1)India vs China Economy

Making an in depth study and analysis of India vs. China economy seems to be a very
hard task. Both India and China rank among the front runners of global economy and are
among the world's most diverse nations. Both the countries were among the most ancient
civilizations and their economies are influenced by a number of social, political,
economic and other factors. However, if we try to properly understand the various
economic and market trends and features of the countries, we can make a comparison
between Indian and Chinese economy.

Going by the basic facts, the economy of China is more developed than that of
India. While India is the 12th largest economy in terms of the exchange rates, China
occupies the third position. Compared to the estimated $1.209 trillion GDP of India,
China has an average GDP of around $7.8 trillion. In case of per capital GDP, India lags
far behind China with just $1016 compared to $6,100 of the latter. To make a basic
comparison of India and China Economy, we need to have an idea of the economic facts
of the countries.

Facts India China

GDP around $1.209 trillion around $7.8 trillion
GDP growth 6.7% 9.1%
Per capital GDP $1016 $6,100
Inflation 7.8 % -1.2 %
Labor Force 523.5 million 807.7 million
Unemployment 6.8 % 4.3 %

If we make the analysis of the India vs. China economy, we can see that there are a
number of factors that has made China a better economy than India. First things first,
India was under the colonial rule of the British for around 190 years. This drained the
country's resources to a great extent and led to huge economic loss. On the other hand,
there was no such instance of colonization in China. As such, from the very beginning,
the country enjoyed a planned economic model which made it stronger.

Agriculture

Agriculture is another factor of economic comparison of India and China. It forms a

major economic sector in both the countries. However, the agricultural sector of China is
more developed than that of India. Unlike India, where farmers still use the traditional
and old methods of cultivation, the agricultural techniques used in China are very much
developed. This leads to better quality and high yield of crops which can be exported.
Liberalization of the market

In spite of being a Socialist country, China started towards the liberalization of its market
economy much before India. This strengthened the economy to a great extent. On the
other hand, India was very slow in embracing globalization and open market economies.
While India's liberalization policies started in the 1990s, China welcomed foreign direct
investment and private investment in the mid 1980s. This made a significant change in its
economy and the GDP increased considerably.

Difference in infrastructure and other aspects of economic growth

Compared to India, China has a much well developed infrastructure. Some of the
important factors that have created a stark difference between the economies of the two
countries are manpower and labor development, water management, health care facilities
and services, communication, civic amenities and so on. All these aspects are well
developed in China which has put a positive impact in its economy to make it one of the
best in the world. Although India has become much developed than before, it is still
plagued by problems such as poverty, unemployment, lack of civic amenities and so on.
In fact unlike India, China is still investing in huge amounts towards manpower
development and strengthening of infrastructure.

Businessmapsofindia …
2)India vs. China: Whose Economy Is Better?

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In the inevitable comparisons that economists and businesspeople make between Asia's
two rising giants, China and India, China nearly always comes out on top.

The Chinese economy historically outpaces India's by just about every measure. China's
fast-acting government implements new policies with blinding speed, making India's
fractured political system appear sluggish and chaotic. Beijing's shiny new airport and
wide freeways are models of modern development, contrasting sharply with the sagging
infrastructure of New Delhi and Mumbai. And as the global economy emerges from the
Great Recession, India once again seems to be playing second fiddle. Pundits around the
world laud China's leadership for its well-devised economic policies during the crisis,
which were so effective in restarting economic growth that they helped lift the entire
Asian region out of the downturn. (Read "Amid Recovery, China's Property Market
Soars.")

Now, however, India may finally have one up on its high-octane rival. Though India still
can't compete on top-line economic growth — the World Bank projects India's gross
domestic product (GDP) will increase 6.4% in 2009, far short of the 8.7% that China
announced in mid-January – India's economy looks to be rebounding from the downturn
in better shape than China's. India doesn't appear to be facing the same degree of
potential dangers and downside risks as China, which means policymakers in New Delhi
might have a much easier task in maintaining the economy's momentum than their
Chinese counterparts. "The way I see it is that the growth in India is much more
sustainable" than the growth in China, says Jim Walker, an economist at Hong Kong–
based research firm Asianomics.

India's edge is due to the different stimulus programs adopted by the two countries to
support growth during the downturn. China implemented what Walker calls "the biggest
stimulus program in global history." On top of government outlays for new infrastructure
and tax breaks, Beijing most significantly counted on massive credit growth to spur the
economy. The amount of new loans made in 2009 nearly doubled from the year before to
$1.4 trillion – representing almost 30% of GDP. The stimulus plan worked wonders,
holding up growth even as China's exports dropped 16% in 2009.

But now China is facing the consequences of its largesse. Fears are rising that Beijing's
easy-money policies have fueled a potential property-price bubble. According to
government data, average real estate prices in Chinese cities jumped 7.8% in December
from a year earlier — the fastest increase in 18 months. The credit boom has also sparked
worries about the nation's banking system. Many economists expect the large surge in
credit to lead to a growing number of nonperforming loans (NPLs). In a November
report, UBS economist Wang Tao calculates that if 20% of all new lending in 2009 and
10% of the amount in 2010 goes bad over the next three to five years, the total amount of
NPLs from China's stimulus program would reach $400 billion, or roughly 8% of GDP.
Though Wang notes that the total is small compared with the level of NPLs that Chinese
banks carried in the past, she still calls the sum "staggering." Policymakers in Beijing are
clearly concerned. Since December, they have introduced a series of steps to cool down
the housing market and restrict access to credit by, for example, reintroducing taxes on
certain property transactions and raising the required level of cash that banks have to
keep on hand in an effort to reduce new lending. (Read "Foreign Luxury Cars: Picking
Up Speed in India.")

India, meanwhile, isn't experiencing nearly the same degree of fallout from its recession-
fighting methods. The government used the same tools as every other to support growth
when the financial crisis hit – cutting interest rates, offering tax breaks and increasing
fiscal spending – but the scale was smaller than in China. Goldman Sachs estimates that
India's government stimulus will total $36 billion this fiscal year, or only 3% of GDP. By
comparison, China's two-year, $585 billion package is roughly twice as large, at about
6% of GDP per year. Most important, India managed to achieve its substantial growth
without putting its banking sector at risk. In fact, India's banks have remained quite
conservative through the downturn, especially compared with Chinese lenders. Growth of
credit, for example, was actually lower in 2009 than in 2008. As a result, economists see
continued strength in India's banks. A January report by economic-research outfit
Centennial Asia Advisors noted that based on available data, "there was no sign that
domestic banks' nonperforming assets were deteriorating materially." Nor do analysts
harbor the same concerns that India's monetary policies are sending prices of Indian real
estate to bubble levels. "India's growth, though less stellar, does have the reassuring
factor that the [risks of] asset price bubbles are less," says Rajat Nag, managing director
general of the Asian Development Bank in Manila.

India maintained robust growth without Beijing's hefty stimulus in part because it is less
exposed to the international economy. China's exports represented 35% of GDP
compared with only 24% for India in 2008. Thus India was afforded more protection
from the worst effects of the financial crisis in the West, while China's government
needed to be much more active to replace lost exports to the U.S. More significantly,
though, India's domestic economy provides greater cushion from external shocks than
China's. Private domestic consumption accounts for 57% of GDP in India compared with
only 35% in China. India's confident consumer didn't let the economy down. Passenger
car sales in India in December jumped 40% from a year earlier. "What we see [in India]
is a fundamental domestic demand story that doesn't stall in the time of a global
downturn," says Asianomics' Walker. (See pictures of India's "slumdog" entrepreneurs.)

The Indian economy is not immune to risks. The government has to contend with a
yawning budget deficit, and last year's weak monsoon rains will likely undercut
agricultural production and soften rural consumer spending. But rapid growth is expected
to continue. The World Bank forecasts India's economy will surge 7.6% in 2010 and 8%
in 2011, not far behind the 9% rate it predicts for China for each of those years. Indian
Prime Minister Manmohan Singh, when speaking about his country's more plodding pace
of economic policymaking, has said that "slow and steady will win the race." The Great
Recession appears to have proved him right.

Time.com

3)Why India's economy lags behind China's

By Ramtanu Maitra

The on-going six-day trip to China by the Indian Prime Minister Atal Bihari Vajpayee
that ends on Friday contains many elements, but one of the major objectives will be to
improve India-China economic relations.

In tow with Vajpayee are business leaders from 100 of the biggest Indian companies,
including one of India's top five, software developer Infosys Technologies Ltd. The
biggest tractor maker, Mahindra and Mahindra; the largest drug manufacturer, Ranbaxy
Laboratories Ltd and the top cement manufacturer, Grasim Industries Ltd, are
accompanying the premier. These industries represent the areas in which India enjoys an
edge over its Chinese counterparts, and New Delhi expects to pull off business deals of
benefit to India.

The comparison
Comparing the Indian economy with the Chinese economy has become almost a pastime
for many analysts. A majority of these economic analysts have come to the conclusion
that as of the year 2003, China is well ahead of India. As The Economist of London titled
its recent cover story on the subject: "India V China: A Tiger, Falling Behind a Dragon."

China's relative success over India in attracting foreign direct investment (FDI) was what
tipped the balance for The Economist, although the article points out that China's figures
are "inflated by 'round-tripping' of domestic investment through Hong Kong". At the
same time, The Economist notes, some Indian economists claim that India's FDI figures
are understated, because "they exclude foreigners' reinvested profits, the proceeds of
foreign stock market listings, intra-company loans, trade credits, financial leases, and so
on".

The second criterion cited by The Economist is the respective growth rates of the two
countries. Decidedly, China's growth rates are much higher than India's. But the article
points to some Indian businessmen and policy makers who angrily claim that China,
being under a dictatorial government, cooks its books and presents a much rosier picture
of its economy than reality warrants. India, with a democratic system, cannot resort to
such official chicanery.

The Economist concludes that India's economic backwardness has little to do with
democracy as such, but has a lot to do with corruption, fiscal mismanagement, a lack of
international ambition and a history of over-protection at home. On the surface, the
argument is cogent, but it is also true that corruption in China is similarly high and often,
if not always, fiscal mismanagement is another face of corruption.

Significantly, however, The Economist report did not look at the respective country's
investments in the physical sectors - such as manpower development, health, power,
water management, railroads, roads and highways, communication etc - and hence
remains highly superficial and gossipy. A comparison of investments by China and India
in their respective physical economic sectors over the past two decades would have made
it very clear why China is surging ahead, and India is not. It must, however, be said that
India's growth rate in recent years, for which the Vajpayee government hardly deserves
any credit, though highly inadequate, was better than most distressed economies of the
world.

Skewed investments
In the 1990s, following the opening up of the Indian economy with the intent of inviting
foreign direct investment, foreign investors were given an open invitation. As a result,
investment was concentrated in consumer durable sectors where it is quick-yielding and
withdrawal is very easy. This exemplifies the fly-by-night nature of many foreign
investors.

As was pointed out by Indian Planning Commission member Dr S P Gupta at a memorial

lecture two years ago, India now must encourage foreign investment with a priority in
infrastructure. There investment is of a long-term nature and the amount of investment
needed is very high. The Indian private sector finds it very difficult to enter such heavy
investment areas.
Similar views were expressed by a senior World Bank economist recently. "Since 1991,
India has had a policy of attracting private investment into infrastructure," said India
country director Edwin Lim, speaking at a conference in New Delhi. "While some
progress has been made, India's demands for infrastructure services are still not being
met. If the private sector is to play a big role in meeting India's infrastructure demands,
then India needs sectoral policies and a regulatory framework that are conducive to
private investment."

Since India opened up to foreign investment in the early 1990s, there has been some
economic expansion. But there has been little parallel investment by successive
governments in the power industry or other critical infrastructure such as railways,
airlines, highways and telecommunications.

Decrepit infrastructure
A World Bank report issued almost three years ago said, "The shortage of power is
estimated at about 10 percent of total electrical energy and roughly 20 percent of peak
capacity requirement." Fifty years after independence, many rural areas are still without
electricity. Even measured against neighboring countries, India's per capita electricity
consumption is very low - 270 kilowatt hours/year as compared to 300 for Pakistan and
480 for China.

Perhaps no single issue excites Indian industrialists more than the subject of erratic power
supply. Indian small and medium-sized enterprises (SMEs), the backbone of India's
manufacturing and industrial employment, are now reeling under pressure from imports.
"We do not want protection," says Y P Suri, secretary of the Federation of Associations
of Small Industries of India, an apex body representing SMEs. "All we want is support in
terms of infrastructure."

From padlocks to electrical appliances, Chinese goods have made a mass entry into
Indian markets. Chinese electrical goods flooding the Delhi market have forced over 250
units in the capital to close shop. "How can you compare us with China?" asks Suri. "Can
the Indian government guarantee us the same kind of power supply that Chinese SMEs
get?"

With more than 3.3 million small-scale units spread across the country and with over 18
million people employed in them, SMEs are India's second largest employer - after
agriculture. But, according to the Ministry of Small Scale Industries, more than 300,000
SMEs have been sick since March 2000.

While the power shortage in India is for all to see, including those foreigners who travel
only by air, India's railroads have been in a mess for decades now. At least 14 million
people ride each day on the world's second largest railway system, which stretches
66,800 miles, zig-zagging up and down and across India.

"Freight traffic volume has gone up by 620 percent and passenger traffic by 514 percent
since 1951, while input into increasing capacity has grown by only 200 percent," said M
K Mishra, a former member of the Indian Railway board. The higher load has increased
pressure on railway staff and affected safety on a state-run network inherited from the
country's British colonial masters at independence in 1947. Railroad accidents have
become a daily affair and, like terrorist killings in the state of Jammu and Kashmir, the
deaths in railroad accidents do not raise any hue and cry from the people. No rail minister
opts to resign any more. The death toll in train accidents has gone up significantly
because, experts say, the outdated equipment combined with sub-standard parts on rail
coaches make the railways more vulnerable to such accidents. At the same time, rail
budgets have been decreasing. And the priority for every railway minister is adding a
new train that connects his or her own constituency to Delhi or Mumbai or some other
metro.

Ever since the Narasimha Rao government in 1991 embarked on its "liberalization"
policy, the power sector has been systematically starved of funds. Not only has the
private sector failed to contribute to production capacity in any significant way, but
investment in transmission and maintenance of existing plants has seen catastrophic
declines. As a result, even when new plants are commissioned, the problem of poor
transmission networks remains.
One area where the neglect of infrastructure over the decades is most apparent is in the
nation's roads network. Only 2 percent of Indian roads are four-lane, 34 percent are two-
lane, and 64 percent are single-lane. Much of the problem is due to the fact that India has
been spending less and less on road infrastructure. India's first five-year plan (1951-56)
spent 1.4 percent of its total outlay on roads. The share gradually declined, to a mere 0.6
percent in the eighth five-year plan (1992-97). Even after 50 years of independence,
nearly 50 percent of Indian villages are yet to be connected by all-weather roads.

The Rakesh Mohan Committee estimated in 2001 that the economic cost of bad roads
ranges from Rs 200 billion (US$4.3 billion) to Rs 300 billion annually. External
assistance is being obtained for the improvement of national highways through
international agencies such as the World Bank, the Asian Development Bank and the
Overseas Economic Cooperation of Japan. This is one area the Vajpayee administration
has paid attention to, and is investing in quite liberally.

A similar weakness is all too visible in the Indian port system. Decrepit and bogged down
by lack of modernization, Indian ports are a nightmares to importers. The old state-run
Mumbai port is a classic example: it suffers from inefficiency, poor draught, low
productivity, high costs and long vessel turnaround times. Mumbai's inadequacies have
benefited Colombo in Sri Lanka, which is enjoying growing container volumes.

Efforts to develop India's ports have all too often been stymied by the creaking
bureaucracy. For example, recent bureaucratic problems encountered in the private
tendering processes at Mundra in northwestern India and in the conversion of two break
bulk berths to a new container terminal at Nava Mumbai under the Jawaharlal Nehru Port
Trust have slowed down the development of ports in India.
Conclusion
In contrast to India's neglect of the basic infrastructure, China is investing its surplus in
railroad, power, road and water management in a concerted way. There is no question
that China still lacks adequate infrastructure, but it has understood clearly the importance
of modernizing its basic infrastructure to generate employment and adequate utilization
of its vast population.

Indian policy makers, and some economists, on the other hand, give the impression that
India's strategy to accelerate growth is to leapfrog past technologies through its
information technology (IT) acumen. India's services sector has seen a steady increase in
growth rates, share of GDP and contribution to GDP growth. More than half of India's
GDP growth in the 1990s came from the growth of the services sector.

It is one thing to applaud the contribution of IT - with its minimal requirement for
infrastructure - to the Indian economy at this time. It is quite another matter, and
potentially disastrous, to pretend that boosting IT is a development strategy. IT cannot
move a slow-moving economy, burdened with a massive shortfall of infrastructural
development, a huge number of illiterates, crippling poverty and very high
unemployment and under-employment. As the International Finance Corporation's 2001
report, "Leapfrogging India's Information Technology Industry and the Internet," put it,
"while the technology offers considerable promise for India, it will have to be combined
with more widespread reforms if the promise is to be realized."

The real bad news lies elsewhere. India's agricultural sector, which continues to employ
about 60 percent of the country's workforce, has seen a real decline in terms of its
contribution to GDP growth and its share of GDP. India's industrial sector has not been
able to replicate the growth magic of the services sector either. While industry's share of
GDP has increased over the years, its growth rate dropped in the 1990s and its
contribution to GDP growth has more or less remained constant over the years. Data
show that six major industry groups - food products, cotton textiles, textile products,
wood, paper and basic metal and alloy industries - have experienced a sharp slowdown
over the past four years.

Overall, as industrial development was divorced from efficiency and productivity, India's
ability to compete globally has been seriously compromised. By contrast, during the same
period, Chinese manufacturers became increasingly competitive. Infrastructure has made
all the difference.

Asiatimesonline..