Comparison of India and China Economy

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A Comparison of Economic Growth in India and China
- Lessons to be Learnt

Author: G.Charles Arokia Das
EPGP (2008 – 2010)

Table of Content
1.Purpose of the Study 3
2.Understanding the economic growth model of China9
2.1.Factors Leading to China’s Success in Manufacturing 12 2.1.1.Preferential Government Policy 12
2.1.2.Foreign Investments 13
2.1.3.Infrastructure Investment 14
2.1.4.Human Capital 15
3.Understand the economic growth model of India15
3.1.Factors Leading to India’s Success in Services17
3.1.1.Passive Role of Government17
3.2.Lessons for China from Indian Services Success Story20
4.Shortcoming of Indian Economy compared to China20
4.1.Problems of skipping the Industrial revolution21
4.2.GR-2-SER (Green Revolution – II to Services)24
4.2.3.Green Revolution – 226
4.3.GR-2-MAN-2-SER (Green revolution to manufacturing to Services)27 4.3.1.Advantages: 28
4.3.2.Government policies28
4.4.GR-2-MAN-SER (Green revolution – II to Manufacturing and Services):29 4.4.1.Advantages29
4.4.2.Government policies30


Business process outsourcing
Gross Domestic Product
Foreign Direct Investment
Information Technology
1.Purpose of the Study
There are a lot of common factors between India and China, similarly there is a large number of factors which are completely diverse in nature between these 2 countries. The basic intention of this comparative study is to first understand how differently the 2 countries have progressed and what are the factors that contributed for their growth and which of these can be used by the other to further vault the growth rate of each of these 2 great countries. Before comparing let us understand the position of these 2 countries and where they are currently placed in terms of the GDP, distribution of GDP among the 3 main sectors of Agriculture, Industry and Services. This will provide a good overview of both the countries on where they stand today and will be useful for rest of the discussion in this paper.

GDP (Real) of India from 1950 to 2002

Chart: 1

GDP (Real) of India from 2000 to 2007

Chart: 2

The above 2 charts depict the GDP of India since 1950 until 2008. Indian Economic growth can be classified into 3 phases. The first phase was 3 decades after Independence, during this period the growth was very slow, then came the period of moderate growth between 1980 to 1991. The 3rd phase was the high growth phase after the economic reforms of 1992. The reasons in details are discussed further in this Paper.

Chart: 3
The above chart provides an overview of the GDP of India and the contribution of the 3 sectors (Agriculture, Industry and Services) towards GDP and the evolution of each of the sectors over the period 1950 to 2007. Until 70’s agricultural sector was the dominant sector with Services catching up with agriculture, since 80’s services have piped agriculture and has grown very fast and now it captures over 50% of the GDP. Manufacturing Industry has been very stable since the 60’s without any dramatic increase or decrease.

Sector wise Growth contribution to GDP (India)

Table: 1

The above table depicts the growth rate of each industry across the 3 phases of Indian economic growth.

Sector wise employment – India

Table: 2

The above table indicates the share and the growth of employment in each of the 3 sectors. Agriculture employs over 50% of the total employment. But the most productive sector is Services with just 26% of labor share but contributes for 50% of the GDP.

Chart: 4

Chart: 5

The above 2 charts depict the GDP growth of China since 1952. There is no unique pattern found here until 1992. Occasional hike and drop in GDP has been the trend for China and sometimes the GDP has also gone down to negative mainly during the...
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