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MANAGERIAL ECONOMICS

Who will be ahead in 2030- India or China?

Submitted by:

Submitted to:

Shivani Sisodia

Mrs. Jharna Lulla

MFM/14/47

The US intelligence community in a report released in December 2012 says by 2030, a


surging India, along with decelerating China, will straddle global commerce and
dominate the world economy amid the gradual decline of the west. The report shows that
India will surge ahead after 2020 even as China begins to wane or decelerate, mainly on
account of demographic changes which will see China aging before India.
Thus following are pros and cons of both Indian as well as Chinese economy, which
would help us understand this situation better.
Pros of Indian Economy
As Mr. Sanjeev Bhatia starts his debate, he very interestingly puts a point about the
young pool of human capital that India will have in the upcoming years. Not only will this
pool of people be young but also optimistic as against China, whose people can be
hostile due to the stringent political system. It is true that china has grown in the past 2
decades but looking back to those 20 years, when both India and China had the same
level of urbanisation and per capita income, Chinas growth is not substantial. The
relative growth in GDP is not much. The stretch of years 2015 to 2045 is supposed to be
the golden phase for the Indian economy and hence there is a huge potential to growth
and development.
The number of children has gone up by 58% in the past 20 years in India. Also the
literacy rate is improving with the coming time. This means in the near future that is by,
2030 India will have a huge pool of human resource which is both young and skilled.
As Mr. Wong Ting mentions, a country can be ahead of another on socio-economic
parameters. There are three basic things that one has to keep in mind,
i.
ii.
iii.

How well are you accepted by the people around you,


Is there a system that can handle and manage social and political problems, and
Do people feel good about themselves in the country?

The answers to all the three questions have a positive response when talking about the
India economy. India is a democracy and the political system, even though flawed, has
its own advantage. People can discuss and solve their problems openly, unlike in China.
India can also emerge as super power because of the strong maritime trade it has. It
has good trade relations with a lot of countries and has strong navy to support it.
Decentralization or devolution has been an advantage for our nation because even poor
states like Bihar like have an 11% growth rate, which contributes to the overall
development of India as a superpower.
Following are the certain facts and figures that would support the pros of Indian
Economy:

India is today one of the worlds fastest growing economies. By 2030, India will
become the worlds third largest economy with projected GDP (PPP) at $13,716
bn.
India has the ninth-largest economy in the world by nominal GDP and the thirdlargest by purchasing power parity (PPP).

India is the 19th-largest exporter and the 10th-largest importer in the world.
During 201112, India's foreign trade grew by an impressive 30.6% to reach
$792.3 billion.
India is one of the fastest growing retail markets in the world. One of the top five
retail markets in the world by economic value, the retail industry is estimated to
be $450 billion.
India has the world's third largest road network, covering more than 4.3 million
kilometers and carrying 60 per cent freight and 87 per cent passenger traffic.
Over half of India's population is below 25 years. By 2020, the average age of an
Indian is expected to be 29 years. India's working-age population will increase by
240 million over the next two decades, according to Deutsche Bank. India has
the second-largest pool of scientists and engineers in the world.
The aviation sector in India has attracted foreign direct investment (FDI) worth
$449.26 million from April 2000 to March 2013.
With official gold holdings of 557.7 tonnes, India ranks 10th in gold reserves.
India's foreign exchange reserves stand at $280.17 billion.

Source: http://www.rediff.com/business/slide-show/slide-show-1-special-25-interestingfacts-you-must-know-about-the-indian-economy-/20130808.htm#25
Cons of Indian Economy
Mr. Parag Khanna mentioned a lot of cons that the Indian Economy has and which
might not lead to its leap ahead of China in 2030. According to him, China has raced
much ahead of India in many economic terms. Indias GDP is 1/5th of China and the
population of India is liability for it because the labour is unskilled. Also the life
expectancy rate of China is greater than that of India by 7-8 years.
The major problem with Indian Economy is it discontinuous and not so competent
government. Mr. Khanna feels that the whole population does not participate in the
political system and hence the whole power is in hands of a few regional players. This
has led to other problem of corruption in India.
Since India has instable relations with neighbours like Pakistan, and Himalayas stand to
the north of it, this can also prove to be hindrance when commencing trade activities.
Pros of Chinese Economy
Mr. Parag Khanna very rightly and precisely said a few things about the Chinese
Economy. It is the leader in Hard-power, the second largest economy today, has a
strong and modernising military and the geo-political advantage that China has can be
summed up to a single term, Business. In 2 decades, china has invested 1 trillion
dollars in advanced technology. It is slow in economic terms but is richer when it comes
to power.
China shares it border with 14 nations and has settled relations with all of them. It has
huge investments in infrastructure and has a first mover advantage. The reforms for
development and strategic changes began a few years ago and hence any flaw in the
economy would be a stage of correction in the upcoming years.

The government is continuous, competent and secular and hence there is no political
instability. The financial reforms and help from nations like Japan will help it overcome
the gap that can emerge between Indian and Chinese economy. The currency is
supposed to be stronger and become a reserve/international currency.
On social terms, Mr. Parags fellow speaker specified that the Chinese society is a lot
more open than what people think. It is flexible enough to adapt to small changes.
Cons of Chinese economy
One of the major cons of the Chines economy would be the huge population it has. The
number of children in the economy has drastically fallen to 18% which signifies that in
the future where on one hand India will have a huge pool of young working people,
China will have a huge pool of old people. Even though the population of India and
China are almost equal, the One Child Policy implemented by the Chinese Government
means that very soon china will have a huge percentage of old people(dependents) who
will need to be supported by the comparatively lesser number of the economically active
people(providers), this will be a huge strain on their economy. Also the ratio of girls to
boys is 118:100 which means a disproportion.
Chinese have made big investments in their fixed capital and infrastructures. To
maintain these resources, China invests about 4 trillion dollars every year. Now this is a
really big sum to pay every year. The two options available with the Chinese are- either
misallocate the capital or export it to other countries. No doubt that exporting your
currency will mean increase in trade and good relations with other economies, but it
weakens your own economy in a greater way.
Thus, the labour force is increasing and china is investing for no reason and getting its
capital to waste.
On social terms, all the newspapers and radio stations are under government control in
China. Even Facebook is banned here. Thus people do not have an outright freedom of
speech and expressions. This leads to dissatisfaction among the people of the country.

Who will be ahead in 2030- India or China?


There are no doubts as to how strong Indian economy is and what potential it holds for
the future but in economic terms say hard power, by 2030 India would not surpass the
Chinese economy. India will definitely grow and race ahead of many countries but China
with its pace of development and infrastructure will still be ahead.
On the basis of the video following are the reasons to support my viewpoint:

China shares its borders with 14 countries and has border issues settled with
most of them
It has created strong infrastructural linkages with its neighbours along with
commercial ties, importing raw materials and exporting finished goods. This has
created a transnational empire of resources
China has a first mover advantage

China has invested trillions of dollars in advanced technological R&D which has
helped it achieve economies of scale
The GDP of China is 1.9% in the third quarter of 2014 and 5 times that of India
The lead in terms of development is directed and managed by a strong,
competitive, secular and more importantly, a stable government, which India
does not have

China will keep the lead that it has gained over the period of time. The reasons which will
help her maintain this lead areFirstly, the financial reforms and policies that are taking place in China will help her get
out of middle income trap and will help China to further develop and maintain the
infrastructure it has created. Secondly, continuous changes on supply side along with
regional growth and financial Liberalization will help China to maintain 6-7% of growth
over next 15-20 years. Thirdly, China has developed as a land based power and is also
developing maritime navy to explore and trading resources from American and Latin
American continents through Pacific Ocean. Lastly, the social and long term political
stability will help China maintain the lead over India in field of economic and social
development.
According to various other secondary data, it is very clear that China will be ahead of
India in 2030. Some of the facts and figures mentioned are:

China initiated economic reforms 12 years ahead of India, thus it enjoys a huge
lead which will be maintained in coming 3-4 decades
The present 9 trillion economy of China is far ahead of 2 trillion economy of India.
Income of an average Indian today is what was of an average Chinese in the
year 2004, a nine year gap which India will need decades to overcome
At present, the average age of a worker in India is 23 years as compared to 37 in
China. Even if the working population of China is aging and decreasing, Chinas
R&D activities on innovations and automations of processes will help them to
maintain the production
China has developed itself as a producer nation, exporting different products to
most countries of the world; India on the other hand tries to bring world products
into itself. Thus China will have more foreign currency.

Conclusion:
During the past 30 years China's economy has changed from a centrally planned
system that was largely closed to international trade to a more market-oriented that
has a rapidly growing private sector. A major component supporting China's rapid
economic growth has been exports growth. Chinas growth in terms of economy is
very recent and this proves their strong determination and hard work.
India on the other hand is developing rapidly but has a lot of factors which pull its
growth down. Economically, the economy isnt as strong as China and by 2030, it
would not surpass China.

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