Comparative Analysis of India and China’s Growth as Asian Emerging Powers in International Trade
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Introduction
China and India are the two main economies on the globe that are developing at the highest rates. China and India are on a shared economic trajectory that is strikingly different from the slow rise of the Western economy (The World Bank 2022). In spite of the fact that private investment is stagnant or declining, China and India’s fast rising economies are characterized by huge growth in governmental investment (Baylis, 2020). Western countries, on the other hand, favor private engagement and do not expect major increases in government investment in the near future. As a result of their sheer size, both countries are economic behemoths, and if they continue to develop at the rates seen in recent years (decades in the case of China), it is clear that their transformation will have far-reaching consequences, not only for themselves, but also for the rest of the world. There have already been numerous market opportunities created as a result of the increased purchasing power and increased competitiveness of these mega-economies as producers of specific commodities, as well as a slew of new market opportunities created by their increased purchasing power and increased competitiveness as producers of specific commodities (Tellis & Mirski, 2013). This essay will compare and contrast India and China, in their rise to economic development, market strategies, government involvement, and other critical areas that have derailed or propelled the nations to the current dominance. To create goals and processes that anticipate change and allow for the exploration of new prospects while minimizing any abnormalities that may occur in subsectors unable to manage the difficulties, it is critical to analyze the anticipated effect of the changes.
China’s Economic Rise
Prior to the implementation of economic reforms and trade liberalization in China some 40 years ago, the country’s economy was underdeveloped, slow, heavily centralized, and inefficient. According to the World Bank (2021), China’s GDP has grown at an average annual rate of 9.5 percent since 1979, making it the major economy with the highest sustained growth since its openness to global trade and investment, as well as the implementation of free-market reforms, by 2018. As a result of China’s ability to double its GDP every eight years, The World Bank (2022) report that an estimated 800 million people have been lifted out of poverty in the country. China has eclipsed the United States as the world’s largest economy, manufacturer, seller of products, and holder of foreign exchange reserves, surpassing the United States in all categories (on a purchasing power parity basis) (Baylis, 2020). As a result, China has surpassed Japan in terms of importance as a commercial partner for the United States. In terms of goods trade, China is the most significant trading partner for the United States. It is the country’s largest source of imports and third-largest export market. China is also the largest foreign investor in US Treasury bonds, which helps to reduce the country’s debt while also keeping interest rates low in the long run.
China’s real GDP growth dipped to about 6 percent in 2019, and then expected to fall to 5 percent by 2025, according to Schindler Jepson, and Cui (2020). This is due to the country’s economy maturing, which reached 14 percent in 2008 (Hopewell, 2015). Recent years have seen economic development stall, and the Chinese leadership has come to terms with the fact that this is the “new normal.” It has, as a result, begun to shift toward a new growth model that is less dependent on fixed investment and exports than it is on private consumption, household spending, services, and innovation to drive economic expansion (Gani & Ahmad, 2020). Policy changes are needed in order to avoid getting further into the “middle-income trap,” defined by Glawe and Wagner (2020) as the point where a nation’s economic and industrial growth starts to decline significantly due to the government’s inability to accept new opportunities for growth, such as science and technology innovations and advancements, and globalization.
Chinese authorities have launched high-profile initiatives, including the Made in China 2025 campaign, to ensure that the nation’s manufacturing sector and the industrial economy are improved and overhauled in a way that positions the nation as a significant international player in a number of distinct industries. Made in China 2025 is one of these projects that are spearheading a new era in economic growth in China, led by a focus on private spending, household consumption, and science and technological innovations. As a consequence of these industrial endeavors, Li and Pogodin (2019) note that an increasing number of individuals are already becoming alarmed about China’s intentions to reduce its dependency on external technologies (including by barring foreign enterprises from operating in China) and ultimately conquer international markets.
India’s Economic Rise
The country of India is expected to rise to become one of the world’s top three economic powers over the next decade. The world Bank (2022) places India’s economy to increase by approximately 8% in the 2023 fiscal year, unmoved from last year’s predictions because the recovery from COVID-19 effects and related issues are yet to attain broad-based status (World Bank, 2022). This exponential growth is owed to India’s strength as a democratic nation and worldwide alliances, which have propelled it to become the world’s fastest-growing major economy since independence. According to projections by May, Nölke, and Brink (2019) in response to the better economic situation, investment has grown across the board in a wide range of economic sectors. With the introduction of the production-linked incentive plan, a plethora of new opportunities for private investment will be opened up as a result of an increase in government expenditure. The most effective way to improve the Indian economy is for the government to offer constant, proactive, graded, and calibrated assistance to the people.
In response to several government initiatives, such as Digital India (a science and technology innovative countrywide policy) and Make in India (a focus on manufacturing to keep up with competitors such as China), the number of multinational firms establishing operations in India have increased tremendously (Borah, 2021). The Make in India programme was created by the government in order to enhance the country’s manufacturing industry and the buying power of the average Indian. Investors will see an increase in demand and growth as a result of the Make in India initiative in the long run. The Indian government intends to expand the manufacturing sector’s proportion of GDP from 18 percent to 29 percent by 2022 as a result of the Make in India and the Digital India innovative projects (Borah, 2021), which are now under state-sponsored implementation (Tyagi, 2019). The Digital India plan, developed by the government, includes three components: the development of digital infrastructure, the provision of services through digital channels, and the promotion of digital literacy among the general public. The Indian consumer economy is forecasted by the World Bank (2022) to surpass the United States in size by 2025, owing to the government efforts to increase private consumption and manufacturing and reduce the dependence on foreign investment.
Differences Between China and India’s Economic and Political Models Towards Growth
In recent years, there has been no doubt that the global power balance has moved to the east, with the U.S. being the most significant beneficiary of this transformation. There can never be enough emphasis placed on the fact that India and China’s fast economic and political expansions have had a significant impact on the modern world in the fields of politics, economics, demographics, and sociological developments. In recent years, the two countries have restored a degree of world domination that was not witnessed since the mid-19th century, thanks to their massive populations and abundant natural resources (Sen, 2021). The fast economic successes in which both India and China have had in recent times, China since the political and economic changes of 1978 and India since its changeover in the early 1990s, have contributed to Asia’s precipitous rise to unparalleled heights of wealth and prosperity. Even if a majority of scholars and academicians are interested in the parallels and variances between India and China, what is more essential is the distinction between the two nations and the disparities that exist between them. The most important point to remember is that the political economies of the two nations are radically different from each other. While China is a single-party autocratic state, India has the world’s largest democratic parliamentary system, with a population of 1.2 billion people (Sen, 2021). As seen in the case of India, state-owned companies have been decreased, whereas state-owned corporations have been developed in China as a result of changes that mirror a pseudo-free-market centrally planned economy (Sattar et al., 2018). The capitalist West has been courted by India, while China has attempted to disrupt this wooing by courting the communist East of the world. Understanding how China and India have achieved such enormous achievement at the same time while maintaining their different cultures will give essential insights into the entire process.
Source: (Wang, Su, & Li, 2018)
When it comes to the Chinese marketplace, the government maintains a strong and visible presence. Despite the fact that they no longer control a large portion of the economy, China’s state-owned businesses continue to wield great power. Specifically, the Communist Party has indeed been assigned a position within private enterprises, and an unprecedented number of independent corporations have changed their corporate entities in recent years to reflect this new role. The Chinese government has, in reality, retained a substantial element of its centrally planned economy. Crane et al. (2018) assert that China pursues a purely communist growth model, but it wraps it up inside a capitalist guise in order to disguise the degree to which the government gets involved in the economy. While the country has taken advantage of market dynamics whenever it was favorable, it has also decided to disregard them when it was not. At the price of a high degree of political volatility, China’s visibly hybrid system has delivered significant economic successes.
Undoubtedly, India’s growth and ultimate rise to global status have been by far more gradual, but it has still been significant, in comparison to China’s pace and status. Since the country gained its independence, India’s status as a functional parliamentary democracy has remained unaffected by the passage of time. During the 1990s, India’s economy grew to become the third biggest in the world, overtaking both the United States and the United Kingdom (Prime, Subrahmanyam, & Lin, 2012). This was done by more typical economic developments in the Western world. Since 1991, there have been hints of improvement in the Indian economy. Following the reforms, India’s real GDP per capita expanded by 3.5 times, and the country overtook the United States to become the world’s third largest economy in terms of purchasing power parity, surpassing the United Kingdom (Prime, Subrahmanyam, & Lin, 2012). India has grown closer to the exact forces that it formerly reviled, and it will continue to do so in the future. Between 1950 and 1960, India was an original member of the Non-Aligned Movement, which was critical in putting together a coalition of governments that were opposed to both American and Soviet control (Shahbaz, Bhattacharya, & Mahalik, 2018). In spite of the fact that India has accepted core capitalist economic principles since 1991, it has done so in a variety of ways, including by opening its markets to international trade while simultaneously pursuing deregulation and privatization measures. Recently, India has grown closer to the United States, as Indian leaders are concerned that a stronger China may become more forceful in the region (Gani & Ahmad, 2020). As a result of its current demographic makeup, the country is virtually undoubtedly poised to continue its upward trajectory into the next century. Indians are younger than their Chinese counterparts, and the rate of private savings in the country is growing. One of the issues is the over-reliance on capital-intensive manufacturing, which is trailing behind labor-intensive industry in terms of productivity.
Conclusion
The economies of China and India have expanded at a very high rate in the recent past. While the two were early adopters of communist economic principles, they have mostly adopted different policies and political and economic models. China’s government uses a centrally planned economy while incorporating elements of capitalism, when possible, whereas India favors a more classic free-market structure. Both states have diametrically opposed economic and political frameworks, as well as diametrically opposed international objectives. The impact of their rise to superpower status on the rest of the globe is still unknown. India’s and China’s ascent will undoubtedly be one of the most important milestones in the planet’s economics and politics landscape.
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