China & India: A Comparison of Economic Growth Dynamics (1980-2018)

Abstract

The comparison of China’s and India’s economic trajectories over the last 40 years reveals the massive potential of targeted policies for economic development (in general) and economic growth (in particular). In the early 1980s India and China had a roughly similar GDP and up until 1990 India had a higher GDP per capita. Fast-forward to 2018 and … India’s economy is 5 times smaller than China’s and GDP per capita is $2010 in India vs. $9771 in China. Accordingly, nowadays most of the major economic development indicators are in China’s favor – for instance, in 2017 the value of China’s exports of high-technology products was 43 times higher than India’s.

The relevant question here seems to be ‘how did China manage to outgrow India economically by such a margin in the span of four decades?’ This paper attempts to answer it by:

1. Examining the economic reforms that China and India underwent in the late 1970s, the 1980s and the 1990s.

2. Comparing key macroeconomic indicators: GDP (incl. GDP per capita), exports and imports, net FDI inflows, and domestic credit to private sector.

3. Comparing human capital indicators, infrastructure quality, and the innovation ecosystems of India and China.

Keywords: Economic growth, Economic development, Economic policy, Economic reforms, Comparative economics

JEL Classification: E22, E61, E65, F43, H54, H63, O11