India and China are two world giants that have made an incredible breakthrough during the last 50 years. During the Cold War, these countries were considered the poorest and had low potential in terms of economic and scientific development (Matsumura, 2007). However, currently, the situation has changed, as China has become the largest world manufacturer while India has become the world’s second labor force (Sen, 2013). The comparative analysis of these countries shows that they were developing in different ways but, in the end, both states succeeded.
First, it is necessary to begin with the countries’ political systems that have the biggest impact on the economy’s development. India is a multi-party democracy state while China is a one-party authoritarian country. The political line of the countries has predetermined their further orientation. As a result, the democratic-oriented India created the positive conditions for the foreign investments in its economy. In China, the situation was different. In particular, private business was suppressed and farmlands were privatized, which led to the centralization of the Chinese economy. Nevertheless, the foreign investment and small-scale entrepreneurs were supported. In both cases, it gave a necessary impulse for the economic growth. However, in the case of India, it was the foreign investments while in China it was the centralization of the domestic economy (Ghosh, 2009).
Being more oriented on the foreign investment, India has started losing its status of the isolated country while China, in contrast, became even more isolated. Hence, India had to meet the demands of the foreign market while China needed to satisfy own needs. The overseas market required new software, design, services, and precision industry. Mass manufacturing, electronics, and heavy industrial plants introduced the domestic demands of China. In both cases, it led to the increase in GDP, but in India it was mostly services while in China GDP was much impacted by industries and services.
India’s employees are demanded worldwide because they are characterized as qualified and hardworking. They usually work as engineers, designers, and soft developers. Unlike India, China cannot introduce high quality of its products but it always produces them in big quantity and at incredibly low prices. Hence, talking about the Chinese manufacturing, one first mentions quantity but not quality while in India quality is the priority.
Despite the fact that China produces fewer quality products, its GDP increases while India’s GDP becomes lower compared to the growth in the previous years. In 2010, India’s GDP increased by 11.2% while, in 2012, it increased only by 6.5%. In China, the GDP growth also decreased but only by 2.5% during the period of 2010-2012 (Ghosh, 2009).
The further economic prosperity of India is doubtful if it does not make any changes. Democracy had a positive impact on India in the past, but it may have the destructive influence in the future. India introduces low employment opportunities while Indian professionals are much demanded all over the world (Matsumura, 2007). As a result, the young employees cannot find a good job at home and leave their country searching for a place where their knowledge and skills are required (Dahlman, 2012). India is too much oriented on foreign investment and services. Consequently, domestic industry is developed worse than in China. Taking into consideration this fact, one can say that democracy will probably not give an advantage because India will lose its best human resources. On the other hand, the demographic situation in India indicates that there will be incredible population growth in India during the next 40 years. The absence of one-child policy will not slow down the demographic growth and soon the number of Indian employees will overcome the Chinese, making India a leader in the working-age population. Therefore, it can be said that demographics will give a certain advantage to India because there are no limitations as one may face in China (Coy, 2011). Moreover, the developing countries like India always show better demographic growth than the rich ones like Germany or the United States. Still, the democracy will not be an advantage for India and, compared to China, it will have more negative than positive effects. The isolation of Chinese people from the rest of the world and the absence of free internet connection give the Chinese government a certain advantage in managing its human resources (National Research Council, 2010). Less freedom of actions, in this case, means prevention of the best labor loss abroad.
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As a conclusion, it can be said that both India and China demonstrated that economic growth depends not on the political line of the country or the economic situation but on the government’s ability in managing its labor. Despite the fact that both countries show the paramagnet economic growth and the economists predict the further prosperity, there are some challenges that India and China experience today. In both cases, the difficulties are connected with the economic direction that the countries chose in the past. For instance, India has a well-developed service sector while China is more oriented on manufacturing. As a result, China has high domestic savings and low domestic demands. At the same time, in India, the situation is opposite because manufacturing is worse developed than service in India. If India and China create the trade coalition in the near future, it will help them to solve their major problems and control more than 65 percent of the world trade. Such coalition will mean that India and China will have enough influence to affect major world economic bodies and dictate own conditions for economic development in the world.