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Jayati Ghosh
Asian century?
Both China and India have large populations covering substantial and diverse geographical areas, large economies with even larger potential size. Current success stories of globalisation: two economies that have apparently benefited. Success defined by the high and sustained rates of growth of aggregate and per capita national income; the absence of major financial crises; and substantial reduction in income poverty.
Institutional conditions
India was mixed economy with large private sector, so essentially capitalist market economy with the associated tendency to involuntary unemployment. China mostly a command economy, which until recently had a very small private sector; still substantial state control over macroeconomic processes that have differed from more conventional capitalist macroeconomic policy.
13.5 12.2
12.0 9.8
10.1 8.7
9.3
6.0
2.0
2 2
Rates of investment
The investment rate in China (investment as a share of GDP) has fluctuated between 35 and 44 per cent over the past 5 years, compared to 0 to 6 per cent in India. Aggregate ICORs (incremental capital-output ratios) have been around the same in both economies. Infrastructure investment from the early 1990s has averaged 19 per cent of GDP in China, compared to per cent in India.
India
Chart 4: Investment as per cent of GDP
77 i a
China
Inv n r nd r o grow h o G P
/ D
Structural change
China: classic pattern, moving from primary to manufacturing sector, which has doubled its share of workforce and tripled its share of output. India: Move has been mainly from agriculture to services in share of output, with no substantial increase in manufacturing, and the structure of employment has not changed much. Share of the primary sector in GDP fell from 60 per cent to 5 per cent in four decades, but share in employment still more than 60 per cent.
Trade patterns
China: Rapid export growth involving aggressive increases on world market shares, based on relocative capital attracted by cheap labour and heavily subsidised infrastructure. India: Lower rate of export growth, with cheap labour due to low absolute wages rather than public provision and poor infrastructure development. So exports have not yet become engine of growth, except in services.
Trade policies
China: export employment was net addition to domestic employment, since until 00 China had undertaken much less trade liberalisation than most other developing countries. India: increases in export employment were outweighed by employment losses especially in small enterprises because of import competition.
Poverty reduction
China: Officially 4 per cent of the population now lives under the poverty line, unofficially around 1 per cent. (Reflects earlier asset redistribution and basic need provision in China under communism, plus larger mass market and role of agricultural prices.)
India: poverty ratio much higher and persistent, between 6 per cent and 34 per cent depending upon how one interprets the NSS data.
80
70
50
40
30
20
10
0 1980 1984 1985 1987 1990 1992 1993 Year BS World Bank
1994
1995
1996
1997
1998
1999
2001
Pove y i U ba
6
i a
U ba Pove y Ra e (%)
1988
1989
1990
1995
1998
1999
Yea
Human development
China: earlier extensive public provision of health and education: universal education until Class X, and public services to ensure nutrition, health and sanitation. (Recently some privatisation of such services, which has led to worsening conditions especially in particular areas.) India: the public provision of all of these has been extremely inadequate throughout this period and has deteriorated in per capita terms since the early 1990s.
Inequalities
In both economies the recent pattern of growth has been inequalising. China: spatial inequalities across regions have been the sharpest. More recently, vertical inequalities, especially for migrant population vis--vis others. India: vertical inequalities and the rural-urban divide have become much more marked.
Rural 22 30 33 37
Urban 16 23 28 34
National 30 37 45
Political systems
India: Political democracy deeply entrenched, though not translated into economic enfranchisement. Plays a role in creating more confused but less extreme patterns of economic growth; allows for progressive legislation such as NREGA (National Rural Employment Guarantee Act). China: Potential future instabilities because of excessive top-down growth orientation.
25
20
15
10
0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Unit value
19 92 -9 3
19 82 -8 3
19 96 -9 7
19 86 -8 7
19 90 -9 1
19 88 -8 9
19 84 -8 5
19 80 -8 1
19 94 -9 5
20 00 -0 1
19 98 -9 9
Quantum
Unit value
20 02 -0 3
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