Presentation is loading. Please wait.

Presentation is loading. Please wait.

Indian Economy : A Comparative Overview with China

Similar presentations

Presentation on theme: "Indian Economy : A Comparative Overview with China"— Presentation transcript:

1 Indian Economy : A Comparative Overview with China

2 Some General Facts India is the world’s second most populous country of over 1 billion people after China. Urban population 28% of total. (China 39%) More than half of its population is 25 years of age. ‘Demographic dividend’. Measured in USD exchange rate terms, 12th largest in the world, with a GDP of $3.32 trillion (PPP) , China ranked 2nd largest with GDP of $7.8 trillion. (2008) PCI $2,900 at PPP and that of China $6100 (2008) Population below poverty line is 27.5% (2008 est.) China 10% World Bank classifies India as a low income economy

3 The contribution of Agriculture, industrial and service sector (2007-8) in GDP has been 21,24 and 55%. ( In China the corresponding percentages are 11.3, 48.6 and 40 % in GDP 2008) Agriculture is the predominant occupation in India, accounting for about 60% of employment ( China 43%) . The service sector makes up a further 28% (China 32%) , and industrial sector around 12% (China 25%). Organized sector employs 8% of workforce (two thirds of which are in public sector), and produces about 40% of GDP. Rest in informal sector --with predominance of ‘women.’ Urban informal sector is a fast growing sector. 30% of total labour is constituted by casual labour and only 10% are in regular employment. Major problem not of open unemployment but of underemployment and disguised unemployment. Unemployment rate 6.8% (2008 est., in China 4.3% is official and 17% unofficial UR).

4 Why India? GDP growth rate 9% in , slowed down to 7.3% in Major industries are Textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software. Services are a growing sector and play an important role in Indian economy. India is an imp. ‘back office’ destination for global outsourcing of customer services and technical support. Major exporter of highly skilled workers in financial, software, software eng. Potentials are in , manufacturing, pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding, aviation, tourism and retailing.

5 Composition of India’s GDP (at Factor Cost by Economic Activity – at 1999-2000 prices, in%)
1)Agriculture etc 2)Industry * 2.1 Manufacturing 2.2 Construction 3) Services 3.1 Trade, hotel, Restaurants ** 3.2 Transport, storage & communica 3.2 Finance, insurance, etc 3.3 Community, social and per service * Inclusive of2.1, 2.2, ** of 3.2. Source : EPW 14TH June , 2008 and Economic Survey of India Source: EPW June 14, 2008

6 India- Structural Transformation-?
Economic policy: Approach i) Since independence (1947) – till almost late eighties followed a socialist inspired approach- strict govt. control over -private sector participation, foreign trade and FDI (Approach-import substituting rather than export promoting) . ii) India’s low average growth rate ( 3%) from was referred as ‘Hindu rate of growth’, because of the unfavorable comparison with the other Asia countries, especially the ‘East Asian Tigers’.

7 A period of import tariff, export taxes, quantitative restrictions , approvals needed for 60% of new FDI in the industrial sector. FDI averaged only $200M between In 2004, net FDI inflow was about 7-8 USD bn. ( China, 52 USD bn) A large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non resident Indians. Largely and intentionally isolated from world markets.

8 Late eighties: the govt
Late eighties: the govt. led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents, removed price control and reduced corporate taxes. Phase of high growth with high fiscal deficit and worsening current account Collapse of soviet union – a major trading partner, first Gulf war causing spike in oil prices led to major balance of payment crisis with the prospects of defaulting on its loan. Prime Minister Narasimha Rao with Finance Minister Manmohan Singh initiated the economic liberalization of 1991. Reforms did away with license Raj in investment, industrial and import licensing-ended many public monopolies, introduced automatic approvals of FDI in many sectors.

9 Agriculture India ranks second world wide in farm output.
In 2007, accounted for 17% in GDP employing 60% of the total workforce. After having growth rate of 2% for many years- now the growth rate is about 4.5%. Two thirds of India’s workforce still earn their livelihood directly or indirectly through agriculture. High level of disguised unemployment. Despite improvements, average yield in India ranges from 30-50% of the highest average yield in the world. Major agricultural products include rice, wheat, oilseed, cotton jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep goats, poultry and fish. India is the largest producer in the world of milk cashew nuts coconuts tea, gingerturmericand black pepper.It also has the world's largest cattle population (193 million). It is the second largest producer of wheat rice sugar groundnutand inland fishIt is the third largest producer of tobacco India accounts for 10% of the world fruit production with first rank in the production of banana and sapota.

10 Industry India ranks 14th in the world in factory output.
Industry accounts for 27.6% of the GDP and employs 17% of the work force. Manufacturing growth rate 8.4%. high-skill sectors account for almost 40 percent of the manufacturing output of India. Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output One third of industrial labour force is engaged in simple household manufacturing only. Economic reforms led to more private sector participation, an expansion in the production of consumer goods and both domestic and foreign competition.

11 Services India is fifteenth in services output.
With largest share in GDP of 55%, it employs 23% of workforce. The growth rate which was 4.5% in increased to 7.5% in Recent growth rate 10.7%. Fastest growing services are –business services, information technology enabled services, business process outsourcing contributing about one third of total output of services in 2000. India’s IT industry an important contributor to BOP, accounts for only about 1% of total GDP and 1/50th of the total services. India leads the market in offshored back-office services, but as a manufacturing center it lags behind China, Thailand, and the rest of Asia.

12 External Sector $175.7 billion f.o.b (2008 est.)
Exports $175.7 billion f.o.b (2008 est.) Export goods petroleum products, textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures Main export partners US 15%, the People's Republic of China 8.7%, UAE 8.7%, UK 4.4% (2007) Imports $287.5 billion f.o.b. (2008 est.) Import goods crude oil, machinery, gems, fertilizer, chemicals Main import partners People's Republic of China 10.6%, US 7.8%, Germany 4.4%, Singapore 4.4%

13 Almost stagnant export for the first 15 years after independence
Almost stagnant export for the first 15 years after independence. Dominated by products like tea, jute and cotton manufacturers having generally inelastic demand. Since liberalization ex-im have become much broad based. India’s exports are consistently rising, covering about 80% of its imports. Merchandise trade of India about 31% of GDP in 2007 (China 68%) High technology exports as % of total manufacturing exports are 5% in case of India and 30% in case of China. FDI in India has reached 2% of GDP (China 3%, 2006), compared with 0.1% in 1990 The top five countries in FDI inflows ( ) are Mauritius (44%),United States(9.4%), UK( 8%), Netherlands(6%)and Singapore(5%).

14 Sectoral Employment Share by Current Daily Status
Industry Division Agriculture and allied activities Mining & Quarrying Manufacturing Electricity, gas and water supply Construction Trade , hotels and restaurants Transport, Storage & communication Finance, insurance, real estate and business services Social, community and personal services Source: Economic Survey of India

15 Employment Share: Economically Active Adult population (%) 2004-2005
Agriculture Labour Cultivator Farm regular Non Farm Sector Casual Regular Self employed Source: NSSO, 62th Round

16 Structure of Employment

17 Growth of working class

18 Rural workers Workers in the countryside have also increased in numbers. There were 144 million rural workers in There is a high proportion of casualisation in rural areas. Regular wage/salaried employee: These were persons who worked in others’ farm or non-farm enterprises (both household and non-household) and, in return, received salary or wages on a regular basis (i.e. not on the basis of daily or periodic renewal of work contract). This category included not only persons getting time wage but also persons receiving piece wage or salary and paid apprentices, both full time and part-time. Casual wage labourer: A person who was casually engaged in others’ farm or non-farm enterprises (both household and non-household) and, in return, received wages according to the terms of the daily or periodic work contract, was a casual wage labourer.

19 Urban workers There were nearly 63 million urban workers in Proportion of regular workers is more among urban workers when compared to rural areas

20 Wages Wage rates defer between rural and urban areas and between males and females Source: NSSO 62nd Round, RM-Rural Male, RF-Rural Female Data indicates sharp disparities between the male-female and rural-urban areas. The average wage rate for regular wage/salaried employee, was Rs for males and Rs for females (rural) and Rs for the males and Rs for the females (urban) and thus, male-female salary differential was around Rs. 50 in both rural and urban areas.

21 Working age population
A big majority of India’s population is in the working age group. Share of working age population (15-59) will increase from 58% in 2001 to 63% in 2011. In , about 60% of the population was in the working age group. Of the working age group population, roughly 460 million people were in the workforce in Of these about 206 million (45%) were regular/casual workers. Some people may not be in the workforce because they are students, housewives etc.

22 Youth workers India has among the largest number of youth workers in the world. In , in the age group there were 390 million youth (35% of population) Of these 40.4% were engaged in gainful activity – i.e, nearly 160 million. Nearly half of them were workers. Many youth are students, housewives or unemployed

23 Rate of growth of employment in Organized Sector (% per annum)
Public Sector Private Sector Total Organized Source: Eleventh Plan Document.

24 Public-Private organized sector
Total no. of public and private sector workers stagnated between and slightly decreased in recent times. According to NSSO there are 58 m regular employees and 117 million casual labourers. DGET figures show that there are only m workers in public and private sectors. The rest are in the “unorganised” sector

25 Public sector workers

26 Private sector workers

27 Is development inclusive?

28 Labour Market Growing employment but poor in qualitative terms with low regular employment, underemployment and mismatch between education and employment. A huge section of the working class lives in rural areas, is unskilled and condemned to low wages. In non-agriculture sector growth in employment is in informal sector. Even in the urban areas there is a high degree of casualisation, contract labour working in deplorable conditions with no security of work. Although regular employment has risen, its growth has been almost exclusively in the smaller, least productive enterprises. About 87% of manufacturing employment taking place in micro enterprises(<10 persons) producing just a third of manufacturing output.

29 Employment in firms with more than ten employees accounts for only around 3.75 per cent of total employment (one quarter of regular employment) and has been falling. Indeed, India has a much smaller proportion of employment in enterprises with ten or more employees than any OECD country. 70% of Indians(800million), lived on less than 20 rupees( slightly less than C50 cents) per day with most working in informal sector with no social security. (2007 Report on National Commission for Enterprises in the unorganized sector)

30 Sex Ratio in Population with Rural-Urban break up Year Sex Ratio Rural
Total 1901 979 910 972 1911 975 872 964 1921 970 846 955 1931 966 838 950 1941 965 831 945 1951 860 946 1961 963 845 941 1971 949 858 930 1981 951 879 934 1991 938 894 927 2001 901 933 Source : Office of the Registrar General, India Sex Ratio (Total, Rural and Urban) from Brief Analysis of PCA paper-2 of 1992 1961 Population from PCA 1961 1971 Population from Social and Cultural Tables 1981 figures from Series Part-II A(I), General Population Tables – Census of India 1981. Figures of 1991 (including interpolated data for JK-1991 based on 2001 census) and 2001 from PCA census of India -2001

31 Trends in Gender Disparity in Literacy Rate
Year Male Female Male/Female Literacy rate disparity Slightly more than half of total women are literate. Male-Female LR disparity is on decline. 1961 40.4 15.3 0.45 1971 39.5 18.4 0.38 1981 56.3 29.7 0.35 1991 63.8 39.4 0.28 2001 75.8 54.1 0.21 Source: Census of India various years

32 Area and Gender based Labor and Work Force Participation Rate (%)
Labor force Work force participation rates participation rates Rural male Rural female Urban male Urban female Source: Economic Survey of India:

33 Area and Gender based Structure of Employment 2004-2005
Particulars Rural Urban Male Female Male Female Labour Force % % % % Self empl % % % % Regular Wage and Salaried % % % % Unempl. Rate % % % % Source: NSSO 62 Round

34 Gender based Distribution of Occupation in Rural India (%) 2004
Sector Male Female Agriculture Casual Cultivators Regular Non Farm Casual Self empl Regular Total Not working Casual Self emp/cultivators Regular

35 Share of women employment out of total employment
Share of women employment out of total employment in organized sector in India Year % of women in Public sector % of women in Private sector % of women in Total 1995 13.4 20.2 15.4 2000 14.8 23.9 17.6 2001 14.9 24.2 17.8 2002 24.3 18.1 2003 15.6 24.5 18.4 2004 15.9 24.8 18.7 2005 16.2 18.9 Source : Quarterly Employment Review, Directorate General of Employment & Training, Ministry of Labor

36 Women wage lower than men by 33-40 points
Women wage lower than men by points. Women-men wage differential is 0.75:1. The gender based wage differential though has narrowed down with increase in education level. It is still high. Urban wage differential persists but narrower than in rural area.

37 INDIA AND CHINA India China 2007 GDP (current US$billion) GNP PC (current US$) GDP growth Annual % 9.1% 13% Population growth rate (annual %) Mobile and cellular subscription Per ‘ooo population Internet user per ‘000 population 7 16 Source: World Bank: World Development Indicators: Country Profile April 2009

38 Situating India and China in World Trade (2007)
Particulars Unit China India Share in Merchandise Exports (%) Rank Imports (%) Rank Share in Commercial Services Exports (%) Rank Imports (%) Rank Source: WTO- World Trade Statistics, April 2009 Source: WTO, World Trade Statistics, April 2009

39 China India world Trade highlights 2007
Particulars China India Exports of good & services % of GDP Imports of goods & services % to GDP Trade per capita ($US, ) Patents granted

40 China- Merchandise Trade 2007
Breakdown in economy's in total exports: total imports By main commodity group (ITS) (%) (%) 1.Agricultural products Fuels and mining products Manufactures: By main destination By main origin 1 European Union (27) Japan United States European Union (27) Hong Kong, China Korea, Rep. of Japan Taipei,Chinese Korea, Republic of China 9.0

41 India’s- Merchandise Trade 2007
Breakdown in economy's in total exports: total imports By main commodity group (ITS) (%) (%) 1.Agricultural products Fuels and mining products Manufactures: By main destination By main origin 1 European Union (27) European Union (27) United States China United Arab Emirates Saudi Arabia China USA Singapore United Arab Emi. 5.4

42 Trade in Commercial Services-2007
Breakdown in economy's total exports total imports (%) (%) China: 1. Transportation Travel Other commercial services India: 1. Transportation Travel Other commercial services

43 Cross Country Comparison
Compared to a number of other Developing countries it can be seen that in India the share of manufacturing sector in GDP has been relatively low. Most of the major South East Asian countries and major Latin American countries have a significantly higher share. In China the manufacturing sector’s contribution is more than twice than of India. Source: World Development Indicators

44 Composition of Manufacturing Sector Across Countries
Looking at the composition of the Manufacturing sector across some major developing countries, one can see that India focuses mainly on textiles, and chemicals. On the other hand several South East Asian countries have a big contribution from Machinery and Equipment. In countries like Malaysia and Korea more than 40 % of the Manufacturing output comes from Machinery and Transport Chemicals include 351 - Manufacture of industrial chemicals 352 - Manufacture of other chemical products FBT includes Food manufacturing 313 - Beverage industries 314 - Tobacco manufactures Mach and Transp include 382 - Manufacture of machinery except electrical 383 - Manufacture of electrical machinery apparatus, appliances and supplies 384 - Manufacture of transport equipment Others 33 - Manufacture of Wood and Wood Products, Including Furniture 34 - Manufacture of Paper and Paper Products, Printing and Publishing 353 - Petroleum refineries 354 - Manufacture of miscellaneous products of petroleum and coal 355 - Manufacture of rubber products 356 - Manufacture of plastic products not elsewhere classified 36 - Manufacture of Non-Metallic Mineral Products, except Products of Petroleum and Coal 37 - Basic Metal Industries 381 - Manufacture of fabricated metal products, except machinery and equipment 385 - Manufacture of professional and scientific, and measuring and controlling equipment 390 - Other Manufacturing Industries Textiles Include 321 - Manufacture of textiles 322 - Manufacture of wearing apparel, except footwear 323 - Manufacture of leather and products of leather, leather substitutes and fur, except footwear and wearing apparel 324 - Manufacture of footwear, except vulcanized or moulded rubber or plastic footwear Source: World Development Indicators

45 Manufacturing Exports: Cross Country Comparison
Comparing with other developing countries, India has a higher share of manufactured exports than the Latin American countries but less than some of the South East Asian countries. Both Korea and China enjoy a far greater share of manufactured exports in their merchandise trade. Source World Development Indicators

46 Levels of Manufactured Exports Across Countries
Looking at the level of manufactured exports we find that China is far ahead than other developing countries with an annual export of $542 billion in South East Asian countries like Korea and Malaysia also have significantly higher level of exports than India. Countries like Argentina and Indonesia have lower level of exports. Source World Development Indicators

47 Size of Labor Force in Manufacturing Sector
The size of the labor force devoted to Manufacturing sector is much higher in China than India. In China number of people employed in Manufacturing is roughly three times that of India. Dr. Kumar – The number for India has been obtained using the NSSO report fro Since we are not using the other slide with NSSO employment data should we give this number?? Regards Abhijit

48 Spending on R & D as a percentage of GDP (2003)
Definition Research and development (R&D) expenditures (as % of GDP) Current and capital expenditures (including overhead) on creative, systematic activity intended to increase the stock of knowledge. Included are fundamental and applied research and experimental development work leading to new devices, products or processes. India is among one of the lowest spender on R&D among major developing countries. Its share is almost one fourth of South Korea 60 percent of China. The US spends about 2.7 percent of its GDP on R&D Human Development Report 2005

Human Development Index ( Position among 179 countries) INDIA CHINA Particulars Rank Value Rank Value HDI Life expectancy at birth( yrs) Adult literacy rate (%) Combined(pri—ter)enrolment ratio GDP PC($PPP) Source: Human Development Report 2008

Particulars India China Rank Value(%) Rank Value(%) HPI Probability of Not surviving to Age 40 (% of cohort) Adult Illiteracy Rate contd.

Particulars India China Rank Value(%) Rank Value(%) Children Under Weight for age (% aged under 6, ) Population below Income Poverty line $1.25 a day $2 a day National poverty line HPI-1 rank minus income Poverty Rank Source: Human Development Report-2008

52 Gender Related Development Index (GDI)
Particulars India China GDI Rank Value % of HDI Rank Value % of HDI Male Female Male Female Life Expectancy At birth (2006) Adult literate ( ) Combined gross Enrol. Ratio (%) Estimated Earned Income (PPP US$) HDI rank minus GDI -1 1

53 Gender Empowerment Measure (GEM) 2007
Particulars India China GEM Rank Ratio of estimated Female to male earnings % to total Seats in parliament held by women Female legislatures, Senior officials & Managers Female professional And tech. workers

54 India-China comparative Business Scenario-2007
Particulars India China (Rank out of 183 countries-2008) Corruption perception index Procedure (no) duration cost (% GNP) Procd Duration Cost Starting a business days days duration cost (as % of estate) Recovery rate duration cost recovery rate (cents per dollar) Closing a business 10 yrs yrs Source: Transparency international 2008

55 GLOBAL COMPETITIVENESS RANKING 2008-9: India and China (Rank out of 134 countries)
Pillars Components India China GCI Global Competitiveness Index Basic requirements Institutions Infrastructure Macroeconomic stability Health and primary education Efficiency Enhancer Higher education and training Goods market efficiency Labour market efficiency Financial market sophistication Technological readiness Market Size Innovation and Sophistication factors Business sophistication Innovation Source: Global Competitiveness Report 2008

56 Major Areas of Reforms Needed
Labour market: Stringent labour laws should be relaxed Business environment: Lowering the barriers to entrepreneurship Ending reservation of products fro SSI Need for Bankruptcy law Dispersion of tariff rates Easing of Service sector FDI restrictions More privatization of public sector enterprises. Financial sector: More liberalization Privatization of public sector banks Infrastructure : Electricity reforms to be speeded up transport: More private sector involvement Public Finances: Better targeting of subsidies, GST Education: Higher public expenditure on primary and education, Addressing financing of higher edu. India can learn from China in: Social and Physical Infrastructure Improving manufacturing sector’s productivity

57 In Conclusion India and China – non comparable:
India-- Democracy (messy) Highly diverse social structure Reforms reactionary in nature- a late starter Less integrated to Global market (including East Asia) Dissimilar trade pattern Lagging behind in FDI and infrastructure Weak link between economic development and social welfare at regional level compared to China.

58 Differencing Relative strengths
India China i) Agriculture √ reforms ii) Industrial growth √ iii) FDI √ IV) Open to external trade √ v) National market √ vi) Service sector √ √ vii) Infrastructure √ viii) Capital efficiency √ viii) Corporate governance √ ix) Democratic accountability √ x) Foreign portfolio capital √

59 Two divergent development Paths:
India China Increasingly building ground up Top down approach Service sector led growth Manufacturing sector and foreign trade Private sector led growth State led modernization (late 1970’s) (early nineties) Consumption driven Investment driven v) Knowledge based sector-labor Cheap- assembly line workers vi) World’s back office Factory of the world

60 India China Domestic Private Companies FDI inflow
State owned enterprises Young work force Aging workforce Cheaper labour Rural reform

61 India- A country with Potentials for ‘sustaining’ development!!
India’s hope!!!! No Trade off to democracy for 2% higher growth! Accumulated diversity not assimilated. Both India and China have accepted the capitalist road to prosperity but capitalism is more comfortable in democracy which fosters entrepreneurs. India’s growth may be more enduring as people have scripted its growth whereas in China it is state crafted. India- A country with Potentials for ‘sustaining’ development!!

62 “Because the Indian state is inefficient, millions of entrepreneurs have stepped in to vacuum. When government schools fail, people start private schools in the slums, and the result is millions of ‘slumdog millionaires’ .” You cannot do this in China!! Gurucharandas Times of India, 10 May 2009


Download ppt "Indian Economy : A Comparative Overview with China"

Similar presentations

Ads by Google