways, waterways,
airports and urban rail
transit, with 131 projects in
2016, 92 projects in 2017
and 80 projects in 2018
India, Modi government has
appointed as its chief
economic adviser a specialist
on China’s economy - Arvind
Subramanian, who
supported by India’s Finance
Minister Arun Jaitley stated
state investment as one of
the key to India’s growth.
Infrastructure spending is
now about 6% of the gross
domestic product (GDP),
which is to be increased to
9% to make a (yearly)
growth rate of 8%
sustainable over a long term
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5. STATE INVESTMENT AS A KEY GROWTH FACTOR
The analysis done by Professor Zhu
Tian from China Europe International
Business School points out, referring to
National Statistics Bureau data, as of
January to June 2016, state-owned
fixed-asset investment increased by
23.5% over the same period last year,
but private fixed asset investment
growth decreased to 2.8%
India shows the same pattern as China.
The analysis by Pranjul Bhandari, chief
India economist of HSBC, in July noted
that the year-on-year increase of
India’s state investment was 21% while
private investment fell by 1.4%
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6. FISCAL CHALLENGES FACED BY INDIAN ECONOMY IN 2017
Bad debts delaying recovery of capital expenditure
Collapse in Investment growth and fall in credit offtake
Demonetization has lowered aggregate demand
Spike in Oil & commodity prices can increase fiscal deficit
Larger foreign outflows from complicated fight against Inflation
6Shefali naval

7. 1. Spike in crude oil
prices
2. Spike in Oil prices can raise India’s Twin deficits
3. A pile of bad debts weighs on the Indian economy
7Shefali naval

8. COLLAPSE IN INVESTMENT GROWTH DUE TO BAD DEBTS
8Shefali naval

9. OVERRELIANCE ON INVESTMENT
Previously, debt and investment fueled China's expanding economy.
Tampering with the country’s interest rate could harm the economy further.
Measures to decrease the housing supply could negatively impact China's financial market and industry sector.
High levels of debt have harmed economic output.
The country seeks to double gross domestic product by 2020 from 2010's figures. China's budget deficit is expected to
expand in 2016.
The National Bureau of Statistics reported that factory output was 5.6% from October 2014 to October 2015, lower
than what was previously projected. Property investment has remained relatively low, which has affected overall growth.
Shoubhik Pakrasi
FISCAL CHALLENGES OF CHINESE ECONOMY
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10. DEFLATION
An overabundance of homes has contributed to deflationary pressures in China, and leaders plan
to reduce the supply of homes in 2016.
A strong U.S. dollar in 2016 will add to deflationary pressure in China.
China's 2016 growth rate is projected at 6.5%. Stagnating growth rates may trigger deflation; the
yuan may not gain enough strength in 2016 to prevent deflation. Government policies aim to
increase aggregate demand.
The Chinese government requires growth of at least 6.5% for five years to achieve structural goals.
Shoubhik Pakrasi 10

11. HIGH CAPITAL OUTFLOWS
Overexposure to the U.S. dollar has contributed to high capital outflows in China.
Bloomberg estimates that $500 billion left China from September 2015 to December 2015.
Capital outflow difficulties have occurred partially due to competition between banks on deposit rates.
The greatest risks companies face are a slowing domestic economy, increasing competition, and rising
operation and labor costs.
CPA Australia’s poll showed 45.3% of responders expect an increase of 2% to 29% in capital
expenditures, with 4.4% projecting an increase of 30% or more.
In 2016 and beyond, leaders expect modest growth after the economy’s slowdown. Beijing’s growth target
was 7% for 2015.
Shoubhik Pakrasi 11

12. Source link: AMITHAVIKRAMA AV 12

13. CONCLUSION
Both India and China have a lot of things that are in common in terms of their economies.
As discussed earlier China has opened up for foreign investors and most of the policies that have been adopted are friendly to
people who wish to invest from abroad.
The economy is growing at a very high rate and one of the major reasons for this is that it has opened business to the rest of the
word. On the other hand, India is doing as well in terms of the growth of the economy, however, most of the government policies that
have been put in place to regulate business locally are not user friendly to the foreign investors.
Most of the foreign investors have withdrawn from operations in the region and as a result, the economy of India is dependent mainly
of the local people and the local market based on the reason that the country is yet to open up fully to the foreign investors.
Therefore, over the next two decades, the likelihood that India will overtake China in terms of the size of its economy is very high but
India needs to adopt some of the tactics that have been adopted by china to reach where it is today.
It should also be noted that in both these countries, there is rise of capitalism and also China keeps on developing new ways to ensure
that its economy grows bigger and better and as a result, it will not be an easy task for India to get to the level of China in terms of
the economy.
AMITHAVIKRAMA AV 13

14. REFERENCES
➢http://ablog.typepad.com/keytrendsinglobalisation/2016/09/why-are-china-and-
india-growing-so-fast-state-investment.html - Key Trends in globalisaton
➢THEWORLDPOST - Why Are China and India Growing So Fast? State Investment
➢World Bank Data Centre
➢ Wikipedia
➢Investopedia
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15. THANK YOU
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