Financial Daily from THE HINDU group of publications
Saturday, Mar 05, 2005
Industry & Economy
India needs `radical reforms' to catch up with China: Economist
New Delhi , March 4
INDIA needs to raise its investments rates to over 30 per cent of GDP and undertake radical reforms in order to emulate China's growth story, according to a survey by The Economist.
"Despite both the countries making giant strides in reducing poverty since liberalising and reforming their economies, the tiger in front is China. Chinese reforms have gone much further than India's and have reaped bigger rewards," said Mr Simon Long, author of the `Survey on India and China'.
According to the survey, the Chinese economy is way ahead of India mainly because it began to tread the path of modernisation much earlier and ensured nation-wide education along with an efficient healthcare system.
China's rapid growth brought a sharp dip in its poverty level, the survey said, adding that the number of people living on less than one dollar fell by about 400 million between 1981 and 2001, while in India the number of poor fell by 69 million between 1977 and 2000.
Thirty-five per cent of Indians live on less than one dollar a day, compared to China's 17 per cent, the survey added.
While India's real GDP grew by an average of 5.6 per cent a year in the 80s and by 5.8 per cent a year from 1991 to 2003, Chinese growth was comparably faster, from a higher starting point of 9.3 per cent in the 80s to an average of 9.7 per cent between 1991 to 2003, Mr Long said.
He added that China's GDP grew by an average of 8.5 per cent between 1990 to 2003 compared to India's four per cent during the same period.
"As a result, China's national income per head in 2003 stood at $1,100, compared to only $530 in India."
After adjusting for purchasing power, China has grown 70 per cent richer than India, he added.
The survey, to be published in the March 5 edition of The Economist, also said that China is way ahead of India in attracting FDI.
According to Mr Long, last year alone China attracted $60 billion in foreign investment, about 12 times more than the investments that came into India.
Between 1979 and 2004, the Chinese economy absorbed a total of $560 billion in FDI, he added.
The survey said that India's IT prowess and the outsourcing boom is largely irrelevant to its masses as the entire IT industry employs only a million people.
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