After the dawn of the Second World War, the national economies of China and India stood at broadly similar levels. In 1950, the Gross National Product (GNP) of India was 49.5 percent higher compared to that of China. It has managed to achieve per capita GNP that was 2.3 times higher compared to its Chinese rival (Bosworth & Collins, 2008). The Chinese per capita gross domestic product stood at 43.5 percent in comparison with that of China. However, in the 1970s, this trend shifted in favor of China as it implemented reform policies that enabled the economy to achieve the significant growth it continues to highlight in the modern era. India has similarly attempted to formulate measures for boosting its economic growth (Bosworth & Collins, 2008). However, it has mostly lagged behind China. In the modern era, both nations highlight a similar potential for growth despite China’s rapid rise as an economic power. This phenomenon is explainable through the economic strategies and political predispositions adopted by both countries to facilitate economic growth.
Earlier Post Second World War Economic Strategies
Between 1947 and 1949 as well as 1978 and 1980, both nations highlighted the emphasis on the production of goods such as cement, machinery, and steel. They based this priority on the notion that these products were essential to their economic growth initiatives. At the time, India objectified supplementing its excellent textile sector with these products (Bosworth & Collins, 2008). However, in the process, it notably stifled the world-class textile sector as it pursued a largely employment-oriented growth strategy. Adherence to this strategy implied favoring small-scale low technology companies over industrialized companies (Bosworth & Collins, 2008). As a result, it diverted its resources from the production of machine-based consumer goods to investment-heavy goods production especially in the industrial sector as well as small-scale consumer products. However, these measures did not result in significantly raising its savings rate, which implied that its growth rate remained mostly modest.
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Similarly, China concentrated its economic growth efforts on the production of essential goods, especially during the initial stages. However, during the first three years, it adopted a comprehensive strategy towards the development of heavy and light industries (Bosworth & Collins, 2008). Aside from the aberration of small-scale steel industries during the famous Great Leap Forward phase, the economy was not stifled by a small-scale industrial strategy. However, at the time, noting that China had a significantly more successful resource mobilization approach compared to India is highly essential (Bosworth & Collins, 2008). In its second Five year plan for the period covering 1956 and 1961, India experienced several resource constraints in 1958 (Bosworth & Collins, 2008). On the other hand, China was experiencing the drawbacks of overweening ambition especially in the launch of the Great Leap Forward. The Chinese economy experienced a slowdown in between 1960 and 1965 (Bosworth & Collins, 2008). In India, this slowdown in economic growth during the second half of the 1960s, shortly following the end of the third five-year plan in 1966.
Both countries exhibited the focus on employing agrarian reform as one of the strategies for achieving and cementing economic growth. However, the management of these reform measures differed significantly. In particular, China managed to outrank India in the management of these reforms by transforming both the tenurial agriculture regulations and production conditions (Holcomb, 2018). It abolished landlords and encouraged the formation of cooperative unions and communes, which enabled some beneficial changes in the distribution of surplus and size. India concentrated its efforts on altering tenurial relations through the elimination of intermediaries and the zamindari, which facilitated the distribution of surplus (Holcomb, 2018). The reform measures were different in alignment with the differences on a regional level. However, India’s efforts to enforce changes in land pooling, production conditions, technology use, and the deployment of labor resources. As a result, the nation experienced in the 1960s with the advent of the Green Revolution, which was notable for a combination of domestic subsidies, rural private initiatives, and foreign knowledge, as well as the establishment of the capitalist revolution in the countryside (Holcomb, 2018). Despite this trend, China managed to maintain a healthy lead in agricultural productivity. Additionally, it built on this lead in the run-up to the second phase that triggered its superior economic growth in the modern era.
Under the leadership and influence of Deng, China accelerated its economic growth as India lagged considerably far behind. During the next twenty-five years, it nearly tripled its per capita income. On the contrary, that of India merely doubled. It managed to capitalize on the prevailing economic conditions and achieved two times the growth rate of India (Holcomb, 2018). China attained this objective paradoxically through the relinquishing of the old communist approaches and the adoption of capitalist methods. Additionally, it adhered an approach that was just as available for India. It advocated for the greater importation of foreign capital; an approach that Indian capitalists somehow ignored (Holcomb, 2018). On the contrary, India restricted its considerably large native capitalist following the achievement of independence. Meanwhile, China formulated an examination structure for examining the selection of bureaucrats as India sought guidance for conducting examinations for civil servants. By 1998 China, had received a considerable level of foreign capital to the extent of reaching $183 in FDI per capita. Ironically, India’s FDI per capita stood at merely $14 (Holcomb, 2018). A significant level of China’s FDI came from the diaspora. However, the trend highlights India’s inability to attract investment capital from its diaspora despite numerous attempts. The past five years have been favorable for India concerning this trend.
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Nevertheless, the process is still in its initial phases. China’s savings rate, which is nearing the 40 and currently stands twice that of India. The combination of this savings rate and the influx of FDI has not necessarily resulted in significantly separating it from India. India averaged between 5.5% in the 1980s and about 6.5% in the 1990s (Holcomb, 2018). Even at this rate, the growth rate attained by China points to the inefficient employment of capital. Alternatively, it could highlight the significantly declining returns to capital. However, this perspective is highly doubtful due to the significant embodiment of FDI with the latest knowledge.
Current projections indicate that these two nations have a mostly similar potential for attaining economic prosperity. The basis for these projections is their large populations, which translates into immense human resources along with the conduciveness of the modern policies adopted for achieving economic growth in the past few decades (Holcomb, 2018). Notably, China commenced its economic liberalization efforts earlier in comparison with India. However, the latter nation has managed to catch up with this rival in a relatively short period. In this context, the projections placing these two nations in the forefront of a post-American economic world have some validity. During the six decades that followed the end of the Second World War, the United States exerted dominance in the global political and economic realms to the point of becoming an international superpower (Holcomb, 2018). However, by the time globalization was emerging, these two nations had managed to formulate economic policies that made them havens for cheap labor and industrialization. As a result, their economies currently double that of the United States with which they are close to achieving economic parity.
Despite being at the same economic level at the end of the Second World War, China and India formulated policies that determined the trajectories their economies took. While some of these policies were similar, their management differed, the secure management of agrarian reforms, support for industrialization, and harnessing of FDI inflows allowed China to overtake India on its way to achieving economic growth and dominance that continues to astound many in the modern world. On the contrary, India’s weak management of agrarian reforms, failure to capitalize on FDI inflows, lack of emphasis on the adoption of capitalistic measures ensured that it lagged behind China for periods after the end of the Second World War. Nevertheless, the adjustment of economic policies to favor the modern trend of economic globalization has allowed both economies an opportunity to establish dominance in the global economy. Against the backdrop of the United States’ hegemony in the global economic realm, these two nations appear poised to overcome their weaknesses and become dominant forces on the international economic scene. Witnessing their transition to dominance will be particularly interesting in the modern era of globalization.
- Bosworth, B., & Collins, S. M. (2008). Accounting for growth: comparing China and India. Journal of Economic Perspectives, 22(1), 45-66.
- Holcomb, A. (2018). Foreign Direct Investment and Regulatory Uncertainty: Failures of the “Make in India” Campaign. Retrieved from http://www.alexjholcomb.com/wp-content/uploads/2018/02/Make_in_India_report.pdf
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