The Elephant & The The Elephant & The DragonDragonAbhishek JainAbhishek Jain

$305.6 billion $305.6 billion $132.1 billion $132.1 billion Debt Debt -- external external 44.3% of GDP 44.3% of GDP 29.2% of GDP 29.2% of GDP Investment Investment 1.5% 1.5% 5.3% 5.3% Inflation rate (CPI) Inflation rate (CPI) 798 million 798 million 509.3 million 509.3 million Labor ForceLabor Force40%40%60.7% 60.7% ServicesServices48.1% ( g = 22.9%)48.1% ( g = 22.9%)19.3% (g = 7.5%)19.3% (g = 7.5%)IndustryIndustry11.9%11.9%19.9% 19.9% AgricultureAgriculture$7,600$7,600$3,700 $3,700 Per Capita GDPPer Capita GDP10.5%10.5%8.5% 8.5% GDP Real GrowthGDP Real Growth$10 trillion$10 trillion$4.042 trillion $4.042 trillion GDP (PPP)GDP (PPP)$2.512 trillion$2.512 trillion$796.1 billion $796.1 billion GDP (GDP (exhexh rate) rate) (2006)(2006)

1.3 (0.59%)1.3 (0.59%)1.1 b (1.38% )1.1 b (1.38% )Population Population (July 2006) (July 2006)

ChinaChinaIndiaIndiaSource CIA World FactbookSource CIA World Factbook

China StoryChina Story

Why China is growing fast?Why China is growing fast?

Prior to the 1978 reforms, nearly four in five Chinese worked inagriculture; by 1994, only one in two did.

Pillars of Performance Pillars of Performance

Chinese reforms started with agriculture.Incentive to use underutilized land and labor resources intensively.When rural incomes rose, the demand for non-agricultural output increased proportionately.

Labor-intensive manufactures for export promotion by developing infrastructure mainly in the southern coastal cities using FDIDiaspora to substitute lack of local entrepreneurship & technology

Pillars of Performance Pillars of Performance ……

Marry Chinese cheap labor resources with Hong Kong's market-based institutions, business organizations and supply chain networks to make a successful entry into the world market

Comprehensively Beaten?Comprehensively Beaten?

India India –– PoisedPoised

ExpectationExpectation

RealityReality

India India –– World Factory?World Factory?

India Infrastructure ChallengeIndia Infrastructure Challenge

High cost of powerHigh cost of powerInefficient portsInefficient portsPoor RoadsPoor RoadsRailway cross subsidize passenger with freightRailway cross subsidize passenger with freight

High Cost of FinanceHigh Cost of Finance

Way to go!Way to go!

SocialSocial

Red Indian Red Indian

How will India rein in its fiscal deficit? How will India rein in its fiscal deficit? How will India discipline its political class?How will India discipline its political class?How will India deregulate its overHow will India deregulate its over--regulated regulated economy?economy?

How long will world How long will world remain Flat?remain Flat?

Globalization has Improved theInflation and Growth Trade-Off

Is China's growing lead over India irreversible?

Chinese WhisperInfirmities in its microeconomic, institutional and entrepreneurial bases raise doubts on the sustainability of its superior performance.High capital-output ratio suggests excess capacities, and probably misallocation and wastage of capital resources.Industrial structure fragmented by scale and location leading to poor efficiency Legal framework of business is still rudimentaryLack entrepreneurial groupsCollapse of D'Long - China's largest private company with operations worldwide

ChinaChina’’s s CapiCapi--tolltoll

Capital Capital stock grew by nearly 7 percent a year over 1979–94But capital-output ratio has hardly budged.

Production of goods and services per unit of capital remained about the same.Financing of unprofitable investment – Political rather than economic decision logic!NPA between 25 – 50% of GDP

ChalteChalte ChalteChalte

2005 Data