GBE Term Paper Presentation

8/14/2019 GBE Term Paper Presentation

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GBE Term Paper Presentation

Contents

Part I : Birds Eye vie

wPart II : How are the two giantsemerging?

Part III : Going backward to forward

Part IV : Who scores where?

Part V : Conclusions

Part VI : References


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Part I: Birds eye view

Economic indicators

INDIA CHINA

Gross Domestic Product $1.17 trillion $ 6.9 trillion

GDP growth rate 9.1% 11.9%

Population (m) 1,123 1,319

Population growth (annual) 1,2% 0,6%

Inflation 4,3% 5,2%

Export of goods andservices (% of GDP)

Over 40% 21%

Imports of goods andservices (% of GDP)

24% Over 30%

Source:World Development Indicators database, 2008


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ContdThe added va

lue 199022%1990

46%

199032%

2007

29%

2007

53%

2007

18%

India: Composition of GDP

Industry Services Agriculture

Source:Internal elaboration on World Development Indicators database,September 2008


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GBE T P P i


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ContdForeign Trade

Export of Goods and Services as % of G0

5

10

15

20

2530

35

40

45

50

2000 2005 2007 2008

CHINA

INDIA

China has been a moreexports dominanteconomy as comparedto India with exports as

high as 40% of ChinasGDP as compared to22% for India in 2007.

Source:www.worldbank.org

GBE T P P t ti


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GBE Term Paper Presentationar : ow are e wo g an semerging?

India as back office of the world

FACTORS RELATED AND SUPPORTING INDISTRIES

High profile human resources High R&D investments and capabilities

Skilled labour software R&D Centres/Labs andsoftware training institutes

High level infrastructure, (Reliable/satellitetelecommunication) availability of fastDigital telecommunication links

telecom, power and roads

High technological internal resources IT parks (Bangalore, Hyderabad, Chennai, Pune,Gurgaon)

GBE T P P t ti


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ContdChina as the work shop of the world

FACTORS DEMAND

Unskilled and low cost labour Internal demand(State Owned industries)

Basic industrial infrastructure External demand(exportation)

Cheap raw materials Demand of labor intensive production

Externalsource of technology

Dependent on foreign technology

GBE T P P t ti


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ContdIndia vs China remarks

INDIA

Focus on services

Lower GDP per capita

Strong corporate governanceStrong corporate governancestandardsstandards

Advanced institutional infrastructureAdvanced institutional infrastructure

Commercially-driven companiesCommercially-driven companies

CHINA

Focus on industry

GDP per capitaGDP per capita two times higher thanIndias (in USD PPP terms).

Lack of advanced institutionalinfrastructure and corporategovernance

Indifference towards oil pricesIndifference towards oil pricesfluctuationsfluctuations

Global economic integration throughinternational trade and investments

GBE T P P t ti


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GBE Term Paper Presentationar : o ng ac war oforward

Development in strategic terms

INDIA CHINA

Poverty Low level of education

Poor knowledge of the industry dynamics Poor living conditions

Low level of resources Low level of resources

Bad physical infrastructures Low level of institutional infrastructuresand corporate governance

Inadequate supplies of capital Skilled labour necessity

Late process of modernisation Technological capacity

SOME DISADVANTAGES OF BEING BACKWARDCOUNTRIES



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ContdRole of the government

INDIA before CHINA before

Semi-socialist autarkic economy Socialist economic system

High protection State monopoly of the foreign tradesystem

Difficulty to set up a new business State-owned domestic enterprises

Foreign investment not welcomed Strict control

INDIA now CHINA now

State planning through 5Year Plan 3Step Development Strategy

Mixed economy Reduced control on economy

Reduced control on foreign trade andinvestment

Government supervision through indirectguidance of a more dynamic economy

Privatization trend Many institutions to control and supervise(People's Bank of China, National Development and

Reform Commission, Ministry of Finance)



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Part IV: Who scores where?

India China

Referred as The back office of the worldThe technology lab of the world

The workshop of the worldThe factory of the world

DevelopmentStrategy

Homegrown entrepreneurship. Foreign Direct Investment (FDI)

Development

approach

From the ground up. Top-down approach

FDI status Medium Extensive

Domestic firmsenvironment

Nurturing environment fordomestic firms supported bystronger infrastructure thatallows enterprises to flourish.

Restricted environment with manyobstacles for private domestic firms,preventing them from challengingstate-owned enterprises.

Legal System Advanced and decent legalsystem, that provides ownershipprotection for private domesticenterprises.

Unfair & inconsistent legal systemwith low political status. Domesticprivate enterprises are discriminatedagainst several policies andregulations.



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Contd

India China

Political system Democracy No democracy

Capital market Allows firms to obtaincapital they need to grow.Capital market operateswith greater efficiency and

transparency.

Tightly controlled capitalallocation restricting theability of private companiesto obtain stock market

listings and access themoney they need to grow.

Macro-economicfigures[Growth rate & GDP]

Low performance High performance

Micro economic level Fuller use of resourcesowned necessary for long-term growth.

Misallocation and Inefficientuse of resources dependingon FDI.



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Published studiesLast year, the Forbes 200, an annual ranking of the worlds

best small companies, included 13 Indian firms but just 4from mainland China.

A report issued in 2000 by the Chinese Academy of SocialSciences concluded that, private and individualenterprises have a lower political status and arediscriminated against several policies and regulations.

In a recent survey of leading Asian companies by the FarEastern Economic Review (FEER), India registered a higheraverage score than any other country in the region,including China.

In a World Bank study published last year, only 52 percentof the Indian firms surveyed reported problems obtainingcapital, versus 80 percent of the Chinese companies polled.



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ContdWho scores where?

Why

?

IfIndia has so clearly surpassed China atthe grassroots level, why isnt Indias

superiority reflected in the numbers? Whyis the gap in GDP and other benchmarks

still so wide?


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References

Books: Dancing with giants: China, India, and the global economy, by

Alan Winters and Shahid Yousuf.

Chindia: How China and India are revolutionizing the GlobalBusiness by Pete Engardio.

Papers: Chinas Socialist Market Economy: Lessons for democratic

developing countries, by Arvind Virmani, published by PlanningCommission (Working Paper No. 5/2006 PC).

China and India: A visual Essay, Report by Deutshe Bank.

Transferring the Rebound into Recovery: Published by WorldBank, November 2009.

Websites: www.worldbank.org

www.planningcommission.gov.in

www.imf.org



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GBE Term Paper Presentation