A Comparison Of Chinas And Indias Gdp Economics Essay

China and India are the two giants of Asia, which are now regarded as the “ success narratives ” for their monolithic economic development for the past two decennaries. On their manner to economic growing they have more unsimilarities than similarities. The most common things among them are most ancient civilisations, most thickly settled, covering significant geographical countries and developing economic systems of the universe. They both seemingly benefited from globalisation as good sound macro-economic policies. But on the other side they have different socio-economic-political set ups they had followed different development schemes. China followed the socialistic form from the really beginning ; India resorted for “ mixed-economy ” for economic growing. In this paper I would wish to discourse how China outpaced India in their economic growing even though both started their journey over same period of clip. A brief analysis on their GDP ‘s, rising prices, unemployment and foreign exchange militias in both the states every bit good how the planetary recession had affected their economic systems.

A Comparison of China ‘s and India ‘s GDP:


The Chinese economic growing quickly changed with its market-oriented reforms when it opened its weaponries to the universe in 1979.Today Chinese population is about fifth part of the universes and its GDP part is about 10 per centum of the universe ‘s entire, doing it to be the 3rd largest economic system in the universe harmonizing to Central Intelligence Agency of America in 2009. But latest beginnings tell us that China is 2nd following to United States in GDP exceling Japan. GDP of China at the terminal of 3rd one-fourth is 9.6 % .China ‘s GDP reached its extremum during 2007 with 14.2 % and it performed good during the planetary recession every bit good. The major factors act uponing China ‘s economic growing is exports. Exports of goods and services contributed about 26 % in 2009 while the agricultural sector lending merely 10 % of its GDP. China ‘s policy shapers decided to travel from their traditional agricultural economic system to universe ‘s fabrication hub. This very measure of theirs in early 1980 ‘s helped them in their rapid economic growing doing their presence felt in the universe. The jutting existent GDP for this twelvemonth is expected to be about 10.5 % harmonizing to International Monetary Fund.

hypertext transfer protocol: //www.chinadaily.com.cn/business/2010-09/09/content_11279777.htm hypertext transfer protocol: //www.cia.gov/library/publications/the-world-factbook/geos/ch.html

hypertext transfer protocol: //www.rferl.org/content/China_Overtaking_Japan_As_Worlds_SecondLargest_Economy/2128986.html

hypertext transfer protocol: //www.imf.org/external/country/CHN/index.htm

Beginning: World Bank ( hypertext transfer protocol: //data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG )


India liberalised their economic system in 1990 when they faced balance of payments job. India is fundamentally an agricultural orientated economic system concentrating less on fabrication sector and on FDI ‘s. India economic system started pitching up with the economic reforms in 1990 from so on its GDP raised at an mean 7.08 % one-year growing since 2000.First half of the decennary was small slow and with its FDI and fabrication sectors increase it put up a good show in the 2nd portion of the decennary. The planetary recession had affected it really much where its one-year GDP was merely 5.1 % in 2008.Projected existent GDP of India is approximately 9.7 % for this twelvemonth harmonizing to International Monetary Fund. China and India both had followed centralized planning but China followed the rigorous communism to implement policies where as India approached the democratic policy. China carried the reforms sharply in 1980 ‘s and 1990 ‘s contrastingly India started its reforms in 1990.China followed the traditional development theoretical account but India jumped tried to leap from agribusiness to service sector ensuing really low fabrication growing for India compared to China.

hypertext transfer protocol: //www.imf.org/external/country/IND/index.htm

Foreign Direct Investments in China and India: Affects on their GDP

Foreign Direct Investment one of the drive force behind these two economic systems. China is the frontrunner in this sector. China anticipated much before India and liberalised its policies towards planetary engagement in their economic system. China is the universe ‘s largest receiver of FDI ‘s for over two decennaries and continues to be. India has opened its market to the universe much later and that to non in all sectors. In 2009, China attracted $ 95 billion FDI influxs, accounting for 1.9 per centum of its GDP compared with India ‘s $ 36.6 billion influxs, tantamount to 2.7 per centum of its gross domestic merchandise. China attracted 2.5 % more FDI ‘s than India in the twelvemonth 2009.India ‘s FDI influx dropped by 14 per centum in 2009 and that of China by 12 per centum.

hypertext transfer protocol: //economictimes.indiatimes.com/news/economy/finance/Indias-Jan-June-FDI-flows-dip-18-pc-y/y-Govt/articleshow/6461908.cms

hypertext transfer protocol: //data.worldbank.org/indicator/BX.KLT.DINV.CD.WD/countries/1w-CN-IN? display=default

Beginning: hypertext transfer protocol: //data.worldbank.org/indicator/BX.KLT.DINV.CD.WD/countries/1w-CN-IN? display=graph FDI

Foreign Exchange Reserves and Exchange Rate Policy:

China: Policy on Exchange Rate

China ‘s exchange rate policy in 1950s and 1960s was largely determined by the state ‘s geo-political, security, and strategic involvements. China revised its currency reforms on January 1, 1970, by replacing 10,000 renminpiao for one renminbi ( RMB ) and it fixed an official rate of 2.46 kwais to a dollar. China maintained a stable currency even during the fiscal crisis of Asia when many states of Asia ‘s currency value were dropped. . Since July 2005, China has been implementing the managed exchange rate policy, i.e. the RMB is pegged to a basket of foreign currencies, notably the US dollar. Many argue that Chinese RMB is undervalued and it gives an unjust advantage for the Chinese exporters and this ensuing for a big trade excess and accretion of Foreign Exchange militias. Main conditions favoured to keep Chinese exchange rate are the authorities policies and the term “ Four Bulwarks. ”

The Four Ramparts:

China had adopted an internally fixed exchange rate policy. It has pegged the RMB at a preset rate against the dollar. During the Asiatic fiscal crisis in 1997 four factors worked as ramparts to continue the RMB ‘s fixed exchange rate: ( 1 ) significant foreign exchange militias, ( 2 ) immense current and capital history excesss, ( 3 ) a high ratio of foreign direct investing ( FDI ) to short- term foreign capital influxs, and ( 4 ) inconvertibility of the kwai on capital history. These in bend were strengthened by sound macroeconomic restraints implemented since 1993.

These policies had helped China to keep the largest official foreign currency militias in the universe presently estimated to be $ 2.4 trillion an addition of about $ 500 billion in the class of 2009.China is the 2nd largest holder of US Treasury Securities at the terminal of December 2009 with $ 755.4 billion following to Japan.

Asiatic Survey Vol. 40, No. 6 ( Nov. – Dec. , 2000 ) , pp. 938-957

Published by: University of California Press

hypertext transfer protocol: //www.jstor.org/stable/3021196

hypertext transfer protocol: //baselinescenario.com/2010/02/25/should-we-fear-china/

hypertext transfer protocol: //www.uscc.gov/hearings/2010hearings/hr10_02_25.php


hypertext transfer protocol: //siteresources.worldbank.org/CHINAEXTN/Resources/318949-1268688634523/cqu_Nov_2010.pdf

India: Foreign Exchange Reserves and Exchange Rate Policy

India besides followed a really traditional reform procedure in exchange rate policy. Indian rupee was devalued by 19 per centum. The exchange rate was unified in 1993.The authorities had an option of either leting the Indian rupee to drift in the unfastened market and happen its equilibrium rate or repair the nominal rate and keep that rate by selling or purchasing foreign exchange. The Indian authorities opted to purchase and sell foreign exchange and pegged the exchange rate. Rather than reforming the existent exchange rate due to grasp, the Indian authorities decided to accept hazard of rising prices and came up with some sum sterilisation and financial control. The existent exchange rate exceeded 10 per centum in the last two old ages. An grasp in exchange rate helped to maintain the rising prices depression in 2007. A more flexible exchange rate supports a counter-cyclical involvement rate. China is about $ 2.2 trillion at current exchange rates and India is about $ 700 billion. China ‘s foreign exchange militias are about 5-1/2 times more than India.

hypertext transfer protocol: //www.emeraldinsight.com/journals.htm? articleid=847539 & A ; show=abstract

Macroeconomic conditions and opening up – Argentina, Chile and India

A comparative survey by Debasish Chakraborty page-304,305

Department of Economics, Central Michigan University, Mt Pleasant,

Michigan, USA

hypertext transfer protocol: //finmin.nic.in/reports/annualreport.asp

hypertext transfer protocol: //imf.org/external/np/tr/2006/tr060518a.htm

hypertext transfer protocol: //www.eastasiaforum.org/2010/10/02/how-to-manage-a-float-of-the-indian-rupee/


Inflation is the step of one-year per centum addition in monetary values. The most utile step is that of the consumer monetary values. Inflation straight affects people of the state.


In recent old ages rising prices in China has been well lower. Consumer monetary value rising prices in China varied twelvemonth by twelvemonth. At a point of clip, it fell back to – 4 per centum in July 2005, and increased to 5 per centum in May 2007. Since so it was about 5 per centum for over a period of clip. Even under really low rising prices China managed really high GDP growing rates. Inflation in China remains low because its demand is non facing supply constrictions. China managed lower nutrient rising prices than India despite lower production growing and while per capita incomes were turning much faster. Consumer monetary value rising prices hit a 23 month high of 3.6 per centum during September. Chinese rising prices has been mostly driven by nutrient costs, which account for about a 3rd of the state ‘s consumer monetary value index. The addition in planetary trade good monetary values and comparatively loose domestic pecuniary environment was besides adding to rising prices hazard.

hypertext transfer protocol: //www.reuters.com/article/idUSTRE69Q3CP20101027? pageNumber=2

hypertext transfer protocol: //www.businessworld.in/bw/2010_10_21_China_Has_Inflation_Under_Control.html



India does non hold an official consumer monetary value index. Unlike most states India calculates rising prices on sweeping monetary value index over a basket of 435 basic goods. Food monetary values constitute a large portion in India ‘s most likely representative consumer monetary value basket. India has non suffered peculiarly from dramatic rising prices ; it is presently sing a rise in rising prices as in other emerging economic systems. The sweeping monetary value index in May 2010 rose to 10.16 per centum, the highest since 2008.Rise in nutrient and fuel costs was the ground behind the rise in rising prices. With economic system turning at a alert gait lifting in monetary values remains a cardinal concern. On a measuring note to command rising prices authorities raised its involvement rates trusting that it would convey down rising prices.

hypertext transfer protocol: //www2.goldmansachs.com/ideas/brics/ten-things-doc.pdf

hypertext transfer protocol: //www.voanews.com/english/news/India-Raises-Interest-Rates-to-Control-Inflation-103129694.html

hypertext transfer protocol: //news.bbc.co.uk/1/hi/8738280.stm

Beginning: hypertext transfer protocol: //www.tradingeconomics.com/Economics/Inflation-CPI.aspx? Symbol=INR

Unemployment in China and India:

“ Unemployment refers to the portion of the labour force that is without work but available for and seeking employment ” . ( World Bank group, 2010 ) .


China is the highest populated state in the universe. About 22 per centum of China ‘s labour force is without employment. Chinese society had undergone a meaningful reform in the past three decennaries. They were allowed to work in any portion of the state or get down a concern of their ain. Young Chinese had watched their state to emerge as an economic world power and they wants to be a portion of it Chinese unemployment rate is about 4.3 per centum ( September 2009 est. , harmonizing to Central Intelligence Agency ( CIA ) ) .It ‘s major labor force is in agribusiness, services followed by industries. Education system in China demands to be changed. China should guarantee a steady passage from its low cost fabrication to a service oriented economic system. Some of the jobs China confronting unemployment was due to frequent natural catastrophes, economic uncertainnesss.


India is the 2nd largest populated state in the where about 60 per centum of them live in rural countries. Many people in India work in the agribusiness sector or self – employed. With planetary economic reforms in topographic point, India is besides traveling into the fabrication sector every bit good as service sector which are supplying some employment to its huge population. Low literacy per centum is a major reverse for India and does non possess marketable accomplishments necessary for the occupation market. India had an unemployment rate of 10.7 per centum in 2009 ( est. ) the major labor force are in agricultural sector, services and industry. Indian authorities had taken major stairss in supplying employment to its rural population. Schemes like National Rural Employment Guarantee Scheme ( NGRES ) , Swarnjayanthi Gram Swarozgar Yojana ( SGSY ) , Swarna Jayanti Shahari Rozgar Yojana ( SJSRY ) , were introduced by the authorities to supply employment for the rural people. Employment in the current state of affairs was affected by the planetary fiscal crisis and economic lag in India.

hypertext transfer protocol: //www.optimumpopulation.org/blog/ ? p=2888

hypertext transfer protocol: //www.forbes.com/2010/09/07/china-economy-unemployment-leadership-managing-rein.html

hypertext transfer protocol: //www.cia.gov/library/publications/the-world-factbook/geos/in.html

hypertext transfer protocol: //www.cia.gov/library/publications/the-world-factbook/geos/ch.html

Consequence of Recession on China and India:

The planetary economic crisis had a greater impact on these emerging economic systems of the universe. But they were non the worst affected 1s. Even during recession China put up a good economic growing but it affected India to a certain affect. The Chinese societal construction, market kineticss and political system helped China to defy the recession. The lessening in exports, lead to a stall in domestic production. Factories were closed in southern China. In order to understate the recession affect China authorities announced a US $ 586 billion stimulus bundle. This was aimed at promoting growing and domestic ingestion in 10 countries of Chinese society. China had besides instituted cuts in involvement rates ; greater discounts were given on revenue enhancements charged to exporters.

India was severely affected by recession because US is India ‘s largest market for exports. In order to neutralize the recession authorities of India came out with an economic bundle which encompassed countries involvement rate cuts, indirect revenue enhancement, pecuniary policy steps and responsibility cuts. Prime imparting rates of the commercial Bankss were reduced.

hypertext transfer protocol: //chineseculture.about.com/od/thechinesegovernment/a/Chinaeconomy.htm

hypertext transfer protocol: //www.businessandleadership.com/leadership/item/19640-china-leading-global-econom

hypertext transfer protocol: //www.groundreport.com/Business/Indian-Economy-Strong-Amid-Global-Recession/2904110


China and India are emerging as the planetary economic systems of the universe.