CBSE Class 11 Economics Comparative Development Experiences Notes Set 02

DEVELOPMENT EXPERIENCE OF INDIA, PAKISTAN AND CHINA—A COMPARATIVE STUDY

• Strategy of Growth of India, Pakistan and China
• Comparative Performance of the Economies of India, Pakistan and China in terms of:
  • GDP growth,
  • Structure of growth,
  • Demographic profile, and
  • Human Development
• Common Success Story of India and Pakistan
• China's Edge Over India

I. STRATEGY OF GROWTH OF INDIA, PAKISTAN AND CHINA

After independence (1947), India and Pakistan adopted almost a similar strategy of growth. The principal features of this strategy are as under:

• It was a mixed-economy model of growth.
• The strategy of growth underlined the significance of both private and public sectors.
• Public sector was assigned the key role of 'kick-starting' the process of growth.
• Private sector was assigned the secondary role of pushing the process of growth.

Question. Why was the public sector assigned the key role?
Answer: This was because:
(i) Partition of the country (into India and Pakistan) had rendered both the economies as laggard economies (slow growing or backward economies).
(ii) Both the economies needed a big push of investment. Only the government could afford it. Hence, the greater reliance on the public sector.

China, on the other hand, adopted a more rigorous model of growth. Established as People’s Republic of China in 1949, it decided to bring all critical areas of production activity under government control. National resources (included all land) were declared a government monopoly.

Thus, China adopted 'Statism' as a model of growth in which:

• Ownership of all resources vested with the state, and
• The state was to decide what to produce, how to produce and for whom to produce.

The common element in the strategies of growth adopted by China, India and Pakistan are as under:

• All the countries relied on public sector as the core sector of the economy.
• Also, all the three economies relied basically on 'inward-looking' strategy of growth. It focussed on protection of the domestic industry, insulating it from foreign competition.

However, while Chinese economy was like a closed economy, the economies of India and Pakistan had very limited integration with the other global economies. FDI (foreign direct investment) was considered as a bane rather than a boon in the process of growth.

In China, all the national resources were under the control and command of the government. In India and Pakistan, on the other hand, private ownership of resources was allowed. Which is why the strategy/model of growth adopted by China is termed as 'statism' (complete ownership of resources by the state), while the strategy/model of growth adopted by India and Pakistan is called the 'mixed economy growth model'.

Over time, the strategy of growth has undergone a significant change in India and Pakistan as indicated by the following observations:

• The government in both the economies are now relying on a model of growth which continues to be mixed economy model. But it is the one which assigns greater importance to the private sector rather than the public sector, and
• Now, the model of growth is the one which assigns greater importance to FDI rather than the domestic investment.

In China, on the other hand, the core element of the growth model has not changed. It continues to be a state-managed economy. However, a substantial transformation has occurred in China in terms of the integration of the economy with the rest of the world. The Chinese economy has shown a significant transformation from a closed economy to an open economy. It now largely depends on external demand: it is an export-oriented economy. FDI is now accorded a high priority in the context of economic growth.

It is owing to the change in the strategy of growth, that all the three economies (India, China and Pakistan) have succeeded in achieving a breakthrough in their growth-path. Thus:

• GDP growth has taken a substantial jump in the economies of India, Pakistan and China.
• The structure of growth has recorded a significant transformation, and
• The demographic profile is being re-written, and human development index has broken its stagnation.

However, it needs to be noted that the performance of these three economies with respect to the various indicators of growth has been different. China has established a substantial lead over India and Pakistan, particularly in the areas of GDP growth and the structural transformation.

2. COMPARATIVE PERFORMANCE OF THE ECONOMIES OF INDIA, CHINA AND PAKISTAN

Comparative performance of the economies of India, China, and Pakistan is studied with reference to the parameters of: (1) GDP Growth, (2) Structure of Growth, (3) Demographic Profile, and (4) Human Development.

(1) GDP Growth

Following discussion offers a brief description of the growth story of China, India and Pakistan.

Growth Story of China

The principal points explaining the growth story of China are as under:

• In 2019, GDP in China was estimated to be 14.2 trillion USD (US dollars). It achieved the distinction of 2nd largest economy in the world (next only to US).
• Between 1979-2017, average annual GDP growth was estimated to be about 9 per cent. GDP growth reached its peak of 15.2 per cent in 1984, and it touched the bottom of 3.8 per cent in 1990. In 2018, GDP growth rate was 6.6 per cent.
• China achieved a breakthrough in GDP growth in the early 1980’s. The jump has indeed been very substantial: from about 4 per cent per annum to nearly 10 per cent per annum. The breakthrough is attributed to the following factors:
  • (a) Shift from a centrally planned economy to a market economy.
  • (b) Focus on export-related domestic production.
  • (c) Influx of FDI.
  • (d) Availability of cheap labour force, giving China a comparative cost advantage.
  • (e) GLF (Great Leap Forward) campaign (launched in 1958).

Great Leap Forward (GLF)

• Great Leap Forward (GLF) was the campaign launched in China in 1958 to accomplish economic and industrial development at faster rate.
• It focussed on widespread industrialisation of the economy, encouraging people to set-up household industry in their backyard.

• Quantum jump in FDI was achieved through the following steps:
  • (a) China established SEZ (Special Economic Zones). These zones offered all basic amenities to the investors. Accordingly, China became a lucrative destination for FDI.
  • (b) Hundred per cent equity investment permit for the foreign investors and free flow of FDI in the retail sector were the typical inducement parameters for the global investors.
• A jump in GDP growth was achieved not only through FDI, but also through domestic investment. As noted above, domestic investment was induced through GLF campaign. It was a campaign to generate awareness among the people that they can play a significant role in the process of GDP growth by establishing industrial units, even in their courtyards. There were no checks and no restrictions. The campaign was so motivating that it almost generated a momentum for economic growth.
• Relying basically on external demand, China achieved a record growth in exports and by 2010 it emerged as the largest exporter in the global market.

However, in the recent past (2014-15, 2015-16, 2016-17 and 2017-18), GDP growth in China has slowed down. Some notable reasons in this regard are as under:

(a) Slowdown in the global economies (European economies in particular) has lowered the demand for the Chinese products.

(b) Growth of domestic demand in China is slowing down. This is because of the rising propensity to save in the Chinese economy. (Propensity to save refers to the ratio between saving and GDP.)

(c) Corruption and economic crimes have tended to rise over time.

(d) Chinese people are now exploring higher wage opportunities of employment. It is leading to massive migration of the skilled labour to rest of the world. Domestic investors are also exploring opportunities of investment in economies where government intervention is minimum and political as well as social liberty is maximum.

(e) Chinese Government is battling with the problem of environmental degradation. High GDP growth has led to a serious challenge of sustainable development.

Growth Story of India

Growth story of India is explained in terms of the following observations:

(i) In 2019, GDP of India was estimated to be 2.972 trillion USD (US dollars). Between the years 1951-2019, Indian economy achieved an average annual growth rate of about 6 per cent.

(ii) The GDP growth in India showed a substantial rise only after 1991, the year when New Economic Policy was launched. Between the period 1991-2019, GDP growth rate was recorded to be 6 per cent per annum. New Economic Policy that led to a significant rise in GDP, was driven by the following elements of change:

(a) A significant shift towards privatisation (selling off government equity in public enterprises to the private entrepreneurs).

(b) A big leap/jump towards liberalisation (doing away with controls and quotas).

(c) A big push to export-promotion in place of import substitution.

(d) Greater reliance on FDI rather than the domestic investment.

(iii) Deeper integration of the domestic economy with the global economies through the market forces of supply and demand. However, since 2014, GDP growth has lost its momentum. Opportunities of employment have tended to shrink. Growth without employment is becoming an emerging challenge of the Indian economy.

Growth Story of Pakistan

Following observations highlight the growth story of Pakistan:

(i) In 2019, GDP of Pakistan was estimated to be 274.05 billion USD (US dollars). Pakistan economy recorded an average annual growth rate of 4.2 per cent between the period 1960-2019.

(ii) Pakistan achieved a breakthrough in GDP growth in the mid 80's. It was as a consequence of economic reforms, focusing on FDI and greater participation of the private sector in the process of growth.

(iii) Economic reforms in Pakistan were almost similar to those in India. But, from the beginning of 2008, economic outlook in Pakistan turned to be disappointing. It is attributed to several factors, as these:

(a) Pakistan has been gripped by the war of terror. It has eroded business confidence of the domestic as well foreign investors. Domestic investment as well as FDI has started shrinking. Accordingly, GDP growth has been severely hit.

(b) Corruption and political instability are the other factors, significantly contributing to economic stagnation of the economy of Pakistan.

(iv) The average annual growth rate of GDP has slumped to 3.75 per cent between the period 2008-2016. In 2017, economy of Pakistan grew at the rate of 5.3 per cent. In 2019, it further slumped to 3.3 per cent.

(v) Owing to slow GDP growth, and consequently the low level of income, Pakistan economy has almost sunk into a 'low income-low growth' trap.

Conclusion

Following points sum up the relative growth story of India, China and Pakistan:

(i) China has outpaced both India and Pakistan with regard to GDP growth.

(ii) India has performed better than Pakistan. But compared with China, India is way behind.

(iii) The relative success of China is credited to political stability in China. Besides (unlike India and Pakistan), China has shown a strong political will to use the national resources in the best interest of the nation.

The success of China (in terms of GDP growth) is an eye-opener for most of the developing nations of the world. China has proved that the most relevant factor in the context of GDP growth is not the availability of resources but good governance by the state and 'good compliance' by the citizens.

(2) Structure of Growth (Sectoral Share in Output and Employment)

We know that the growth process causes a shift in sectoral share in output and employment. As the process of growth and development gathers momentum, percentage share of primary sector in output and employment tends to decrease while that of secondary and tertiary sectors tends to increase. Table 1 sums up the experiences of India, Pakistan and China in this respect. The table is based on the data-set for the year 2016 or close to it.

Table 1. Structure of Growth (Sectoral Share in Output and Employment)—India, Pakistan and China

• Per Cent Share in GDP:
  • India: Primary 15.4, Secondary 23.1, Tertiary 61.5
  • Pakistan: Primary 24.4, Secondary 19.1, Tertiary 56.5
  • China: Primary 7.9, Secondary 40.5, Tertiary 51.6
• Per Cent Share in Employment:
  • India: Primary 47, Secondary 22, Tertiary 31
  • Pakistan: Primary 42.3, Secondary 22.6, Tertiary 35.1
  • China: Primary 27.7, Secondary 28.8, Tertiary 43.5

[Source: CIA World Factbook, 2018]

Note: This table is to be interpreted in the light of the fact that all the three countries were predominantly agricultural economies. Primary sector in these economies engaged nearly 75% of the workforce and contributed nearly 50% to the country's GDP in 1950.

Table 1 offers following observations:

• All the three countries have experienced a noticeable structural transformation. No longer primary sector is the principal contributor to GDP.
• In terms of the sectoral contribution to GDP, economies of India and Pakistan are now relying more on tertiary sector, while the economy of China is relying more on secondary sector.
  • Experience of China, in this respect, is like the experience of most developed countries in the world.
  • Historical experience of the developed countries shows that in terms of the percentage share in GDP, it was first the secondary sector and later the tertiary sector which emerged as the leading sector of the economy.
  • Experience of India and Pakistan, however, shows a major shift directly from primary to the tertiary sector. Implying that lesser emphasis has been given to industrial expansion in India and Pakistan, compared to China.
  • Expansion of services sector in India and Pakistan is owing to faster integration of these economies with the global economies (under the economic and political impact of the developed nations).
• China has succeeded in placing greater reliance on industrial sector compared to India and Pakistan. It is owing to:
  • (i) GLF (the Great Leap Forward), a campaign launched in China in 1958 focusing on widespread industrialisation of the country, encouraging people to set-up household industries in their backyard, and
  • (ii) Policy of 'reforms and opening-up' launched in 1978 which gave a big push to China’s manufacturing exports.
• In terms of employment, the shift from primary to secondary and tertiary sectors has not been as significant in India as in China and Pakistan. India has virtually failed in this respect. People in India have stuck to primary activities, despite a substantial reduction in percentage contribution of this sector to GDP. Suggesting the fact that while there has been a substantial increase in output outside agriculture (tertiary sector in particular) there has not been a proportionate increase in employment opportunities. Outside agriculture, increase in output is to be explained more in terms of increase in productivity (caused by new technology) rather than increase in employment. This is like an economy slipping into a 'jobless growth process'.

(3) Demographic Profile

Table 2 presents some critical indicators of the demographic profile of India, Pakistan and China.

Table 2. Select Demographic Indicators, 2011

• India: Estimated Population (in million) 1210; Annual Growth of Population (2001-2011) 1.76; Density (per sq. km) 382; Sex Ratio (Number of women per thousand men) 940; Urbanisation 31.2
• China: Estimated Population (in million) 1339; Annual Growth of Population (2001-2011) 0.47; Density (per sq. km) 143; Sex Ratio (Number of women per thousand men) 950; Urbanisation 51.3
• Pakistan: Estimated Population (in million) 176.2; Annual Growth of Population (2001-2011) 1.8; Density (per sq. km) 225; Sex Ratio (Number of women per thousand men) 952; Urbanisation 37.2

[Source: Census 2011, HDR 2012 and World Bank]

Table 2 shows that:

(i) India and China together are a habitat for 38 per cent of the world's population.

India with a little more than 1.3 billion people is a habitat for nearly 18 per cent of the world's population.

China with nearly 1.38 billion people is a habitat for nearly 20 per cent of the world's population.

In comparison, Pakistan is a small country. Its population is just 1/10th of China or India.

Both for India and China, large size of population is a hindrance in the process of growth, as it requires a huge amount of 'maintenance investment'—investment which is directed towards the maintenance of existing standard of living of the people. High 'maintenance investment' implies low 'development investment'. Accordingly, pace of growth and development is impeded.

However, two demographic parameters are distinctly in favour of China: (a) moderate growth rate of population, and (b) low density of population.

One Child Policy

'One Child Policy' adopted by China in 1979 has been very successfully pursued. Consequently, growth rate of population which was nearly 1.33 per cent in 1979 has now been reduced to 0.47 per cent per annum. Containing its population growth rate, China can now focus on quality of life rather than sustenance of the people.

(ii) Growth rate of population continues to be fairly high in India (1.17 per cent—2017 estimate) and alarmingly high in Pakistan (1.43 per cent—2017 estimate). It is feared that at the existing rate of growth, population size in India may soon exceed that in China.

(iii) China has low density of population compared with India and Pakistan. It is because of a very large geographical area of China than India and Pakistan. It is estimated to be 143 persons per square kilometer in China compared to 382 and 225 persons (per square kilometer) in India and Pakistan, respectively. Other things remaining constant, lower density implies lesser stress on the country’s natural resources, raising its abilities for sustainable development.

(iv) Both China and Pakistan are showing brighter signs of urbanisation than India. Urbanisation is closely linked with structural transformation in the country. It is a consequence of a shift of working force from agriculture to industry and services. In India, 31.2 per cent of population is urbanised compared with 51.3 per cent in China and 37.2 per cent in Pakistan. Accordingly, both China and Pakistan have better succeeded than India in generating job opportunities outside agriculture.

(v) Sex ratio is found to be biased against females in all the three countries. It is estimated to be 943, 950 and 952 for India, China and Pakistan, respectively. Low sex ratio points to social backwardness. Female foeticide (owing to preference for a son) is the principal cause of low sex ratio.

(4) Human Development

Some important indicators of human development are as these:

(a) Life expectancy—higher the better.

(b) Adult literacy rate—higher the better.

(c) Percentage of population below poverty line—lower the better.

(d) Infant mortality rate—lower the better.

(e) Maternal mortality rate—lower the better.

(f) Percentage of population having access to improved water sources—higher the better.

(g) Percentage of undernourished population—lower the better.

(h) Percentage of population having access to improved sanitation—higher the better.

(i) GDP per capita (US $) adjusted for the differences in purchasing power of a dollar across different nations (called purchasing power parity)—higher the better.

Based on these indicators, a composite index is constructed, called HDI (Human Development Index). Higher value of HDI points to a higher rank and a higher level of growth and development for a country.

Important Note on Global Economic Groupings

• With a view to accelerating the pace of growth, different countries are forming regional and global economic groupings, based on common agreements of bilateral relations.
• Examples: SAARC, EU, ASEAN, G-8, G-20.

In the year 2018, HDI for China, India and Pakistan was estimated to be 0.758, 0.647 and 0.560 respectively. Higher HDI ranking of China is mainly due largely to GDP per capita. In the year 2018, its GDP per capita (2011 PPP US $) was estimated to be US $ 16,187, while it was merely US $ 6,829 for India and US $ 4,928 for Pakistan.

Besides higher GDP per capita, China has performed better (than India and Pakistan) in the area of nourishment. Percentage of undernourished population is 11 per cent in China, compared with 20 per cent both in India and Pakistan. China has also performed better with regard to infant mortality rate and maternal mortality rate. Infant mortality rate is as low as 8.0 per thousand in China compared with 32.0 per thousand in India and 61.2 per thousand in Pakistan. Maternal mortality rate is just 27 per lakh in China compared with 174 in India and 178 in Pakistan.

As regards access to improved sanitation, again China shows better performance: 76.5 per cent of its population has access to improved sanitation compared with 39.6 per cent in India and 63.5 per cent in Pakistan. In the provision of improved water sources, China has performed better than India and Pakistan. In China 95.5 per cent of population has access to improved sources of water, compared with 94.1 per cent in India and 91.4 per cent in Pakistan.

Liberty Indicators

• It may be argued that HDI rating of India is low compared with China, partly because HDI does not include parameters of liberties of life, viz., political liberty of participating in state administration, and social liberty of freedom of speech, and related human rights.
• If these indicators are also included in the construction of HDI, India's ranking is likely to improve, as these parameters are much better in India, compared with China and Pakistan.

3. COMMON SUCCESS STORY OF INDIA AND PAKISTAN

Following observations highlight the common success story of India and Pakistan:

(i) Both India and Pakistan have succeeded in more than doubling their per capita incomes. This is a remarkable achievement considering the fact that population has increased four-fold in Pakistan and three-fold in India.

(ii) The incidence of absolute poverty (equated with $1.25 per day) has been reduced significantly although the number below poverty line continues to be very large.

(iii) Food production has successfully kept pace with the rise in population. Leaving aside annual fluctuations due to weather conditions, both countries are self-sufficient in food (Pakistan exports its surplus rice but imports small volumes of wheat).

(iv) Food self-sufficiency has been accompanied with improved nutritional status. Daily caloric and protein intake per capita has risen by almost one-third. However, malnourishment among children is still very high.

(v) A well-developed modern sector (along with a backward traditional sector) has found global recognition in both the countries.

(vi) India and Pakistan have almost similar performance with regard to access to improved water resources. Initially, Pakistan had achieved better results as regards access to improved water resources. However, in the recent past, India has surpassed Pakistan: while in Pakistan, 91.4 per cent of population has access to improved water resources, in India it is 94.1 per cent [CIA World Factbook, 2019].

All these are key characteristics of a progressive economy.

Common Failures of India and Pakistan

Following observations highlight the common failures of India and Pakistan:

(i) The relatively inward-looking economic policies and high protection to domestic industry did not allow India and Pakistan to take timely advantage of globalisation.

(ii) The mind-set of the politicians and the bureaucrats has not shown a progressive change: Controls continue to be their preferred option rather than freedom of choice of the producers and consumers.

(iii) Private sector has thrived more on contacts, bribes, loans from public financial institutions. Tax evasion is a national hobby.

(iv) Fiscal management is grossly disappointing. Higher fiscal deficit averaging 7-8 per cent of GDP has persisted for fairly long periods of time. Owing to huge borrowing by the government, private capital formation has failed to trend up to the desired extent.

(v) Large proportion of tax revenue is spent to meet defence expenditures and internal debt servicing. It hampers the process of growth.

(vi) Deficient urban services (water, electricity and transport) are a big hurdle in their process of growth and development.

(vii) The politicians are yet to provide a sincere and strong leadership focusing on social welfare.

(viii) A wide lag between the formulation of policies on the one hand and their implementation on the other, is a serious hindrance in the process of growth.

Areas where India has an edge over Pakistan

Following points may be noted in this regard:

(i) In the area of skilled manpower and research and development institutions, India is better placed than Pakistan.

(ii) India has shown a remarkable breakthrough in the export of software and software-enabled services after economic reforms of 1991. Pakistan is far behind. According to World Bank estimates (2018), external trade-GDP ratio in case of India was 43 per cent as against 28 per cent in Pakistan.

(iii) Human capital formation (accompanied by market-friendly economic policies) in India has emerged as a much more significant determinant of growth than in Pakistan.

(iv) Indian scientists excel in the areas of defence technology, space research, electronics and avionics, genetics, telecommunications, etc. Pakistan is way-behind.

(v) The number of Ph.Ds produced by India in science and engineering every year (about 5,000) is higher than the entire stock of Ph.Ds in Pakistan.

(vi) India also has a better record of investment in education. The adult literacy rate, female literacy rate, gross enrolment ratio at all levels, and education index have trended up much faster in India than in Pakistan.

(vii) Owing to rapid decline in fertility rate, population growth in India has been slashed to 1.17 (2017 estimate) per cent, while in Pakistan it continues to be as high as 1.43 (2017 estimate) per cent per annum.

(viii) Issues of health facilities in general and infant mortality in particular are better addressed in India.

Areas where Pakistan has an edge over India

It is indicated through the following observations:

• (i) Starting from almost the same level as India, Pakistan has achieved better results with regards to migration of workforce from agriculture to industry, or migration of people from rural to urban areas.
• (ii) By reducing BPL population to 29.5 per cent (in 2013) of the total (contrasting with India's 21.9 per cent, in 2011), Pakistan's growth strategy has a better human face than that of India.
• (iii) Even when the rate of investment in Pakistan has been lower than in India, efficiency of investment (in terms of output per unit of capital) has been higher.

Poverty in India, China and Pakistan
India: 21.9%
China: 3.3%
Pakistan: 29.5%
[Source: CIA World Factbook, 2018]

Re-emergence of Poverty in Pakistan

• Starting with the process of planned development programmes after independence, Pakistan relied largely on the policy of 'protection' (protecting domestic industry from foreign competition), assigning central role to public sector enterprises.
• Like in India, Green Revolution in Pakistan brought about a structural transformation in the economy of Pakistan.
• Growth rate continued to remain low till Pakistan took to economic reforms in 1988, shifting its priorities from 'protection' to 'competition' and opening up the economy to the global investors.
• Economic reforms yielded spectacular results, and performance of the Pakistan economy was indeed convincing and (in many respects) way ahead of the performance of the Indian economy.
• But when everything was sailing smooth, Pakistan seems to have been slipping into poverty-mode once again.
• Thus, in the year 2011, while India and China recorded GDP growth rate of 8.4% and 9.5% respectively, in Pakistan it was merely 2.6% per annum.

Reasons:

Re-emergence of poverty in Pakistan is explained with reference to the following observations:

(i) Pakistan has failed to bring about stable institutional reforms in agriculture. Accordingly, performance of agricultural sector has remained volatile and highly vulnerable to climatic conditions. Good harvest depends largely on good monsoon.

(ii) For its foreign exchange requirements, Pakistan has relied largely on remittances from abroad, and (volatile) agricultural exports. A setback to these sources of foreign exchange has caused a corresponding setback to the process of growth.

(iii) Lack of political stability in Pakistan has caused huge public expenditure on law and order.

(iv) Pakistan is allocating huge funds to build a strong defence-system, even when it implies a huge cut in developmental expenditure.

Commune System

• Commune System of collectivised agriculture was implemented in 1950s as one solution to the problem.
• The structure of the commune was such that households were organised into teams then team formed bridges, and bridges formed the commune.
• Peasants pooled their land to create larger fields that could yield greater output and shared farm implements.

4. CHINA'S EDGE OVER INDIA

We may note the following observations in this regard:

(i) The Chinese reform process began more comprehensively during the 80s, when India was in the mid-stream of slow growth process.

(ii) Even when the reform process was actively pursued in the 90's, India focused more on GDP growth, in contrast to China's initiative of focusing on poverty alleviation. While rural poverty in China declined by 85 per cent during the period 1978 to 1989, in India it declined only by 50 per cent during this period.

(iii) Restructuring of the Chinese agriculture went a long way. It abolished commune system of farming (a system of collective cultivation). Instead, households were allotted land for individual cultivation, though ownership of land remained with the state. This brought about a radical transformation in agriculture. In India, agricultural reforms have been far less effective than in China.

(iv) Also, global exposure of the economy has been far more wider in China than in India. Thus:

• China allowed foreign investors 100 per cent equity investment.
• It allowed the foreign investors the freedom to 'hire and fire' the workers. It also offered them a lucrative infrastructure.
• By establishing SEZ, it offered lucrative infrastructural facilities to the foreign investors.
• China was liberal in allowing FDI in retail.

In all these respects, India remained far behind. As a matter of fact, India has been providing protection to the labour-intensive segments of the economy. It is owing to these factors that China has emerged as the 2nd largest economy in the world (in terms of its percentage share in the global GDP), while India is lagging way behind.

Power Points & Revision Window

• India, Pakistan and China relied on Planned Development Programmes as their basic strategy of growth and development. But whereas in India and Pakistan, 'mixed economy' served as the basic premise of the growth model, in China all critical areas of production were brought under 'state ownership' and 'command economy' served as the basic premise of the growth model.
• Economies of India, Pakistan and China did not show any noticeable breakthrough in their growth process till they opened up and integrated themselves with the global economy.
• Economic Reforms were initiated in China in the year 1978, in Pakistan in the year 1988 and in India in the year 1991.
• Exposure of the Economy to the Market Forces of supply and demand and integration of the economy with the global economy have been the central elements of economic reforms. Inward looking policy of self-sufficiency and protection of domestic industry from foreign competition has gradually been replaced by the policy of growth through competition. Reliance on FDI has been key parameter of growth strategy.
• In China, a shift from commune system of farming to individual farming (retaining the ownership of land with the state), household system of manufacturing, 100 per cent equity to FDI, along with FDI in retail, and SEZs (Special Economic Zones) have been the distinct instruments of economic reforms. Along with sincere and strong leadership of the nation, these reforms placed China's economy far ahead the economies of India and Pakistan. Achievements of economic reforms became all the more effective in China as it successfully enforced its 'one child norm' cutting the growth rate of its population to merely 0.47 per cent per annum.
• Comparison of India, Pakistan and China is attempted with reference to the following indicators of comparative development:
  • GDP Growth Rate: Prior to economic reforms, GDP growth rate was very low in all the three countries. After reforms, there was a breakthrough. But China surpassed both India and Pakistan in achieving GDP growth rate of nearly 10 per cent per annum and that too almost consistently. In case of India and Pakistan, GDP growth rate has yet to touch the double digit.
  • Structure of Growth: All the three countries showed a structural transformation, recorded a decline in percentage share of primary sector and rise in percentage share of secondary and tertiary sectors in the GDP. Also there has been a shift of workforce from primary to secondary and tertiary sectors. However, in case of China, the shift has been more to secondary sector, while in case of India and Pakistan the shift has been more to tertiary sector. A substantial growth of export-driven manufacturing sector in China has been the distinct factor.
  • Demographic Indicators: Growth rate of population has been cut to half in China, following strict enforcement of its policy of 'one child norm'. India and Pakistan are still wrestling with the problem of high growth rate of population, which is about 1.17 per cent (2017 estimate) in India and 1.43 per cent (2017 estimate) in Pakistan. However, the size of population is comparatively very small in Pakistan, just about 1/10th of China or India.
  • Despite large size of population density of population is low in China, thanks to its large geographical area.
  • Sex Ratio is found to be low in all the three countries pointing to social backwardness where people hold high preference for a son in the family.
• Indicators of Human Development: (i) Life expectancy, (ii) Adult literacy rate, (iii) Percentage of population below poverty line, (iv) Infant mortality rate, (v) Maternal mortality rate, (vi) Percentage of population having access to improved water sources, (vii) Percentage of population which is undernourished, (viii) Percentage of population having access to improved sanitation, (ix) GDP per capita.
• In most areas of human development, China has performed better than India and Pakistan. China's HDI rank in the world is 85, contrasting with 129 and 152 for India and Pakistan, respectively. However, India may attain a higher ranking if some liberty parameters are included in HDI.
• Common Success Story of India and Pakistan: (i) A substantial rise in GDP per capita, (ii) Self-sufficiency in food production, (iii) Dualistic nature of the economy is gradually declining, (iv) Considerable reduction in the incidence of poverty.
• Common Failures of India and Pakistan: (i) Relatively slow pace of GDP growth, compared with China, (ii) Poor performance in HDI ranking, (iii) Dismal fiscal management, (iv) Political survival a dominating issue rather than good governance.
• Areas where India has an Edge over Pakistan: (i) Skilled manpower, (ii) Investment in education, (iii) Health facilities.
• Areas where Pakistan has an Edge over India: (i) Urbanisation, (ii) Less percentage of population below poverty line (in 2013), (iii) Percentage of population having access to improved water sources.
• Areas where China has an Edge over India: (i) China has successfully focused on pro-poor reforms, (ii) Agrarian reforms have been effectively carried out, (iii) Export-driven manufacturing has significantly grown, adding to the pace of GDP growth, (iv) SEZ policy has proved to be a boon for FDI flow in China.