India and China have long been business partners. Their relationship started way back in the early 19th century (Bradsher 2015). According to the world economic forum, China is the 27th position in the world global competitiveness index of 2018 edition. While its counterpart India is the 40th in the global competitiveness index.In the past years of 1948, both India and China had relatively low GDP per capita with a lot of poverty spreading all over the nations (Bradsher 2015). However, in the recent years they have both attained their economic development paths from different political conditions (Owen 2011). With this, China is now the second nation with the largest and biggest economy in whole world whereas India is ranked the 10th. India is well equipped with different pillars good for their economic development.
According to research carried out, India’s economic growth has been low in the recent years following a decline in their GDP per capita. For example, GDP per capita reduced from 60% in 2001 to 48.01% in 2009(Owen 2011). Similarly, the Global Competitive Report of 2108 shows that India has dormant pillars which are not put in use. The Government of India on the other hand argues that if these pillars are developed and put in use, India would be among the largest economies in the world. Both nations have put more emphasis on foreign dominations and economic development to be moving hand in hand. But China has greatly considered the role of the central governor to be key in their development unlike India (Bukola 2018).
Therefore, this paper analyzes the concerns of the Indian Central Governor in undertaking the actions to develop their economy much better than China as represented by the World Economic Forum (Owen 2011). Under that report, major criticisms came on poor use of Indian’s infrastructure and education systems which were low compared to China (Ranjan 2017). The Forum indicated that India’s major weaknesses are in technology advancements, health and primary education systems. India has also a relatively good market which ranked the third in the whole world. India has an advantage above innovation and sophistication factors since it is below China. It implies that India has the capability to develop more than China if these pillars are efficiently utilized (Bazi and Nicolas 2011).The economic barriers for financial economic development are not so large in the economy. These barriers can be reduced at any time by the central governor of India.
Figure 1shows the performance overview of India (World Bank 2017).
Whereas China has a relatively goodeconomic development in different pillars in which it raked the first in market size. This provides an added advantage to India since they are trade partners.
Figure2 shows the performance overview of China (World Bank 2017)
Position of India and China on the economic development path
The analysis of these two countries shows that China is rich in the infrastructure development, exports and imports. Both China and India had the same growth rate in terms of economic development in 1950. During that particular time, India looked much better than China in terms of development and growth. It implies that china has a good competitive position than India (Gayatri 2017).
China has long been doing well economically even during economic crisis which is not the case for India. Therefore, China‘s overall competitive position is greater than India. Finally, it is believed that India’s economy is growing at high speed compared to that of China in the recent years. Many scholars argued that it does not need much time for India to overtake China’s dominancy in the financial markets. But instead emphasized that, if the government of India can improve on their weaker pillars then we would see India nearing China, On the other hand, other scholars point about the lack of improvement in the infrastructure with strong manufacturing sectors to have contributed to low development of India (Gayatri 2017). India has applied different rules in the evaluation of national competitive advantages. For example, India has greatly improved the educational sector. The government of India believes that by doing that, more peoples are educated hence innovation increases.
Competitive position of India and China;
India has decided to concentrate more on the service sector so as to improve its economic growth and development Cheung and Haan 2013). It reported that India’s service sector contributes about 54.01% on the economic development more than it does in China (Yao 2017). Scholars believe that if the service sector is improved alongside other sectors, India’s Gross domestic Product would increase by 6%. They believed that with this factor and through advancements in technology, India would be the leading economy in the near future. They concluded by saying that improving the financial sector will improve India’s economy and to overtake China (Bradsher 2012). Similarly, China applied the rule to reduce dependence on foreign trade since it limits innovation within domestic firms (Cheung and Haan 2013). China’s dependence was recorded to be at 11.01% of the foreign products. Therefore, the government of China has the rule to reduce this overdependence and create a self-reliable economy (Bradsher 2012).
The competitive advantage of Business sophistication in India is that there is improved efficiency by firms due to different firms coming together (Yao 2017). There is also increase in the innovations by companies. It also extends the networking of trade between firms, suppliers and companies which also reduces entry barriers (Yao 2017). Also, there are associated advantages of innovation in that there are gains which improve infrastructure and institutional systems. It also enhances people’s standards of living in the long run. However, there are many barriers for financial market development in India than China (Gayatri 2017). A vast majority of the population especially the rural poor cant access financial services in India. These barriers look to be high and have hindered the performance of the financial market development. These barriers range to be around 45% to 56.9% compared to China’s in a range of 35% to 42.9%. This indication shows that India’s barriers to financial market development are higher than China (Yao 2017).
Figure 3: shows the challenges of doing business in India (World Bank 2017)
The report presented by the Indian bureaucrats was relatively realistic although most of the pillars are still developing such as infrastructure. In what would be the most driving factor for economic growth in infrastructure, India’s infrastructure is still lacking. There exist a number of areas that are still in accessible which hinder the implementation and supervision of development plans and policies (Bradsher 2012). Therefore, the reported presented needed to improve these pillars so to attain a better economic growth. According to the research, if India successfully improves its pillars and reduces dependence on foreign products, its economy would grow at a higher rate than china in the long run (Gayatri 2017).
Evaluation of the national competitive advantages of India and China;
Even though India’s and China’s Gross Domestic income is still low, their economy has grown impressively with their population giving them enough market (Yao 2017). It remains the case as these two nations are seen to be growing at a high speed and only America has surpassed them. (Bazi and Nicolas 2011).The economy of India and China has linked together in the international market making them one of the largest and biggest economies in the world. Only China and India had a non-negative economic growth rate during the crisis that hit the world in 2008. Their economies never dropped so much as to other economies (Ranjan 2017). India in particular its economy before crisis was growing at a rate of 67.09% which say a slight and insignificant decrease in their rate to 67.085% (Peter 2011). China’s competitiveness position is seen to be better than any other country in the world. Its competitiveness position has enabled it to capture the world market. Since China is capable to produce and trade across the world, it has maintained its competition with other counterparts (Cheung and Haan 2013).
Compute the competitiveadvantages
According to the world Economic Forum, China is ranked the first with its position being maintained for the last three years (Peter 2011). Similarly, India has a relatively good position just after China and United states. India is ranked the third according to the Economic Forum. India’s economy has become more competitive due to its population which has provided enough market (Bukola 2018).China’s economy has changed to a commercial economy from what they originally had in a closed economy. It leads to the destruction of all the local system used in the economy such as common lands(Ravinder 2012). It later led to growth of financial markets, private sectors and a centralized banking sector. China at one point recorded an increase in exports of goods which are essential. China’s economic growth continued to increase which them surpass America’s economy (Ravinder 2012).
Figure 3: showing challenges for undertaking business in china (World Bank 2017)
India is growing at a slow rate to become a financial market nation. It was then recorded that economic policy measures were put into place such as industrial sectors were well regulated under the control of the government. With these policies, India’s economic growth increased up to 7.0% annually from 1998 to 2012 (Malini, 2015). According to the world Economic Forum, a more than 50.0% of the labor force are peasants while service sector seems to be the driving force of India’s development. The high level of interest rates and increasing inflationary periods made India’s economic growth to decline.However, economic growth was later restored growing at a rate of 10% as policies were introduced to reduce deficit were seen working as planned by the governor(Bradsher 2015).
Conclusion
Conclusively, it can be asserted that the high levels of corruption, taxes rates, and limited financial inclusion among other important factors still a big challenge in India. The recent economic growth levels that India is experiencing may not be sustainable if the above challenges are not effectively addressed. China when compared to India has relatively lower levels of corruption this is due to the harsh policies and punishments that deter individuals to engage in corruption vices. China faces a problem of dependence on the production of industrial products which one way or the other affects its economic progress. For the case of India, Financial inclusion needs to be promoted in India at all levels by the various stake holders like the central bank and the ministry of finance. Interest rates should be lowered to allow easy access to credit by all sects of the population including the rural poor. Thus if the above major challenges are not addressed India will continue to lag behind when compared to other economies in east Asia like china, Singapore, Malaysia and south Korea that have harsh policies and law on corruption.
References
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