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There are several reasons with the main one being that China opened itself up for business in 1978, while India didn't start doing so until 1991. Due to a complex regulations and tax system, India could barely be considered a single market today (although there a few reforms in these areas have recently been implemented or are soon going to be.).
Five things that China does particularly better than India is expidiously mobilizing resources/making decisions, appropriating land, managing/supporting state owned or supported enterprises, injecting capital into it's own economy, and educating its citizens (arguments about indoctrination aside). China had a really winning combo of infrastructure, FDI, state investments, and easy credit.
Some things that India has going for it is an economy that isn't as heavily dependent on the government, has a more transparent/independent markets, has a more transparent banking system, has a more transparent legal system, and it's less reliance on debt to fuel economic growth.
Ultimately, India isn't going to develop with some Chinese style state capitalistism/neo-mercantile system due to differences in political systems but rather one where the government basically creates a good environment for economic growth.
You know, i have been looking at this and I think you have a point, I kept wondering why didn't the economy of India soared like China's after the liberalization of 1991.
I feel as though India when you compare it with China is underperforming. They were both about equal in the 60s, probably India was better in some aspects. Very similar countries - large land masses, populations, rich in history and culture and both suffered at the hands of colonialism in the early 20th century.
Yes, China has it's issues and big issues to boot, but they just seem at the moment, and at least on the surface an overall better country compared to India. Which poses the question, would India would have benefitted with an authoritarian dictatorship like South Korea and Taiwan's before slowly evolving to a multi party, vibrant democracy? Things just seem to go very slowly in India, and whilst it still has the basic British setup, they can't seem to be able to convert that materially.
One argument that i heard is that mass manufacturing never took off in India after the 1991 liberalization the way it did in China.
Mass Manufacturing requires a lot of manpower, which drives up employment in non-agricultural sector, and results in better incomes. With better incomes, people can afford to pay more and afford a better lifestyle.
Mass manufacturing means more export revenue.
More export revenue means more foreign exchange reserves as well as better balance of payments.
It all adds up to a nation being more wealthy.
Unfortunately, that also raises the question of why manufacturing never took off in India at the scale it did in China.
Some people said it was because services (IT and BPO) took off in India but that dosn't really answer the question.
You know, i have been looking at this and I think you have a point, I kept wondering why didn't the economy of India soared like China's after the liberalization of 1991.
It seems to me that China basically had better access to more wealthy, developed markets that were interested in developing. For example the Special Economic Zones or port cities:
Dalian -> South Korea and to a lesser extent, Japan.
Shenzhen -> Hong Kong. Basically almost every factory from HK relocated here.
Xiamen -> Taiwan, almost a replica of the above HK/SZ relationship.
Qingdao -> South Korea and Japan.
You could probably also say USA, but they're probably scattered all over China.
China 1978 v India 1991 = 13 years head start.
China Authoritarian v India Democratic = After the changeover, China could use the governmental force to jump start economic growth. However, it is my belief that during later stages of development, India's democratic principles, rule of law, and freedom will propel them ahead of China.
As others have said, I believe there is more haziness to China's numbers. Some numbers are dishonest, other numbers represent real production, but not valuable production. A country, China in this case, can boost its production totals, and reported GDP, by producing below cost which the Chinese government is encouraging through state sponsored loans from their banks. However, a country, just like a corporation, doesn't get rich producing at a loss. A reckoning is coming.
Also, while every wealthy person should diversify geographically, wealthy Chinese have an even greater incentive to transfer their wealth out of the country because they economic rights are far more insecure. Over the long term, India's democratic system will encourage more capital to stay within the country, and that will boost its level of development.
China 1978 v India 1991 = 13 years head start.
China Authoritarian v India Democratic = After the changeover, China could use the governmental force to jump start economic growth. However, it is my belief that during later stages of development, India's democratic principles, rule of law, and freedom will propel them ahead of China.
As others have said, I believe there is more haziness to China's numbers. Some numbers are dishonest, other numbers represent real production, but not valuable production. A country, China in this case, can boost its production totals, and reported GDP, by producing below cost which the Chinese government is encouraging through state sponsored loans from their banks. However, a country, just like a corporation, doesn't get rich producing at a loss. A reckoning is coming.
Also, while every wealthy person should diversify geographically, wealthy Chinese have an even greater incentive to transfer their wealth out of the country because they economic rights are far more insecure. Over the long term, India's democratic system will encourage more capital to stay within the country, and that will boost its level of development.
So China today, India tomorrow.
If you observe Chinese immigrants and Indian immigrants in America, you will find the Chinese actually are more likely to obey the laws and play by rules. Especially if you compare the educated people from both countries.
What impedes economic growth is the lack of motivation or hope that one can strive and improve one's self in this lifetime. That can take various forms. In India, it is the caste system. If people were led to believe that they are untouchables and it is a punishment from a previous life, and they have to wait for the next life for it to become better, then people are not going to strive to improve themselves. To a large extent, society even forbid them to progress at all in the past (and change has been slow in this regard).
In China, it used to be the Marxist ideology holding it back. Prior to "socialism with Chinese characteristics", there was not much motivation to improve one's self. Was also dangerous, as one might be labeled "bourgeois" and be attacked by the Red Guards.
What impedes economic growth is the lack of motivation or hope that one can strive and improve one's self in this lifetime. That can take various forms. In India, it is the caste system. If people were led to believe that they are untouchables and it is a punishment from a previous life, and they have to wait for the next life for it to become better, then people are not going to strive to improve themselves. To a large extent, society even forbid them to progress at all in the past (and change has been slow in this regard).
In China, it used to be the Marxist ideology holding it back. Prior to "socialism with Chinese characteristics", there was not much motivation to improve one's self. Was also dangerous, as one might be labeled "bourgeois" and be attacked by the Red Guards.
Actually, during Mao's era, China made a lot of progress collectively. Railways and bridges were built, nuclear bombs were created, heavy industries were developed, poor people were taught to read, and drugs, gangsters etc. were completely eliminated.
Individuals were poor back then, but the country made a huge progress in infrastructure development.
Last edited by Bettafish; 01-04-2017 at 11:57 AM..
Actually, during Mao's era, China made a lot of progress collectively. Railways and bridges were built, nuclear bombs were created, heavy industries were developed, poor people were taught to read, and drugs, gangsters etc. were completely eliminated.
Individuals were poor back then, but the country made a huge progress in infrastructure development.
Er, no. A lot of what the communists went off were pre developed by the Russians and Japanese during the war years of WW1 and WW2. Similarly, the KMT inherited the same infrastructure in Taiwan from the Japanese.
Anything that was "developed" by Mao basically required a lot of Soviet Union assistance, still is somewhat today e.g. military gear knock offs etc.
To some extent I'm surprised Communism albeit with changes works in China whereas India's democracy doesn't really work.
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