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Emerging markets

Allied rivals

by Praveen Jha

In brief

India’s Prime Minister Narendra Modi with China’s President Xi Jinping in Wuhan last year

India’s Prime Minister Narendra Modi with China’s President Xi Jinping in Wuhan last year

The governments of India and China both like to cooperate on confronting the established economic powers in international settings. At the same time, they are rivals in geo-strategic terms. Due to its superior economic performance, China clearly has an edge. Comparing the two countries’ performance is instructive.

While China has managed to increase the export of manufactured goods dramatically, India’s track record in this field is rather modest. China is now considered to be the factory of the world, and Indian attempts to follow suit have so far not delivered convincing results (see Aditi Roy Ghatak in Focus section of D+C/E+Z e-Paper 2016/09).

According to the World Bank’s WITS database, for example, China’s exports of capital goods were worth 26 times more than India’s in 2015. As for machinery and electrical goods, China’s export volume was 41 times larger. Moreover, 25 % of Chinese exports were high-tech in 2016, while the Indian figure was a mere seven percent. Clearly, India has to do a lot of catching up.

India has had a major problem of significant trade and current account deficits for much of the recent period, which again is in sharp contrast with China’s consistent positive and large trade balances. In fact vis-à-vis China alone India’s trade deficit has ballooned considerably over the last two decades and currently it is well over $ 50 billion. India’s prowess in IT-services is useful, but does not plug the gaps. Unlike China’s vast manu­­facturing industries, more­over, it does not generate mass employment. (pj)

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