A GDP Comparison of India and China

Topics: Inflation, Macroeconomics, Monetary policy Pages: 8 (3234 words) Published: October 4, 2014
A GDP comparison of India and China
China and India are the two giant’s economies of Asia, which are now regarded as the “success stories” for their massive economic development for the past two decades. On their way to economic growth they have more dissimilarities than similarities. The most common things among them are their ancient civilizations, population, covering substantial geographical areas and developing economies of the world. They both apparently benefited from globalization as well sound macro-economic policies. But on the other side they have different socio-economic-political set ups they had followed different development strategies. China followed the socialistic pattern from the very beginning; India resorted for “mixed-economy” for economic growth. In this paper I would like to discuss how China outpaced India in their economic growth even though both started their journey over same period of time. A brief analysis on their GDP’s, inflation, unemployment and foreign exchange reserves, as well how the global recession had affected their economies. Introduction

China started its economic reforms in 1958 when Mao broke with the soviet model and announced the “Great Leap Forward”, which aimed at rapidly increasing industrial and agricultural production. But its economic growth rapidly changed with its market-oriented reforms when it opened its arms to the world in 1979.Today Chinese population is about one-fifth of the worlds and its GDP contribution is about 10 percent of the world’s total, making it to be the third largest economy in the world in 2009. But latest sources tell us that China is second next to United States in GDP surpassing Japan. GDP of China at the end of third quarter is 9.6 percent. China’s GDP reached its peak during 2007 with 14.2 percent and was not affected much during the global recession. (U.S. Department of State, 2010) The major factors influencing China’s economic growth is exports. Exports of goods and services contributed around 26% in 2009 while the agricultural sector contributing only 10% of its GDP. China’s policy makers decided to move from their traditional agricultural economy to world’s manufacturing hub. This very step of theirs in early 1980’s helped them in their rapid economic growth making their presence felt in the world. The projected real GDP for this year is expected to be around 10.5% according to International Monetary Fund. Source: World Bank (http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG) India:

India liberalised its economy in 1990 when they faced balance of payments problem. India is basically an agricultural oriented economy concentrating less on manufacturing sector and on FDI’s. India economy started gearing up with the economic reforms in 1990 from where on its GDP increased at an average 7.08% annual growth since 2000.First half of the decade was little slow and with its FDI and manufacturing sectors increase it put up a good show in the second part of the decade. The global recession had affected it very much where its annual GDP was just 5.1% in 2008.Projected real GDP of India is about 9.7% for this year according to International Monetary Fund. China and India both had followed centralized planning but China followed the strict communism to implement policies where as India approached the democratic policy. China carried the reforms aggressively in 1980’s and 1990’s contrastingly India started its reforms in 1990.China followed the traditional development model but India tried to jump from agriculture to service sector resulting very low manufacturing growth for India compared to China. Foreign Direct Investments in China and India:

Foreign Direct Investment one of the driving force behind these two economies. China is the frontrunner in this sector. China anticipated this much before India and liberalised its policies towards global participation in their economy. China is the world’s largest recipient of FDI’s for over...
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