Sudip Dutta, PGPM 2010 2012

Overview
Introduction Emerging markets compared viz: Power sector Education system Oil and gas sector Port and shipping Agriculture  Infrastructure Service industry Role of FDI Trade patterns Trade policies

Introduction
India and China emerging global players:

 High economic growth rates Rapid raising share in world Large inflows of FDI Engines of demand growth in commodities Positive demographics

The first is look at China with infrastructure - where is China and where is India China and India together account for about 37.5% of world population and 6.4% of the value of world output and income at current prices and exchange rates If China opened up in 1978, India did so in 1991 i.e. 14 yrs after China therefore any comparison of India of today should be made with China as it was more than a decade ago as emerging global powers now Since the two countries have similar labor endowments and development lags due to government controls and protected nature of their economies , they can be expressed to follow similar growth paths on opening up

PREPRE-CONDITIONS FOR A PEACEFUL GLOBAL POWER TRANSITION

Much of Chinas dazzling infrastructure was been built in the late 1990s and India is gearing up to the repeat that performance in the latter part of this decade. Foreign inflows into China jumped substantially in the early 1990s and those into India have jumped in the mid -2000s.

Good education and health facilities are necessary for inclusive development. They are state subjects in India and in China also, local government has the large share of the responsibility for their provision The Chinese culture is more homogeneous and Indian culture is more diversified Indian greater expertise with market also shows in the financial sector, which is more deeper and more robust than Chinese counterpart.
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China Economic Fact Sheet

GDP real growth rate: 9.8% (2008) country comparison to the world: 13% (2007) 11.6% (2006)

GDP-Per capita (PPP-Purchasing power parity): $6,000 (2008)country comparison to the world: $5,500 (2007) $4,900 (2006) note: data are in 2008 US dollars

GDP composition by sector: agriculture: 10.6% industry: 49.2% services: 40.2% (2008)

India Economic Fact Sheet

GDP- real growth rate: 6.6% (2008) 9% (2007) 9.6% (2006) GDP per capita (PPP Purchasing power parity) $2,800 (2008) $2,700 (2007) $2,500 (2006) note: data are in 2008 US dollars GDP Composition by sector: agriculture: 17.2% industry: 29.1% services: 53.7% (2008) 9

Comparing India and Chinas Growth Stories

Indicators Political System India
Multi-party Democracy started in 1991. Average 6% growth rate in past two decades.

China
One-party authoritarian rule Economic reforms started in 1978. Average 9.5% growth rate in past two decades. Dominant in mass manufacturing, electronics and heavy industrial plants
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Speed of Growth Economic reforms

Areas of Specialization

Rising power in software, design, services, and precision industry.

Comparing India and Chinas Growth Stories Indicators Gini index (standard measure of inequality) Foreign Direct Investment Future Areas of growth India
36.8 6.8% (up from 0.3% in 2004)

China
47.0 (up 10 points from 15 yrs ago) 17.8%

IT business, services R&D, bioand continued technology, highmanufacturing value IT enabled services (legal, medical, engineering architecture), manufacturing, agro11 based industry

Comparison


India lags behind China in infrastructure. China has a weak banking and legal system. India has the advantage of the English language which has made it easier to participate in the global economy. What holds India back are bureaucratic red tape, corruption and its inability to build infrastructure fast enough. According to Peter Drucker, India has managed rural to urban transition in a relatively smooth and peaceful manner, which China is still struggling to do.
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GDP Growth 2000 to 2050

[2003 bn US Dollars]
45000 40000

35000

30000 25000 20000 15000

10000

5000 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Japan Russia Brazil Germany

Source: Goldmann Sachs: The Path to 2050

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SECTOR-WISE BREAK-UP OF ECONOMIES SECTORBREAKCHINA & INDIA

100%

50%

Services Industry Agriculture

0%

Sectorwise Break up of China GDP

Sectorwise Break up of China Population

Sectorwise Break up of India GDP

Sectorwise Break up of India Population

Indias 54% of population is engaged in Agriculture but only accounts for 17% of GDP

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GROSS DOMESTIC SAVINGS CHINA & INDIA

China & India: Gross Domestic Saving as a % of GDP
70 China India 60 50 40 30 20 10 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

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India - Low penetration and underserved market

Per Capita Consumption of Electricity
22000
18,408

Comparison with China

India China

14,240

(Kwh/year)

8,231

8,459

Installed capacity in 2006 (GW)

7,442 6,756 6,425

132

622

2,340

1,684

Per capita consumption (per kWh)

618

618

1,684

Capacity growth rate over the past 6 years Capacity addition in past 6 years (GW)

4.4%

11.8%

Germany

Canada

Japan

R ssian Federation

Brazil

France

Uni d States

China

United Kingdom

India

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303

Low penetration providing significant opportunities for future growth Over 400 million people without appropriate access to electricity
Large investment required to achieve Govt. target of per capita consumption of 1,000 KWh by 2012

Source: World Energy Outlook, 2006; Human Development Report 2007-08, Source: China Electricity Council, China 16 16 Power Year Book, Government of India, Ministry of Statistics & Programme Implementation

INFRASTRUCTURE INVESTMENTS

* Transport, Communication & Power

Source: China Statistical Yearbook, RBI, Morgan Stanley Research

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Education system
Growth rate-India@17%, China@13% Primary, secondary education, vocational education trainning in china results in 99.1% literacy rate. Where as in India it is 50 to 60 %

India -61% China-91% Expenditure on education India- 10.7% China -12.8%

But coming to quality education India is far more better than 18 China

Adult literacy

OIL AND GAS

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Port and shipping

Indian exports $13.94 billion in august 2009 where as china is $ 95.41 billion. Indian imports amounted to $130.36 billion where as china is 424.59 billion Installed port capacity in China is 5.6 btpa vis--vis Indias capacity of ~0.75 btpa  Container terminal capacity in China is ~100 m teus vis--vis Indias capacity of 8.6 m teus.  The largest container vessel calling at Chinese Port is more than 13,000 teus where as at Indian container terminal (JNPT) is 6,000 teus. The draft at Shanghai is 19+ m where as at JNPT it is 11.5m and at Mundra it is 17.5 m. The berth length at Shanghai is 13,800 m and that at Hong Kong is 4,426 m whereas total container berth length at JNPT is 2000 m and at 1280 m at Mundra

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Rates of investment


The investment rate in China (investment as a share of GDP) has fluctuated between 35 and 44 per cent over the past 25 years, compared to 20 to 26 per cent in India. Infrastructure investment from the early 1990s has averaged 19 per cent of GDP in China, compared to 2 per cent in India.

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Role of FDI in China



China can afford to have such a high investment rate because it has attracted so much foreign direct investment (FDI). (FDI). But FDI has accounted for only 3-5 per cent of GDP in China 3since 1990, and at its peak was 8 per cent. In the period after 2000, FDI was only 6 per cent of domestic investment. investment. Where as India is only 4%. Recent inflows of capital have not added to the domestic investment rate at all, macro economically speaking, but have led to the further accumulation of international reserves, now increasing by more than $120 billion per year.
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Structural change


China: classic pattern, moving from primary to manufacturing sector, which has doubled its share of workforce and tripled its share of output. India: Move has been mainly from agriculture to services in share of output, with no substantial increase in manufacturing, and the structure of employment has not changed 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.
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Trade patterns


China: Rapid export growth involving aggressive increases on world market shares, based on relocative capital attracted by cheap labour and heavily subsidized infrastructure. India: Lower rate of export growth, with cheap labour due to low absolute wages rather than public provision and poor infrastructure development. So exports have not yet become engine of growth, except in services.

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Trade policies


China: export employment was net addition to domestic employment, since until 2002 China had undertaken much less trade liberalization than most other developing countries. India: increases in export employment were outweighed by employment losses especially in small enterprises because of import competition.

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Poverty reduction


China: Officially 4 per cent of the population now lives under the poverty line, unofficially around 12 per cent. (Reflects earlier asset redistribution and basic need provision in China under communism, plus larger mass market and role of agricultural prices.)

India: poverty ratio much higher and persistent, between 26 per cent and 34 per cent depending upon how one interprets the NSS data.

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