TWO ASIAN ECONOMIES: THE DRAGON VS THE TIGER
In the race between Asia's major two developing nations, china's dragon is, by most indicators, beating India's Tiger, hand down. But both the countries have population of over 1 billion and the quality and cost of living in new York far exceeds that of any cities in both countries. Historically, there are a number of similarities between the two ancient civilization, the world's leading and richest in one time, going down the league table in the second half of the second millennium , and starting there progress to modernity in the middle of the last century.
In the 1950s and 1960s there was considerable media debate on which system authorization communism in china or parliamentary democracy in India will deliver better. There was not much deference in the economic performance roughly until 1980, when the per capita income was also similar, over the last quarter century. Both instituted economic reforms and growth accelerated. China embraced globalization and trade enthusiastically, welcoming foreign direct investment (FDI) with no inhabitations, and gradually gaining control of world markets for low teach labour – intensive manufactures. While reforms in India are supposed to have been initiated in 1991. The doctrinaire socialist policy had begun to be diluted in the second innings of Indira Gandhi regime. The process of liberalization continued under her son Rajiv Gandhi and more dramatically after 1991.
The growth rate double from the precious Hindu rate, but still lagged that of China. The result has been that starting with more or less the same per capital incomes 25 years back, Chinese incomes today are double that of India's – a result not only of faster GDP growth , but also of lower population increase, thanks to the one child policy. Both face growing economic inequality. Today, apart from higher incomes and lower poverty, the areas in which China is forehead of India are literacy, FDI, labour rationalization in the public sector and infrastructure investment.
In India population continuous to grow with a birthrate of 2.9 where as in China its stabilized at 1.9. India's economic growth has been significantly slower than China. Where as Inflation consistently averages 4% per year in India as it fluctuates between 1% and 4% in China. Cost of living of people in China is significantly higher than India. However, the statistics tell only part of the story – “The Macro Economic Story" . At the micro level, things look quite different. There, India displays every bit bas much dynamism as China.
Indeed, by relying primarily an organic growth, India is making fuller use of its resources and has chosen a path that may well deliver more sustainable progress that China's FDI driven approach.The speed with which India is catching up is due to its own efficient development of capital in IT sector. Indian software companies have batted against language, culture and local regulations ever since they established as token presence in mainland China four years ago largely to service multinational clients or specific offshore requirements.
One of the biggest advantages that Indian companies have is, of course, scale at IT. China's IT services market is highly fragmented, with half the 6,000 films employing less than 50 people. Indian subsidiaries and joint virtues such as the one taken by Tata consultancy services (TCS), hope to showcase the cost, advantages of large scale operations by creating additional hubs outside India.
The real issue of course, isn't where China and India are today but where they will be tomorrow. The answer will be determined in large measures by how well both countries utilize their resources and skills and on this score, India is doing a superior job.