Overview
The Asian Economy has assumed a seemingly unstoppable upward trajectory over the past years. The continental economy owes its growth to the individual economic growth of its constituent countries; among them, China and India. Arguably, these two contemporary global economic giants have transcended the continental boundaries to join the global economic battle ground. David and Harris-White (2014), alluding to recent IMF reports, notes that China is the second largest economy in the world in terms of GDP, but number one by parity of purchasing power. The duo also realize that India’s economy is the seventh-largest in the universe by nominal GDP and third-largest with respect to its parity of purchasing power. Over the past 30 years, China topped the ranks as the fastest-growing major economy, with and average growth rate of 10% (Tsui, Wong, Chi & Tiejun, 2017). In the same period, India’s economy had retained the top position in the category of newly industrialized countries and economies, with an average growth rate of 7% (Sharma & Wardhan, 2017). From the late 1970s, the people’s republic of China has transitioned to a more market-oriented system from its previously valued centrally planned framework. The latter has been found to play a major global role and facilitate the growth of the country’s economy in the global scale. Economic reforms in the country commenced through abolishment of collectivized agriculture which gave way for expansions including fiscal decentralization, creation of a dynamic banking system, ratification of the policies concerning the private sector, and gradual price liberalizations. Other foundations of economic reforms included stock market development, increased state enterprises autonomy, and increased foreign investment and trade. China has slowly but surely implemented its reforms, rising above the ranks and judiciously dealing with the oncoming economic challenges.
On the other hand, India is gradually abandoning its autarkic economic policies for an open-market economy which has been determined to favor global competition. Economic liberalization measures have since taken center stage. Some of the prominent measures include privatization of state-owned enterprises, minimal restrictions on foreign investments and trade, as well as industrial deregulation. Some experts note that these reforms, began at the dawn of the 1990s, marked the beginning of accelerated India’s economic growth, and laid a strong foundation to the country’s contemporary economic prosperity. While much of the labor is in agriculture, services are projected to be the major source of India’s economic growth. The services sector account for approximately two-thirds of the total output while having less than a third of the labor force. Fundamentally, the country has maximized the importance of its large pool of English-speaking population to export business outsourcing service, and information technology throughout the world. In General, both China and India are rapidly growing their economies, and besides the prospects of a brighter future for both, it is challenging to determine whether China will remain ahead of India in the foreseeable future.
Comparison: Political Economy, Infrastructure, Education, and Population Growth
Despite the unifying factor that both China and India are global economy forces to reckon with, China’s economy is evidently larger than that of India. It is approximated that the economy of India accounts for a mere one-fifth of that of China (Davin & Harriss-White, 2014; Chandrasekhar & Ghosh, 2007). While India’s economy largely depends on its huge internal market and less on external trade, China’s economy, for the large part, relies on international trade. Unlike India, however, China’s superlative economic growth and prosperity comes in the background of widespread claims of inequality. China’s inequality index equally surpasses that of India at 46.9 and 36.8 respectively (Chandrasekhar & Ghosh, 2007). Nonetheless, China continues to reduce the gap between the rich and the poor with only 10% of its population living below poverty compared to that of India which stands at 22%.
Political Economy
The political histories of both countries is a major aspect in explaining the current differences and possible similarities in the economic growth. China delinked its currency, the renminbi Yuan, from the U.S dollar in July 2005 and revalued it by 2.1%. The move saw the appreciation of China’s national currency rise to above 20% against the U.S dollar. The attempts at restructuring the economy and the subsequent political efficiency gains have seen China’s economy rise tenfold with regards to its GDP (Tsui et al., 2017). Essentially, however, China’s administration has been largely central throughout history unlike India. From the year 1949, the government, alongside the socialist political and economic system, has been solely responsible for managing of China’s national economy. As China stuck to its central political economy, India was wallowing in the quagmire of economic liberalization featuring open international investment and trade alongside a largely deregulated political economy, which in comparison to China, clearly worked against India’s economic growth.
Infrastructure
The current statistics reveal that India expected to invest up to 500 billion dollars in infrastructure by 2012. While the goal is yet to be met, experts forecast that the country will need to spend over 1 trillion dollars on infrastructure between the tear 2010 and 2019 to keep up with other major world economic players like China. The country has since invested up to 7.5% of its GDP in infrastructure with ongoing plans to increase the allocation to 10% (Kotwal et al., 2011). China, on the other hand, is currently spending approximately 11% of its nominal GDP on infrastructure (Tsui et al., 2017). Additionally, the total expenditure on infrastructure has been rising by 25% annually in the recent past. It is on such grounds that Davin and Harriss-White (2014) assert that China’s infrastructure is more developed than that of India.
Education
China has a more robust education sector which it has struggled to build over the years. The country has a literacy level of about 90% compared to that of India which falls between 50-60%. Both India and China are, however, continuing to invest in their education sectors and creating high quality institutions of higher learning. In the face of rapid economic growth on all sectors of the economy, both China and India have opened up their higher education for both the private and foreign investors.
Population growth
India comes second after China in terms of total population; both have surpassed the one billion milestone. While China currently leads the world, Sharma and Wardhan (2017) projects that India will be leading the world by 2050 in light of the current population growth trends. The change comes as a result of the forecasted population decline likely to face China from the year 2030 onwards in the face of the current reforms.
The Future?
The two countries are highly likely to take their economic battle into the unforeseeable future. As the current effective reforms take shape, both China and India will likely continue their economic rivalry in the future, with both of the countries facing a brighter future. However, since India’s population is expected to significantly surpass that of China which is on the verge of a nosedive, India’s economic growth may slow down by the year 2050 as a result of the humongous population. This is likely to give China an advantage to widen the economic gap between its growth and that of India. A reversal of the situation will require India to monitor and control its population growth rate, or draft an effective population management framework.