Comparing India and China Growth strategies
China is marching ahead with over 10% gross domestic product (GDP) growth rates over the last two decades. China has followed a conventional path in transiting from an agricultural economy to a robust industrial economy. China is building vital linkages among its agricultural, industrial and service sectors, and systematically encouraging domestic consumption in parallel with a sharp focus on exports. China’s per capita GDP is now double that of India, although both nations had similar numbers as late as 1991.
In contrast, India is attempting to leapfrog from a predominantly agricultural economy to a knowledge-based service economy. Bureaucrats and business leaders cite India’s 6% GDP. Growth over the last decade and the strong growth of India’s software and IT-enabled services (SITS, henceforth) sector in support of the leapfrogging approach. However, they ignore the lack of vital linkages of SITS with the remainder of the Indian economy. The SITS sector employs mainly the educated, urban youth, leaving a large fraction of the India’s population further behind. If a country is to pursue a politically and economically stable development strategy in largely rural, unskilled agricultural economy it must focus on such linkages. robust GDP growth that exceeded 8%, the Bharatiya Janata Party
Contrast this with the confidence the world has placed on China in awarding her the Olympics in 2008 and the World Trade Fair in 2010. China has demonstrated that it has the will and the resources to host the Olympics, which calls for a massive infusion of resources to create a firstworld infrastructure. The public and private sector investments in China towards preparing for the Olympics are expected to touch $180 billion by 2008. The impact of infrastructure development projects for the Olympics will be significant: jobs for millions of low income and low skilled workers. Further, hosting the Olympics will help enhance the nation’s psyche and its confidence. China is also using the Olympics to prepare its inefficient state owned enterprises (SOE) to compete in the global economy. Such a significant physical and psychological transformation is much needed in the Indian context if India is to compete effectively in the global economy.
Research findings suggest that a country’s performance in the Olympic Games depends not just on its population, but also on per capita gross domestic product (GDP).1 China’s recent 63 (32 gold, 17 silver and 14 bronze) medals – third highest total tally after US and Russia – at the 2004 Olympics in Athens suggest the growing economic progress and confidence. In contrast, India won one silver medal at the Olympics.
While China’s growth is primarily the result of specific policies targeting manufacturing activities, India’s growth in the SITS sector in 1990s has been primarily accidental and reflects the hard work of few companies and individuals. The growth is attributable to enormous demand from the U.S. and other developed countries due to three generations of IT innovation – client-server, Internet and the World-Wide Web (WWW), and wireless communication revolution – within a decade leading to fundamental changes in computing and business practices.
A strategy that relies on the movement of white-collar jobs from developed nations to India is difficult to sustain. Many of these jobs, especially those related to business process outsourcing (e.g., call center jobs) create little or no intellectual property for Indian firms. With few barriers to center or exit, these jobs will shift to other countries for the same reasons they moved to India. In fact, China is potentially the key competitor in this context. China has begun educating its students to speak English in large numbers. The SITS sector does not have strong linkages to the remainder of the Indian economy. Apart from skilled labor, the key inputs such as computers and software (e.g., database...
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