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India v/s ChinaRoute to 2030

By

Hashmeet Kaur

MFM Sem I

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Basis India China

Economy Present Overview Investors' perceptions of India

improved in early 2014, due to areduction of the current account

deficit and expectations of post-

election economic reform,

resulting in a surge of inbound

capital flows and stabilization of

the rupee.

China has made only marginal

progress toward rebalancing goals.The new government of President

XI Jinping has signalled a greater

willingness to undertake reforms

that focus on China's long-term

economic health.

GDPPurchasing Power

Parity

$4.99 trillion (2013 est.) $13.39 trillion (2013 est.)

Household Income

Consumption

Lowest 10%: 3.6%

Highest 10%:31.1% (2005)

Lowest 10%: 1.7%

Highest 10%:30%

Labor Force 487.3 million 797.6 million , population at

working age (15-64 years) was

340 million (2013 est.)

Imports $467.5 billion $1.95 trillion

Debt - External $412.2 billion $863.2 billion

Economic Comparison:

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Basis India China

Age Structure 15-24 years:18.1% (male118,696,540/female 105,342,764)

25-54 years:40.6% (male

258,202,535/female 243,293,143)

65 years and over:5.8% (male

34,133,175/female 37,810,599)

15-24 years:14.7% (male105,763,058/female 93,903,845)

25-54 years:47.2% (male

327,130,324/female 313,029,536)

65 years and over:9.6% (male

62,646,075/female 68,102,830)

Literacy Total population:62.8% Total population:95.1%

Education Expenditure 3.2% of GDP Not Accounted

Urbanization Urban population: 31.3% of

total population

Urban population: 50.6% of

total populationHealth Expenditure 3.9% of GDP 5.2% of GDP

ObesityAdult Prevalence

Rate

1.9% of Total Population. 5.7% of Total Population.

Median Age 27 years 36.7 years

Demographic Comparison:

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Basis for Negative Description

Inflation Fuelled by rising wages, property prices and food prices Inflation is

currently between 8-10%.

Poor Educational Standards High levels of illiteracy amongst the population

Poor Infrastructure Indian public services are creaking under the strain of bureaucracy and

inefficiency

BOP Deterioration The current account reached a peak of 6% of GDP.

Large Budget Deficit Largest budget deficits in the developing world. Excluding subsidies it

amounts to nearly 8% of GDP

Rigid Labor Laws Firms employing more than 100 people cannot fire workers withoutgovernment permission. The effect of this is to discourage firms from

expanding to over 100 people.

Inefficient Agriculture 2013/14 has seen a slowdown in the rate of economic growth to 4-5%.

Real GDP per capita growth is even lower.

Indian EconomyNegative:

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Basis for Positive Description

Population as an Asset 1.2 Billion and counting , more human capital and more consumers.

Positive Liberalization

Economic ReformsThe current Indian government (in 2014) has showcased a positive

mind-set towards liberalization of the economy. Key Investments

pacts signed with Australia, Japan and Fiji for more FDI Inflow.

Improved Urbanization The emergence of satellite towns for example for Delhi the National

Capital Region that includes Noida, Gurgaon, Ghaziabad, Faridabad.

Positive Democratic

SentimentThis point is largely inspired from recent developments in the political

front in India.

Positive response to BJP policy.

Robust Banking Systems RBI policy has been successful to control inflation and CAD.

Entrepreneurial Mindset More than 12 million start ups in India. Leading to more FDI Inflow

and increase awareness.

SMEs Accounting for 15% of GDP.

Promoting entrepreneurial talent and creating sustainableemployment.

Indian EconomyPositive :

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Basis for Negative Description

China's accession to the

WTO

Chinese enterprises do not have adequate competitiveness in international

markets.

Average industrial

concentration

Average industrial concentration is too low to compete with foreign

counterparts.

Issue of Agriculture The price of agricultural land has been decreasing since 1996.,while anaverage peasant's annual income in purely agricultural areas is only $80.

China's GDP Might increase temporarily, but employment, tax and wage per GDP unitwill decrease continuously

Foreign capital To indicate how China's economy relies on foreign capital and markets, theratio of the sum of export and import to GDP rose to 46% in 2010.

Deflation crisis Workers and peasants experienced a ten years' stagnation of income,while cadres in central government and rich regional governments enjoyedan income growth to a factor of ten and white-collar employees.

Rapid growth of the

Unemployed population

With more state-owned enterprises going bankrupt, public feeling against

market-oriented reform strengthened.

Chinese Economy Negative:

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Basis for Positive Description

Gross Domestic Product

(GDP)

$13.39 trillion as compared to $4.99 trillion for India.

Labor Force 797.6 million as compared to 487.3 million for India.

Unemployment Rate 4.1% of Total Population as compared to 8.8% to Indian population.

Budget Revenues: $2.118 trillion

Expenditure:$2.292 trillion

Exports $2.21 trillion as compared to $313 billion for India.

Taxes and Other

Revenues

19.4% of GDP as compared to 10.3% of GDP for India.

Gross National Saving 50% of GDP as compared to 33.7% of GDP for India.

Chinese Economy Positive :

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Concluding Analysis : According to the data, it is evident that as the India

heads towards 2030 it will eventually overtake ChineseEconomy as supported by positive demographics andrising economic indicators.

Key facts that will determine Indias lead would be :I. Positive Investor Sentiment,

II. Stable Political Environment,

III. FDI Inflow in key infrastructure and technological

areas,IV. Private-Public-Partnerships (PPP) in future,

V. Social Initiatives like Swach Bharat Campaign, Toiletfor All, Education for All etc.

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Conclusion

According to UNPD, India will overtake China in 2030 because of

Demographic, Economic and Political Reforms welling in India .

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CONCLUSION

India and China are the two fastest emerging economiesamong the major global players.

Both nations have shown remarkable development after

liberalization. Bilateral trade between these two super nations is one the

important aspects. The bilateral trade has grown

remarkably in the last years.

Today China is being recognized as Indias largest tradingpartner and has become one of the top three trading

partners of India whereas India has reserved its place

among the top ten trading partners of China.