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CESifo Economic Studies Conference on Understanding the Chinese Economy 10 – 11 June 2005 CESifo Conference Centre, Munich India China: Diverging to Converge Surjit S. Bhalla. India - China: Diverging to Converge

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CESifo Economic Studies

Conference on Understanding

the Chinese Economy

10 – 11 June 2005

CESifo Conference Centre, Munich

India China: Diverging to Converge

Surjit S. Bhalla


India - China: Diverging to Converge

CESifo Economic Studies Conference on Understanding the Chinese Economy: ifo Institute, Munich, Germany

June 10-11, 2005

Surjit S. Bhalla*

*O[x]us Research & Investments, New Delhi

Email: [email protected]


India - China: Diverging to Converge

CESifo Economic Studies Conference on Understanding the Chinese Economy: ifo Institute, Munich, Germany

June 10-11, 2005

Surjit S. Bhalla*

*O[x]us Research & Investments, New Delhi

Email: [email protected]


India - China: Diverging to Converge

CESifo Economic Studies Conference on Understanding the Chinese Economy: ifo Institute, Munich, Germany

June 10-11, 2005

Surjit S. Bhalla*

*O[x]us Research & Investments, New Delhi

Email: [email protected]


  • Objectives

  • Compare China and India performance on a variety of indicators – past, present, and future
















  • Undervaluation of Currencies…

  • Undervaluation is defined as the ratio of per capita GDP in current US dollars to per capita GDP in current international PPP dollars.





  • Growth Model…India and China

  • The growth model uses the following variables for the period 1980 – 2003; data arranged in five-year periods.

  • Log Initial Per Capita Income, Log Initial Years of Education, Latitude (proxy for Geography), Log Change in Undervaluation, and Share of Investment in GDP are the independent variables.













  • Conclusion

  • Undervaluation of exchange rate is a very important theoretical and empirical contributor to the Chinese growth performance.

  • Each 10 percent appreciation of the yuan would lower China’s growth rate by 1.4 percent per annum.

  • India growth rate is expected to be higher than China by 2010.

  • Poverty levels ($ a day poverty line) are the same in India and China (circa 2003).


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