India and china economic systems stifled growth and left both countries poor. In 1980, real per capita income stood at $556 in China and $917 in India.
To jump-start their economies, China and India shifted strategies, letting private enterprise flourish and opening markets to trade and investment. The new policies have led to rapid economic development. China’s real per capita income has grown an average of 8.4 percent a year since 1995, climbing to $4,766. India’s 5 percent average annual growth has raised per capita income to $2,534.
China has followed the traditional route, becoming a center for low-wage manufacturing and exporting clothing, toys, electronics and other goods. India has emphasized services, using its large English-speaking labor force for call centers, data-processing operations and the like.
Growth rates give China’s goods-dominated strategy the better track record so far. But India’s approach may pay off better longer term. A look at per capita incomes around the world shows that the wealth of nations eventually depends more on services than industry.
Industry Goods Export Drive China’s Growth
1)Since 1978,China has made great leaps forward in producing inputs such as cloth, electricity, steel and cement and finished products as air conditioners, color televisions, microcomputers and mobile phones.
2)This development path forged an economy skewed toward producing goods, a broad category that encompasses manufacturing, construction and agriculture. China’s goods output as a share of gross domestic product exceeds the average for nations at its per capita income level by about 12 percentage points.
3)China launched their economic transformations by using abundant, low-wage labor to establish manufacturing-for-export industries, becoming the world’s low-cost producer of goods and a daunting competitor for global market share.
Services Exports Drive India’s Growth
1)Japan and South Korea provided a road map for China, but India knew it couldn’t go toe-to-toe with China in manufacturing. It had a better chance with services exports, which are often an afterthought in the early stages of economic development.
2)India possesses advantages that bolster a services strategy. Two are legacies of British rule: large numbers of English-speaking workers and familiarity with the West.
3)India also offers an ample supply of educated workers, many of them college graduates available at a fraction of what they could earn in the U.S. and other advanced economies.
4)India also had the blessing of good timing. Services trade has surged in recent decades, providing new opportunities in the global marketplace. Two factors are at work. First, the Internet and other technologies have made international communications faster and cheaper, lowering barriers to marketing and delivering services over vast distances. Second, rising incomes have shifted consumers’ spending from goods, boosting demand for services and making it an engine for economic growth.
5) India’s services sales have risen from 18 percent to 38 percent of all exports, topping the 30 percent of the U.S., the largest seller of services in the global marketplace
India/China in Indusrty Goods and Services Export
1)India made strides in goods production and trade. Its goods exports, for example, grew 11.4 percent a year from 1996 to 2006—strong but less than China’s 17.8 percent.
2)China made headway selling services on global markets, posting a healthy 13.6 percent export growth rate, compared with India’s 23.7 percent.
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