The literature of economics has many models that describe growth in different ways. But in
general, it can be described as the mean increase in per capita income or increase in Gross
National Product (GNP). In recent literature,1 the term economic growth refers to sustained
increase in a country’s output of goods and services, or more precisely product per capita. Output is
generally measured in terms of Gross Domestic Product (GDP) or GNP.
GDP is the sum of all final goods and services produced during a specified time period (which is usually
a year) with each class of goods and services measured at their market price. GDP growth rate is the most
important indicator of the nation’s economy. The estimates of GDP provide the policy makers with one of
the most important tools for analyzing the economic conditions of a country. In this article, the growth
patterns of India and China are compared by looking into the growth of GDP and investment. The latter
half explains how aging in China has become a threat to China’s economic growth.
The GDP growth rate for China is 11.1% (2006 est.) and for India it is 9.4% (2006 est.) Graph1 shows
the comparison between growth of India’s GDP and China’s GDP. From Graph 1 we see that the percentage
increase in the GDP of China is always more than the percentage increase in the GDP of India. But we see
an almost consistent growth in the GDP growth of India; however, for China there are many ups and
downs. There is a continuous decrease in the percentage growth rate of the Chinese GDP from 1995 to
1999 and then there is a consistent
increase in the GDP till 2004.The reason behind the consistent
growth of the GDP of India is that
Indian policies have proved to be much
more effective than the Chinese
policies. Indian policies are making a
growth-driven economy rather than a
bubble. But in actual terms, China’s
GDP has always remained twice than
that of India and China has been more
labor-intensive than India’s. The export
led industrialization was facilitated by better and more extensive infrastructure created in China, and by the freedom to ‘hire and fire’ as well
as the absence of any ‘social’ burdens carried by firms in this fast growing non-state sector.
In contrast, India continues to hobble the development of small-scale and labor-intensive industry with
its policy of reservations and refusal to repeal the archaic labor laws it inherited from the ‘License Raj’.
In both China and India, the dynamics of their growth have been provided by areas which the state
had overlooked as being of little importance; i.e., the small-scale rural industries in China and the
information-based service sector in India. In both countries, wherever growth has occurred, there have
been dramatic reductions in poverty. However, whilst labor-intensive industrial growth seems to be spreading
faster to the hinterland in China through fierce locational competition for joint ventures with foreign
investors, the Indian policy makers were obsessed with centralization of growth and protectionist policies. |
