INFOCUS | INDIA-CHINA | ECONOMY
IndIa must ready for the leap
Tiger, tiger burning bright
India’s economic journey over the last 20 years has seen it metamorphose from an ambling elephant into a hungry tiger: Today India’s GDP is the third largest in the world, with a total GDP of 2 trillion dollars. Amir Ullah Khan
C
hina continues its relentless pace of growth. It has been growing in double digit terms almost ever since Japan’s growth slowed down in the early nineties. China now is India’s biggest trading partner between the two, relegating the US to the second place after several years. While the West is important for India, it is also time we started looking at our relationship with China closely. The issues with China and Europe are quite different. While China has a huge labour force, Europe and Japan’s labour force is fast dwindling with an ageing population. The median age in Japan is now touching 50 and the problems of a large dependent population are seen everywhere. If the Japanese and the Europeans don’t stop their strict immigration policy, they will at least have to outsource most of their production. And it is India that is ideally suited to take on the manufacturing sector and the electronics sector that the western world might look at outsourcing. What is evident in China is the silent appreciation for India’s rapid strides in the services sector. The Chinese know that they need to move up the value chain and not remain large scale suppliers of manufactured goods. They also realize that India is way ahead on this and can sustain service sector growth for quite a while as its demographic dividend pays and the knowl-
edge economy continues to grow. There are a large number of Chinese delegations coming to India to learn what can be done to help China grow in the tertiary sector. In this it is important for India to continue to harness its strengths and ensure that enough investments are made in the education sector so that the human resource development goes on. It is important to make high school students who will graduate go to college and university so they can be part of the large knowledge economy that the world will have. The reforms in the higher education sector therefore are imperative now. Comparing two giants There are many similarities between China and India. Both have emerged out of a long history of colonialism, with the largest populations in the world. Both have aimed at developing the economy and improving living standards of a vast majority of the population. In the development process, China and India have shared similar experiences, and till recently, their development levels were indeed very close to each other. While China is clearly miles ahead by way of infrastructure growth, India’s capital market is clearly more robust and certain. Telecom infrastructure is comparable in both countries, the education sector is equally strong and technology is leveraged almost at the same levels in each country’s industry. Chinese products are imported for their
lower prices while Indian products are popular in Chinese markets. Evolving from a rural agricultural society, China has become an urban, industrial one. Its vast size and unprecedented speed of industrialisation has led to this. China’s transition from a closed economy to a market economy has also been unique with a combination of experimentation and incremental reforms leading to rapid progress. The result has been a quadrupling of GDP since the late 1970s. During the last two decades, China’s nominal GDP ranking is sixth in the world. With China’s accelerated global integration by intensifying international linkages in trade, investment and finance, the implications have been tremendous. Rapid growth in trade has resulted in high economic growth. In fact, it is predicted that by 2020, China will account for 40 per cent of the increase July 2012 India-China Chronicle |25|