The salient features of the economies of China and India provide sharp contrasts. Jing Ulrich, the chairman of JPMorgan’s China Equities, points out: “Private enterprise plays a greater role in India’s economy than China’s. China’s gross domestic product is about three times larger than India’s and its exports are eight times larger. China’s $US4.8 trillion in savings dwarfs India’s $US215 billion.
“China’s large savings pool provided the investment funds for the rapid build-up of its export-oriented infrastructure. But this has been a mixed blessing. The surplus of capital led to overcapacity and contributed to poor returns on investment. In contrast, Indian companies used their funds judiciously and enjoyed higher returns. A scarcity of savings also explains why India has focused in services, which are less capital intensive.”
The countries’ demographics are also tellingly different. By 2015, two thirds of China’s population will be over 50, while 60 per cent of India’s will be under 30, according to Hong Kong based Global Demographics. By 2025, India will have more people than China.
The potential is great for India to push ahead — but this will depend on a vastly improved education performance. More than 90 per cent of Chinese are literate, compared with only 61 per cent in India. Fewer than half India’s women can read and write. And while India’s familiarity with English is a plus, its language use is fragmented, while China’s is unified around Mandarin.
What do you think is the path of the economy and how is it going to fare.