Sie Ghosh Presentation-1

8/3/2019 Sie Ghosh Presentation-1

1/33

China and India:A comparison of recent economic

growth trajectories

Jayati Ghosh


2/33

Asian century?

Both China and India have large populations coveringsubstantial and diverse geographical areas, largeeconomies with even larger potential size.

Current success stories of globalisation: two economiesthat have apparently benefited.

Success defined by the high and sustained rates ofgrowth of aggregate and per capita national income; theabsence of major financial crises; and substantial

reduction in income poverty.


3/33

Not similar economies

These economies are often treated asbroadly similar in terms of growth potentialand other features.

But there are crucial differences betweenthe two economies which render suchsimilarities very superficial .


4/33

Institutional conditions

India was mixed economy with large privatesector, so essentially capitalist market economywith the associated tendency to involuntaryunemployment.

China mostly a command economy, which untilrecently had a very small private sector; still

substantial state control over macroeconomicprocesses that have differed from moreconventional capitalist macroeconomic policy.


5/33

The financial sector

India: financial sector was typical of the mixed economywithout comprehensive government control over thefinancial system; financial liberalisation since early 1990smeant further loss of control over financial allocations by

the state.

China: financial system still under the control of the state,despite recent liberalisation. Four public sector bankshandle the bulk of the transactions in the economy, andcan regulate the volume of credit to manage theeconomic cycle, and direct credit to priority sectors.


6/33

Rates of GDP growth

The Chinese economy has grown at an averageannual rate of 9.8 per cent for two and a halfdecades, showing volatility around high trend.

Indias economy has grown at around 5-6 percent per year over the same period, breakingfrom Hindu rate of 3 per cent. But very recentlythe average growth rate for the last four years is8 per cent.


7/33

India: Rates of GDP growth

P e r i o d

( y e a r s t a r t i n g A p r i l )

G r o s s D o m e s t i c

P r o d u c t

P e r c a p i t a N e t

N a t i o n a l P r o d u c t

1 9 5 0-5 2 t o 1 9 6 0-6 2 3 . 9 1 . 81 9 6 0-6 2 t o 1 9 7 0-7 2 3 . 5 1 . 2

1 9 7 0-7 2 t o 1 9 8 0-8 2 3 . 5 1

1 9 8 0-8 2 t o 1 9 9 0-9 2 5 . 6 2 . 9

1 9 9 0-9 2 t o 2 0 0 0-0 2 5 . 6 3 . 5


8/33

China: Rates of GDP growth

Chart 7: Trend Rates of Growth of GDP: Sub-periods

10.3

5.9

11.1

13.5

9.3

3.7

11.8

8.7

9.8

4.4

12.2

10.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Overall Primary Secondary Tertiary

Percent

1980-90

1991-2003

1980-2003


9/33

Rates of investment

The investment rate in China (investment as a share ofGDP) has fluctuated between 35 and 44 per cent over thepast 25 years, compared to 20 to 26 per cent in India.

Aggregate ICORs (incremental capital-output ratios) havebeen around the same in both economies.

Infrastructure investment from the early 1990s has

averaged 19 per cent of GDP in China, compared to 2 percent in India.


10/33

India

Chart 4: Investment as per cent of GDP

0

2

4

6

8

10

12

1416

18

20

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

Public Private


11/33

China

Investment rate and rate of growth of GDP

30.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

46.0

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

I/GDP rog GDP


12/33

Role of FDI in China

Argued that China can afford to have such a highinvestment rate because it has attracted so much foreigndirect investment (FDI.

But FDI has accounted for only 3-5 per cent of GDP in

China since 1990, and at its peak was 8 per cent. In theperiod after 2000, FDI was only 6 per cent of domesticinvestment.

Recent inflows of capital have not added to the domesticinvestment rate at all, macroeconomically speaking, buthave led to the further accumulation of internationalreserves, now increasing by more than $120 billion peryear.


13/33

Structural change

China: classic pattern, moving from primary tomanufacturing sector, which has doubled its share ofworkforce and tripled its share of output.

India: Move has been mainly from agriculture to servicesin share of output, with no substantial increase inmanufacturing, and the structure of employment has notchanged much. Share of the primary sector in GDP fell

from 60 per cent to 25 per cent in four decades, but

share in employment still more than 60 per cent.


14/33

Trade patterns

China: Rapid export growth involving aggressiveincreases on world market shares, based onrelocative capital attracted by cheap labour andheavily subsidised infrastructure.

India: Lower rate of export growth, with cheaplabour due to low absolute wages rather than

public provision and poor infrastructuredevelopment. So exports have not yet becomeengine of growth, except in services.


15/33

Trade policies

China: export employment was net addition todomestic employment, since until 2002 Chinahad undertaken much less trade liberalisation

than most other developing countries.

India: increases in export employment wereoutweighed by employment losses especially insmall enterprises because of import competition.


16/33

Poverty reduction

China: Officially 4 per cent of the population now livesunder the poverty line, unofficially around 12 per cent.(Reflects earlier asset redistribution and basic needprovision in China under communism, plus larger mass

market and role of agricultural prices.)

India: poverty ratio much higher and persistent, between26 per cent and 34 per cent depending upon how oneinterprets the NSS data.


17/33

Poverty in Rural Chin

0

10

20

30

40

50

60

70

80

90

1980 1984 1985 1987 1990 1992 1993 1994 1995 1996 1997 1998 1999 2001

Year

HeadcountR

ate(%)

NBS World Bank


18/33

Poverty in Urban China

0

1

2

3

4

5

6

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1995 1998 1999

Year

UrbanPovertyRate(%)

Urban Poverty Rate (%)


19/33

India: Poverty estimates

Urban Rural

Planning

Commission

estimate

Method

1

Method

2

Planning

Commission

estimate

Method

1

Method

2

1977-

78

45.2 45.2 53.1 53.1

1983 40.8 40.8 45.7 45.6

1987-

88

38.2 38.2 39.1 39.1

1993-

94

32.4 32.6 27.9 37.3 37 31.6

1999-

2000

23.6 24.8 27.1 28.4


20/33

Human development

China: earlier extensive public provision of health andeducation: universal education until Class X, and publicservices to ensure nutrition, health and sanitation.(Recently some privatisation of such services, which has

led to worsening conditions especially in particular areas.)

India: the public provision of all of these has beenextremely inadequate throughout this period and has

deteriorated in per capita terms since the early 1990s.


21/33

Inequalities

In both economies the recent pattern of growthhas been inequalising.

China: spatial inequalities across regions have been the sharpest. More recently, verticalinequalities, especially for migrant populationvis--vis others.

India: vertical inequalities and the rural-urbandivide have become much more marked.


22/33

China: regional inequality

P e r C a p i t a G D Pa t c o n s t a n t 1 9 8 0 p r i c e s

b y R e g i o n

Y e a r 1 9 8 0 1 9 9 0 1 9 9 5 2 0 0 0

Y u a n p e r y e a rE a s t 5 9 8 2 2 4 0 7 2 4 71 1 3 3 4

C e n t r e 3 9 1 1 3 3 8 3 7 0 8 5 9 8 2

W e s t 3 0 8 1 1 5 6 3 0 3 5 4 6 8 7

A sp e r c e n to f E a s tC e n t r e 6 5 6 0 5 1 5 3

W e s t 5 3 5 2 4 2 4 1


23/33

Gini coefficients in China(per cent)

R u r a lU r b a nN a t i o n a l

1 9 7 82 2 1 6 3 0

1 9 8 83 0 2 3 3 7

1 9 9 73 3 2 8

2 0 0 23 7 3 4 4 5


24/33

India: Per capita real consumption


25/33

Political systems

India: Political democracy deeply entrenched,though not translated into economicenfranchisement. Plays a role in creating moreconfused but less extreme patterns of economicgrowth; allows for progressive legislation suchas NREGA (National Rural EmploymentGuarantee Act).

China: Potential future instabilities because ofexcessive top-down growth orientation.


26/33

Sustainability of current patterns

China: high export-high accumulation model whichrequires constantly increasing shares of world marketsand very high investment rates. Already signs of reducedunit values of exports and stagnation of manufacturing

employment.

India: IT-enabled services experiencing current boom, butcompetitive threat from other countries, plus question

about whether it will be enough to transform Indias huge

labour force into higher productivity activities.


27/33

US clothing imports from Mainland China

0

5

10

15

20

25

30

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

1

2

3

4

5

6

Volume-based market share Unit value


28/33

US Clothing imports from Hong Kong Chin

0

1

2

3

4

5

6

7

8

9

10

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

4

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

Volume-based market share Unit value


29/33

The structure of IT production and exports in India

Year

Ratio of IT software

and services to total

IT market (%)

Ratio of IT software

and services exports

to total revenues (%)

Ratio of ITeS exports

to software and

services exports (%)

1997-1998 58.47 59.91 NA1998-1999 66.70 64.81 NA

1999-2000 66.28 71.52 14.26

2000-2001 66.86 74.92 14.96

2001-2002 75.25 76.79 19.55

2002-2003 77.76 77.52 24.10

2003-2004E 79.39 78.34 29.51


30/33

Ch art 3: Man ufacturing g ood s trade b

0

10000

20000

30000

40000

50000

60000

70000

80000

1987-

88

1988-

89

1989-

90

1990-

91

1991-

92

1992-

93

1993-

94

1994-

95

1995-

96

1996-

97

1997-

98

1998-

99

1999-

2000

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

-16000

-14000

-12000

-10000

-8000

-6000

-4000

-2000

0

2000

4000

Manuf exports Manuf imports Manuf t rade balan


31/33

Chart 4: Indices of exports of manufactured goods

0

100

200

300

400

500

600

700

800

900

1000

1980

-8

1982

-8

1984

-8

1986

-8

1988

-8

1990

-9

1992

-9

1994

-9

1996

-9

1998

-9

2000

-0

2002

-0

Quantum Unit value


32/33

Workers remittances by source ($

0

100

200

300

400

500

600

700

800

900

1980-81 1985-86 1990-91 1997-98 1998-99 1999-

2000

2000-01 2001-02 2002-03

America Asia Europe


33/33

Current issues similar

Most important problems on both economiesare the same:

Agrarian crisis

Need to generate more employment

Reverse public neglect of social sectors

Deal with growing inequalities.

Date post:	07-Apr-2018
Category:	Documents
Upload:	subhavya-jain
View:	218 times
Download:	0 times

Sie Ghosh Presentation-1

Documents