indian economy a comparative overview with china l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Indian Economy : A Comparative Overview with China PowerPoint Presentation
Download Presentation
Indian Economy : A Comparative Overview with China

Loading in 2 Seconds...

play fullscreen
1 / 63

Indian Economy : A Comparative Overview with China - PowerPoint PPT Presentation


  • 307 Views
  • Uploaded on

Indian Economy : A Comparative Overview with China ARTI NANAVATI PROF. OF ECONOMICS DIRECTOR, CENTRE FOR CANADIAN STUDIES MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA VADODARA- 390002 GUJARAT-INDIA DEPT. OF ECONOMICS, SIMON FRASER UNIVERSITY BURNABY, BC, CANADA 18 JUNE, 2009

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Indian Economy : A Comparative Overview with China' - Ava


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
indian economy a comparative overview with china

Indian Economy : A Comparative Overview with China

ARTI NANAVATIPROF. OF ECONOMICS DIRECTOR, CENTRE FOR CANADIAN STUDIES MAHARAJA SAYAJIRAO UNIVERSITY OF BARODA

VADODARA- 390002 GUJARAT-INDIA

DEPT. OF ECONOMICS, SIMON FRASER UNIVERSITY BURNABY, BC, CANADA

18 JUNE, 2009

some general facts
Some General Facts
  • India is the world’s second most populous country of over 1 billion people after China.
  • Urban population 28% of total. (China 39%)
  • More than half of its population is 25 years of age. ‘Demographic dividend’.
  • Measured in USD exchange rate terms, 12th largest in the world, with a GDP of $3.32 trillion (PPP) , China ranked 2nd largest with GDP of $7.8 trillion. (2008)
  • PCI $2,900 at PPP and that of China $6100 (2008)
  • Population below poverty line is 27.5% (2008 est.) China 10%
  • World Bank classifies India as a low income economy
slide3

The contribution of Agriculture, industrial and service sector (2007-8) in GDP has been 21,24 and 55%. ( In China the corresponding percentages are 11.3, 48.6 and 40 % in GDP 2008)

  • Agriculture is the predominant occupation in India, accounting for about 60% of employment ( China 43%) . The service sector makes up a further 28% (China 32%) , and industrial sector around 12% (China 25%).
  • Organized sector employs 8% of workforce (two thirds of which are in public sector), and produces about 40% of GDP. Rest in informal sector --with predominance of ‘women.’ Urban informal sector is a fast growing sector.
  • 30% of total labour is constituted by casual labour and only 10% are in regular employment.
  • Major problem not of open unemployment but of underemployment and disguised unemployment.
  • Unemployment rate 6.8% (2008 est., in China 4.3% is official and 17% unofficial UR).
why india
Why India?
  • GDP growth rate 9% in 2007-2008, slowed down to 7.3% in 2008-9.
  • Major industries are Textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software.
  • Services are a growing sector and play an important role in Indian economy. India is an imp. ‘back office’ destination for global outsourcing of customer services and technical support.
  • Major exporter of highly skilled workers in financial, software, software eng.
  • Potentials are in , manufacturing, pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding, aviation, tourism and retailing.
composition of india s gdp at factor cost by economic activity at 1999 2000 prices in
Composition of India’s GDP (at Factor Cost by Economic Activity –at 1999-2000 prices, in%)

2000-01 2007-08

1)Agriculture etc 23.89 20.55

2)Industry 25.80 24.71*

2.1 Manufacturing 15.30

2.2 Construction 05.81

3) Services 50.30 54.74

3.1 Trade, hotel, Restaurants 14.34 26.80**

3.2 Transport, storage & communica. 07.96

3.2 Finance, insurance, etc 13.04 14.32

3.3 Community, social and per. 14.98 13.62

service

* Inclusive of2.1, 2.2, ** of 3.2. Source : EPW 14TH June , 2008 and Economic Survey of India 2007-8

Source: EPW June 14, 2008

india structural transformation
India- Structural Transformation-?
  • Economic policy: Approach

i) Since independence (1947) – till almost late eighties followed a socialist inspired approach- strict govt. control over -private sector participation, foreign trade and FDI (Approach-import substituting rather than export promoting) .

ii) India’s low average growth rate ( 3%) from 1947-80 was referred as ‘Hindu rate of growth’, because of the unfavorable comparison with the other Asia countries, especially the ‘East Asian Tigers’.

slide7

A period of import tariff, export taxes, quantitative restrictions , approvals needed for 60% of new FDI in the industrial sector.

  • FDI averaged only $200M between 1985-1991.
  • In 2004, net FDI inflow was about 7-8 USD bn. ( China, 52 USD bn)
  • A large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non resident Indians.
  • Largely and intentionally isolated from world markets.
slide8

Late eighties: the govt. led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents, removed price control and reduced corporate taxes.

  • Phase of high growth with high fiscal deficit and worsening current account
  • Collapse of soviet union – a major trading partner, first Gulf war causing spike in oil prices led to major balance of payment crisis with the prospects of defaulting on its loan.
  • Prime Minister Narasimha Rao with Finance Minister Manmohan Singh initiated the economic liberalization of 1991.
  • Reforms did away with license Raj in investment, industrial and import licensing-ended many public monopolies, introduced automatic approvals of FDI in many sectors.
agriculture
Agriculture
  • India ranks second world wide in farm output.
  • In 2007, accounted for 17% in GDP employing 60% of the total workforce.
  • After having growth rate of 2% for many years- now the growth rate is about 4.5%.
  • Two thirds of India’s workforce still earn their livelihood directly or indirectly through agriculture.
  • High level of disguised unemployment.
  • Despite improvements, average yield in India ranges from 30-50% of the highest average yield in the world.
  • Major agricultural products include rice, wheat, oilseed, cotton jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep goats, poultry and fish.
  • India is the largest producer in the world of milk cashew nuts coconuts tea, gingerturmericand black pepper.It also has the world's largest cattle population (193 million).
  • It is the second largest producer of wheat rice sugar groundnutand inland fishIt is the third largest producer of tobacco India accounts for 10% of the world fruit production with first rank in the production of banana and sapota.
industry
Industry
  • India ranks 14th in the world in factory output.
  • Industry accounts for 27.6% of the GDP and employs 17% of the work force.
  • Manufacturing growth rate 8.4%.
  • high-skill sectors account for almost 40 percent of the manufacturing output of India.
  • Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output
  • One third of industrial labour force is engaged in simple household manufacturing only.
  • Economic reforms led to more private sector participation, an expansion in the production of consumer goods and both domestic and foreign competition.
services
Services
  • India is fifteenth in services output.
  • With largest share in GDP of 55%, it employs 23% of workforce.
  • The growth rate which was 4.5% in 1951-80 increased to 7.5% in 1991-2000. Recent growth rate 10.7%.
  • Fastest growing services are –business services, information technology enabled services, business process outsourcing contributing about one third of total output of services in 2000.
  • India’s IT industry an important contributor to BOP, accounts for only about 1% of total GDP and 1/50th of the total services.
  • India leads the market in offshored back-office services, but as a manufacturing center it lags behind China, Thailand, and the rest of Asia.
slide13

Almost stagnant export for the first 15 years after independence. Dominated by products like tea, jute and cotton manufacturers having generally inelastic demand.

  • Since liberalization ex-im have become much broad based.
  • India’s exports are consistently rising, covering about 80% of its imports.
  • Merchandise trade of India about 31% of GDP in 2007 (China 68%)
  • High technology exports as % of total manufacturing exports are 5% in case of India and 30% in case of China.
  • FDI in India has reached 2% of GDP (China 3%, 2006), compared with 0.1% in 1990
  • The top five countries in FDI inflows (2000-2007) are Mauritius (44%),United States(9.4%), UK( 8%), Netherlands(6%)and Singapore(5%).
sectoral employment share by current daily status
Sectoral Employment Share by Current Daily Status

Industry Division 1993-4 2004-5

Agriculture and allied activities 61.03 52.06

Mining & Quarrying 0.78 0.63

Manufacturing 11.10 12.90

Electricity, gas and water supply 0.41 0.35

Construction 3.63 5.57

Trade , hotels and restaurants 8.26 12.62

Transport, Storage & communication 3.22 4.61

Finance, insurance, real estate and 1.08 2.00

business services

Social, community and personal services 10.50 9.24

Source: Economic Survey of India 2007-08

employment share economically active adult population 2004 2005
Employment Share: Economically Active Adult population (%) 2004-2005

1993 2005

-----------------------------------------------------------------------------------------------

Agriculture 74.8 68.5

Labour 34.4 30.3

Cultivator 39.3 37.3

Farm regular 1.1 0.9

Non Farm Sector 25.2 31.5

Casual 6.3 7.3

Regular 7.0 9.3

Self employed 11.9 14.9

-----------------------------------------------------------------------------------------------

100 100

Source: NSSO, 62th Round

rural workers
Rural workers

Workers in the countryside have also increased in numbers. There were 144 million rural workers in 2005-06. There is a high proportion of casualisation in rural areas.

urban workers
Urban workers
  • There were nearly 63 million urban workers in 2005-06. Proportion of regular workers is more among urban workers when compared to rural areas
wages
Wages

Wage rates defer between rural and urban areas and between males and females

working age population
Working age population
  • A big majority of India’s population is in the working age group.
  • Share of working age population (15-59) will increase from 58% in 2001 to 63% in 2011.
  • In 2005-06, about 60% of the population was in the working age group.
  • Of the working age group population, roughly 460 million people were in the workforce in 2005-06.
  • Of these about 206 million (45%) were regular/casual workers.
youth workers
Youth workers
  • India has among the largest number of youth workers in the world.
  • In 2005-06, in the 15-34 age group there were 390 million youth (35% of population)
  • Of these 40.4% were engaged in gainful activity – i.e, nearly 160 million.
  • Nearly half of them were workers.
rate of growth of employment in organized sector per annum
Rate of growth of employment in Organized Sector(% per annum)

1983-1994 1994-2005

Public Sector 1.53 -0.70

Private Sector 0.44 0.58

Total Organized 1.20 -0.31

Source: Eleventh Plan Document.

public private organized sector
Public-Private organized sector
  • Total no. of public and private sector workers stagnated between 1991-2001 and slightly decreased in recent times.
labour market
Labour Market
  • Growing employment but poor in qualitative terms with low regular employment, underemployment and mismatch between education and employment.
  • A huge section of the working class lives in rural areas, is unskilled and condemned to low wages. In non-agriculture sector growth in employment is in informal sector.
  • Even in the urban areas there is a high degree of casualisation, contract labour working in deplorable conditions with no security of work.
  • Although regular employment has risen, its growth has been almost exclusively in the smaller, least productive enterprises.
  • About 87% of manufacturing employment taking place in micro enterprises(<10 persons) producing just a third of manufacturing output.
slide29

Employment in firms with more than ten employees accounts for only around 3.75 per cent of total employment (one quarter of regular employment) and has been falling. Indeed, India has a much smaller proportion of employment in enterprises with ten or more employees than any OECD country.

  • 70% of Indians(800million), lived on less than 20 rupees( slightly less than C50 cents) per day with most working in informal sector with no social security. (2007 Report on National Commission for Enterprises in the unorganized sector)
slide30

Sex Ratio in Population with Rural-Urban break up

Source : Office of the Registrar General, India

Sex Ratio 1901-91 (Total, Rural and Urban) from Brief Analysis of PCA paper-2 of 1992

1961 Population from PCA 1961

1971 Population from Social and Cultural Tables

1981 figures from Series Part-II A(I), General Population Tables – Census of India 1981.

Figures of 1991 (including interpolated data for JK-1991 based on 2001 census) and 2001 from PCA census of India -2001

slide31

Trends in Gender Disparity in Literacy Rate

Source: Census of India various years

area and gender based labor and work force participation rate
Area and Gender based Labor and Work Force Participation Rate (%)

Labor force Work force

participation rates participation rates

1993-94 2004-05 1993-94 2004-05

Rural male 53.4 53.1 50.4 48.8

Rural female 23.2 23.7 21.9 21.6

Urban male 53.2 56.1 49.6 51.9

Urban female 13.2 15.0 12.0 13.3

Source: Economic Survey of India: 2007-08

area and gender based structure of employment 2004 2005
Area and Gender based Structure of Employment 2004-2005

Particulars Rural Urban

Male Female Male Female

Labour

Force 56% 31% 57% 15%

Self empl. 57% 62% 42% 44%

Regular

Wage and

Salaried 10% 4% 42% 40%

Unempl.

Rate 3% 2% 5% 8%

Source: NSSO 62 Round

gender based distribution of occupation in rural india 2004
Gender based Distribution of Occupation in Rural India (%) 2004

Sector Male Female

-------------------------------------------------------------------------------------------------------

Agriculture 54.7 30.4

Casual 21.8 15.5

Cultivators 31.8 14.7

Regular 1.1 0.2

Non Farm 31.3 7.7

Casual 9.6 2.0

Self empl. 14.4 4.1

Regular 7.3 1.6

-------------------------------------------------------------------------------------------------------------

Total 86.0 38.1

-------------------------------------------------------------------------------------------------------------

Not working 14.3 62.0

-------------------------------------------------------------------------------------------------------------

Casual 31.4 17.5

Self emp/cultivators 46.2 18.8

Regular 8.4 1.4

---------------------------------------------------------------------------------------------------------------

slide35

Share of women employment out of total employment in organized sector in India

Source : Quarterly Employment Review, Directorate General of Employment & Training, Ministry of Labor

slide36

Women wage lower than men by 33-40 points. Women-men wage differential is 0.75:1.

  • The gender based wage differential though has narrowed down with increase in education level. It is still high.
  • Urban wage differential persists but narrower than in rural area.
india and china
INDIA AND CHINA

India China

2007

GDP (current

US$billion) 1176.9 3205.5

GNP PC

(current US$) 950 2370.0

GDP growth

Annual % 9.1% 13%

Population

growth rate

(annual %) 1.3 0.6

Mobile and cellular subscription

Per ‘ooo population 21 42

Internet user per ‘000 population 7 16

Source: World Bank: World Development Indicators: Country Profile April 2009

situating india and china in world trade 2007
Situating India and China in World Trade (2007)

Particulars Unit China India

Share in Merchandise

Exports (%) 8.71 1.05

Rank 2 26

Imports (%) 6.70 1.52

Rank 3 18

Share in Commercial Services

Exports (%) 3.63 2.74

Rank 7 10

Imports (%) 4.14 2.49

Rank 6 13

Source: WTO- World Trade Statistics, April 2009

Source: WTO, World Trade Statistics, April 2009

china india world trade highlights 2007
China India world Trade highlights 2007

Particulars China India

Exports of good & services

% of GDP 42 21

Imports of goods & services 32 24

% to GDP

Trade per capita

($US, 2005-07) 1483 391

Patents granted 67948 4320

china merchandise trade 2007
China- Merchandise Trade 2007

Breakdown in economy's in total exports: total imports

By main commodity group (ITS)

(%) (%)

1.Agricultural products 3.2 6.8

2.Fuels and mining products 3.4 22.0

3.Manufactures: 93.2 70.9

By main destination By main origin

1 European Union (27) 20.1 1. Japan 14.0

2. United States 19.1 2. European Union (27) 11.6

3. Hong Kong, China 15.1 3. Korea, Rep. of 10.9

4. Japan 8.4 4. Taipei,Chinese 10.6

5. Korea, Republic of 4.6 5. China 9.0

india s merchandise trade 2007
India’s- Merchandise Trade 2007

Breakdown in economy's in total exports: total imports

---------------------------------------------------------------------------------------------------------------------------

By main commodity group (ITS)

(%) (%)

1.Agricultural products 11.0 4.4

2.Fuels and mining products 24.3 40.2

3.Manufactures: 63.6 46.3

By main destination By main origin

1 European Union (27) 21.7 1. European Union (27) 14.8

2. United States 13.8 2. China 11.2

3. United Arab Emirates 9.9 3. Saudi Arabia 7.6

4. China 6.5 4. USA 6.5

5. Singapore 4.4 5. United Arab Emi. 5.4

trade in commercial services 2007
Trade in Commercial Services-2007

Breakdown in economy's total exports total imports

(%) (%)

China:

1. Transportation 25.7 33.5

2. Travel 30.6 23.0

3. Other commercial services 43.6 43.5

India:

1. Transportation 9.7 40.1

2. Travel 12.1 11.3

3. Other commercial services 78.2 48.6

human development indicators 2006
HUMAN DEVELOPMENT INDICATORS-(2006)

----------------------------------------------------------------------------------------------------------------------------

Human Development Index

( Position among 179 countries) INDIA CHINA

Particulars Rank Value Rank Value

HDI 132 0.609 94 0.762

Life expectancy at birth( yrs) 127 64.1 69 72.7

Adult literacy rate (%) 118 65.2 53 93

Combined(pri—ter)enrolment 134 61 113 68.7

ratio

GDP PC($PPP) 126 2489 104 4682

----------------------------------------------------------------------------------------------------------------------------

Source: Human Development Report 2008

human poverty index hpi 1 2006
HUMAN POVERTY INDEX (HPI-1) -2006

Particulars India China

Rank Value(%) Rank Value(%)

HPI-1 87 28.5 35 7.9

Probability of

Not surviving to

Age 40 (% of

cohort) 2000-05 16.8 6.8

Adult Illiteracy Rate

1999-2001 34.8 7.8

contd.

human poverty index hpi 1 200651
HUMAN POVERTY INDEX (HPI-1) -2006

Particulars India China

Rank Value(%) Rank Value(%)

Children Under

Weight for age

(% aged under

6, 2005-6) 46 7

Population below

Income Poverty line

$1.25 a day 41.6 15.9

$2 a day 75.6 36.3

National poverty line 28.6 2.8

HPI-1 rank minus

income

Poverty Rank -11 -19

Source: Human Development Report-2008

gender related development index gdi
Gender Related Development Index (GDI)

Particulars India China

-----------------------------------------------------------------------------------------------------

GDI Rank Value % of HDI Rank Value % of HDI

116 0.591 97.1 79 0.760 99.8

-------------------------------------------------------------------------------------------------------

Male Female Male Female

Life Expectancy

At birth (2006) 66.5 97.1 71.0 74.5

Adult literate

(1999-2006) 76.4 53.4 96.3 89.5

Combined gross

Enrol. Ratio (%)

2006 63.3 57.4 68.9 68.5

Estimated Earned

Income (PPP US$) 3698 1185 5646 3644

-------------------------------------------------------------------------------------------------------

HDI rank minus

GDI-1 1

gender empowerment measure gem 2007
Gender Empowerment Measure (GEM) 2007

Particulars India China

GEM - Rank 72

----------------------------------------------------------------------------------------------------------

Ratio of estimated

Female to male

earnings 0.32 0.65

----------------------------------------------------------------------------------------------------------

% to total

Seats in parliament

held by women 9.2 21.3

Female legislatures,

Senior officials &

Managers - 17

Female professional

And tech. workers - 52

india china comparative business scenario 2007
India-Chinacomparative Business Scenario-2007

Particulars India China

--------------------------------------------------------------------------------------------------------------------------------------------

(Rank out of 183 countries-2008)

--------------------------------------------------------------------------------------------------------------------------------------------

  • Corruption perception index 85 72

-------------------------------------------------------------------------------------------------------------------------------------------

Procedure (no) duration cost (% GNP) Procd. Duration Cost

  • Starting a business 13 30 days 70.1 14 40 days 7.5

------------------------------------------------------------------------------------------------------------------------------------------

duration cost (as % of estate) Recovery rate duration cost recovery rate

(cents per dollar)

  • Closing a business 10 yrs 9 10.4 1.7yrs 22 35.3

--------------------------------------------------------------------------------------------------------------------------------------------

Source: Transparency international 2008

global competitiveness ranking 2008 9 india and china rank out of 134 countries
GLOBAL COMPETITIVENESS RANKING 2008-9: India and China(Rank out of 134 countries)

Pillars Components India China

------------------------------------------------------------------------------------------------------------------------

GCI Global Competitiveness Index 50 30

------------------------------------------------------------------------------------------------------------------------

Basic requirements 80 42

1 Institutions 53 56

2 Infrastructure 72 47

3 Macroeconomic stability 109 11

4 Health and primary education 100 50

Efficiency Enhancer 33 40

5 Higher education and training 63 64

  • Goods market efficiency 47 51
  • Labour market efficiency 89 51
  • Financial market sophistication 34 109
  • Technological readiness 69 77
  • Market Size 5 2

Innovation and Sophistication factors 27 32

  • Business sophistication 27 43
  • Innovation 32 28

Source: Global Competitiveness Report 2008

major areas of reforms needed
Major Areas of Reforms Needed
  • Labour market: Stringent labour laws should be relaxed
  • Business environment: Lowering the barriers to entrepreneurship

Ending reservation of products fro SSI

Need for Bankruptcy law

Dispersion of tariff rates

Easing of Service sector FDI restrictions

More privatization of public sector enterprises.

  • Financial sector: More liberalization

Privatization of public sector banks

  • Infrastructure : Electricity reforms to be speeded up

transport: More private sector involvement

  • Public Finances: Better targeting of subsidies, GST
  • Education: Higher public expenditure on primary and

education, Addressing financing of higher edu.

India can learn from China in:

Social and Physical Infrastructure

Improving manufacturing sector’s productivity

in conclusion
In Conclusion
  • India and China – non comparable:

India-- Democracy (messy)

Highly diverse social structure

Reforms reactionary in nature- a late starter

Less integrated to Global market (including East Asia)

Dissimilar trade pattern

Lagging behind in FDI and infrastructure

Weak link between economic development and social

welfare at regional level compared to China.

differencing relative strengths
Differencing Relative strengths

India China

i) Agriculture √

reforms

ii) Industrial growth √

iii) FDI √

IV) Open to external

trade √

v) National market √

vi) Service sector √ √

vii) Infrastructure - √

viii) Capital efficiency √

viii) Corporate governance √

ix) Democratic accountability √

x) Foreign portfolio capital √

slide59

Two divergent development Paths:

India China

  • Increasingly building ground up Top down approach
  • Service sector led growth Manufacturing sector and foreign trade
  • Private sector led growth State led modernization (late 1970’s)

(early nineties)

  • Consumption driven Investment driven

v) Knowledge based sector-labor Cheap- assembly line workers

vi) World’s back office Factory of the world

slide60

India China

  • Domestic Private Companies FDI inflow

State owned enterprises

  • Young work force Aging workforce
  • Cheaper labour Rural reform
india s hope
India’s hope!!!!
  • No Trade off to democracy for 2% higher growth!
  • Accumulated diversity not assimilated.
  • Both India and China have accepted the capitalist road to prosperity but capitalism is more comfortable in democracy which fosters entrepreneurs.
  • India’s growth may be more enduring as people have scripted its growth whereas in China it is state crafted.

India- A country with Potentials for ‘sustaining’ development!!

slide62

“Because the Indian state is inefficient, millions of entrepreneurs have stepped in to vacuum. When government schools fail, people start private schools in the slums, and the result is millions of ‘slumdog millionaires’ .”

You cannot do this in China!!

Gurucharandas

Times of India, 10 May 2009

slide63

THANK YOU

artinanavati@gmail.com