India Versus China Growth

India has been a noisy political democracy where problems are created by clashing ideologies and political interests of the multiple number of political parties without any coherent approach to development. China on the contrary had singled-out a goal which it followed diligently with determination and mobilisation of resources.

• Growth was not an easy ride for China as it experienced many problems in the beginning but it took no time to switch to a concerted approach to develop its light and heavy industries. Thus, from 1965-80 its manufacturing grew at 9.5 percent. It also managed its agrarian reforms better. Thus, the growth was spurred by increase in labour productivity and capital deepening. Then post 1978, it were the efforts of Deng Xiaoping who believed in the principle of “each according to his work” rather than “each according to his need”. Deng transformed agriculture sector prior to industry. He opened avenues for foreign investment in industry and also steered growth of villages and local industries. The professionalism and efficient economic management at all levels helped build investor confidence in the economy and pumped  huge foreign investment. Poverty was eliminated and  its per capita income quadrupled. HDI in 2014 was close to .714.
• Indian economy did improve post-independence but it was the green revolution which steered growth in agriculture. However, the principles were not applied to industry i.e. including private sector, making use of foreign knowledge and also effectively deploying subsidies. The economic liberalisation in 1991 opened Indian economy to growth. There was steady growth seen from 1995-2008 but the momentum kept sinking.
• The main difference in Indian and Chinese pace of growth is slow growth of capital stock in India. China has higher factory productivity as ease of opting out of agriculture to higher productivity sectors is more. Leaving software and agriculture, China has outpaced India in all economic sectors. Over the years China has become the largest trading partner of India. India stands a chance to overtake China in this growth story as there are obvious signs of slowing in Chinese economy. India has to work on its labour productivity, improve the quality of labour force and eliminate corruption.