Civil Services Junction: Daily News Mail

Can we overtake China in economic progress

China and India during India's Independence

China and India started the race from same point at the time of India's Independence.
China and India, despite being such large countries, accounted for only 4.5% and 4.2% of global GDP respectively in 1950.
Both the countries have considered State as the driver of growth, feared foreign domination and have suspected private sector's initiatives.

China and India between 1950 and 1980

China initiated industrialisation and switched to an all-around emphasis on heavy and light industries and had a more successful resource mobilisation strategy than India did. As a result, China's manufacturing industries grew at 9.5%, twice as much India's rate, from 1965-80.This is because of higher growth in Chinese labour productivity and capital deepening.
By 1978, the Chinese per capita income was at $977, and India's at $966, that means by 1978, China have not dramatically surpassed India.

Deng's era

After 1978, the monumental economic progress that China would make because of economic reforms pushed by Deng Xiaoping. The reforms stressed the principle of "each according to his work" than "each according to his need", professionalism and efficient economic management at all levels. Deng opened china to foreign investment, the global market and limited private competition.
This strategy was somehow different from Mao's Great Leap Forward (The Great Leap Forward of the People's Republic of China (PRC) was an economic and social campaign by the Communist Party of China(CPC) from 1958 to 1961. The campaign was led by Mao Zedong and aimed to rapidly transform the country from an agrarian economy into a communist society through rapid industrialisation and collectivization. The campaign caused the Great Chinese Famine - Source)
Deng transformed agriculture first and then industrial sector. He opened up industrial sector to foreign capital while making room for the growth of village and local enterprises. Jiang Zemin, Hu Jintao and now Xi Jinping have continued to follow Deng's principles.

China is the leading nation in export and the second largest economy in the world. The country has eliminated abject poverty. Per capita income is raised to $5,720 for China. China’s Human Development Index has also risen from 0.423 in 1980 to 0.719 in 2013, according to the United Nations Development Programme 2014.

India's progress

India also took steps to modernize its economy in 1980s but petered out(ended weakly). India got freed from the food grains scarcity, thanks to the Green Revolution, but it did not manage to apply to its industrial sector the lessons it learnt from agriculture revolution - using foreign knowledge, relying on the private sector and deploying subsidies selectively. Instead, foreign borrowing was used to cushion loss-making public enterprises and to ease the consumption constraint in the public sector.
India's policy underwent directional change in 1991. Prime Minister Narasimha Rao ushered in reforms which were implemented well by his Finance Minister Manmohan Singh.Indian economic growth accelerated during the period 1995-2008, but could not maintain the momentum due to political paralysis of policies that were necessary for economic growth. Gross national income per capita in 2013 was $1,550 and India’s HDI increased from 0.369 in 1980 to 0.586 in 2013.

How can India overcome china?

The primary difference between India and China is the faster growth of capital stock in China. China has outdistanced India in every economic area except in software industry and agriculture research.
India will overtake China as the most populous country in the world in 2030. India has chance of catching up with China if it can increase is labour participation rate mainly women, increase the average level of education, improves the average quality of its labour force through special training programmes.

Prime Minister Modi, with his majority in Parliament, has an opportunity to reignite the engines of economic growth. Even if the Indian economy were to grow at 10 per cent a year, its GDP at 2011 PPP$ will reach only about 26 trillion in 2030; China can easily reach this by 2022. I don’t see India catching up with China in the next 25 years unless, of course, there is a massive failure of sorts in China.

Prime Minister appointed Columbian University professor as National Institute for Transforming India (NITI) Aayog Vice-Chairman.
P.M also appointed economist Bibek Debroy and the former Secretary, Defence R&D, Dr. V.K. Saraswat, to the Aayog as full-time members.
India’s Tryst with Destiny , a book Dr. Panagariya co-authored with economist Jagdish Bhagwati, praises Gujarat’s growth model. Before the Lok Sabha polls , he argued for scaling back the PDS and disapproved of the food security law. Dr. Debroy has worked at the Centre for Policy Research and National Council of Applied Economic Research.
Union Home Minister Rajnath Singh, Union Finance Minister Arun Jaitley, Union Railway Minister Suresh Prabhu and Union Agriculture Minister Radha Mohan Singh were all appointed as ex-officio members to the Aayog, according to an official release.