1 CESifo Economic Studies Conference on Understanding the Chinese Economy 10 – 11 June 2005 CESifo Conference Centre, Munich India China: Diverging to Converge Surjit S. Bhalla
1 CESifo Economic Studies Conference on Understanding the Chinese Economy 10 – 11 June 2005 CESifo Conference Centre, Munich India China: Diverging to.
Jan 16, 2016
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1
CESifo Economic Studies
Conference on Understanding
the Chinese Economy
10 – 11 June 2005
CESifo Conference Centre, Munich
India China: Diverging to Converge
Surjit S. Bhalla
2
India - China: Diverging to Converge
CESifo Economic Studies Conference on Understanding the Chinese Economy: ifo Institute, Munich, Germany
June 10-11, 2005
Surjit S. Bhalla*
*O[x]us Research & Investments, New DelhiEmail: [email protected]
3
India - China: Diverging to Converge
CESifo Economic Studies Conference on Understanding the Chinese Economy: ifo Institute, Munich, Germany
June 10-11, 2005
Surjit S. Bhalla*
*O[x]us Research & Investments, New DelhiEmail: [email protected]
4
India - China: Diverging to Converge
CESifo Economic Studies Conference on Understanding the Chinese Economy: ifo Institute, Munich, Germany
June 10-11, 2005
Surjit S. Bhalla*
*O[x]us Research & Investments, New DelhiEmail: [email protected]
5
Objectives
• Compare China and India performance on a variety of indicators – past, present, and future
6
Growth Performance…India, China
China
India
-50
51
0G
row
th R
ate
,%
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02GDP Growth
7
Growth and Undervaluation
20
40
60
80
100
Und
erv
alu
atio
n
-50
51
0G
DP
- G
row
th
1950 1960 1970 1980 1990 2000year...
GDP - India GDP - ChinaUV - India UV - China
GDP Growth and Undervaluation
8
TFPG…India, China
China
India
-4.0
-2.0
0.0
2.0
4.0
6.0
Gro
wth
Ra
te,%
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Productivity Growth
9
Investment/GDP…India, China
China
India
15
20
25
30
35
40
%
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Investment-GDP Ratio
10
Industrial Production…India, China
China
India
-10
-50
51
01
5G
row
th R
ate
,%
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Industrial Production
11
Interest Rates…India, China
China
India
-50
51
0%
1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1972-02Real Lending Rate
12
Inflation…India, China
China
India
-10
01
02
03
0%
Ch
an
ge
in
CP
I
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
1962-2002Inflation, CPI (1993)
13
Saving…India, China
China
India
15
20
25
30
35
40
% o
f G
DP
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Savings Rate
14
Governance Indicators…India, China Governance Indicator Values, India and China
China India Change
1997 2002 1997 2002 China India
Voice -1.37 -1.43 0.26 0.36 -0.1 0.1
Rule of Law -0.32 -0.34 0.10 0.07 0.0 0.0
Govt. Efficiency 0.14 0.18 -0.14 -0.07 0.0 0.1
Political Stability 0.26 0.14 -0.44 -0.67 -0.1 -0.2
Regulation -0.09 -0.35 -0.11 -0.36 -0.3 -0.3
Corruption -0.11 -0.42 -0.23 -0.26 -0.3 0.0
15
Governance Indicators…India, China Governance Indicator Rank, India and China
China India Change
1997 2002 1997 2002 China India
Voice 83 85 18 14 -2.0 4.0
Rule of Law 44 36 27 23 8.0 4.0
Govt. Efficiency 21 20 34 28 1.0 6.0
Political Stability 25 30 61 60 -5.0 1.0
Regulation 52 56 53 57 - 4.0 - 4.0
Corruption 28 45 36 32 -17.0 4.0
16
Governance Indicators…India, China
020
40
60
80
Rank
CO GE PS RL RQ VA
Rank in 1997
China India
020
40
60
80
Rank
CO GE PS RL RQ VA
Rank in 2002
China India
-20
-10
010
Rank
CO GE PS RL RQ VA
Change in Rank, 1997-2002
China India
China and IndiaComparative Performances, 1997-2002
17
Corporate Tax Rates…India, China
China
India
05
10
15
20
%
1990 1992 1994 1996 1998 2000 2002 2004Year
Source: Datastream
1991-2004Corporate Tax Rates
18
Foreign Direct Investment…India, China
China
India
01
23
45
%
1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1967-02Share of FDI in GDP
19
Foreign Direct Investment…India, China
China
India
05
10
15
%
1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1967-02Share of FDI in Investment
20
Undervaluation of Currencies…
• Undervaluation is defined as the ratio of per capita GDP in current US dollars to per capita GDP in current international PPP dollars.
21
…Undervaluation of Currencies
Yuan
Re
20
40
60
80
10
0%
Un
de
rva
lue
d
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Undervaluation w.r.t USD
22
…Undervaluation of Currencies
Yuan
Re
-10
-50
51
0G
row
th in
Un
de
rva
lua
tio
n,%
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Undervaluation w.r.t USD
23
…Undervaluation of Currencies
50
100
150
1950 1960 1970 1980 1990 2000Year
Germany Japan
United Kingdom
40
60
80
1001
20
1950 1960 1970 1980 1990 2000Year
Korea Malaysia
Singapore
40
60
80
100
1950 1960 1970 1980 1990 2000Year
Chile Brazil
Mexico
25
30
35
40
45
50
1950 1960 1970 1980 1990 2000Year
Poland Hungary
Russia
Note: Undervaluation value of 100 means fair valuation.Undervaluation of 20 means that the productivity level is 5 times the cost.
Undervaluation w.r.t US$
24
Growth Model…India and China
• The growth model uses the following variables for the period 1980 – 2003; data arranged in five-year periods. • Log Initial Per Capita Income, Log Initial Years of Education, Latitude (proxy for Geography), Log Change in Undervaluation, and Share of Investment in GDP are the independent variables.
25
Living Standards…India, China
• Poverty Levels• Infant Mortality• Fertility Rate• Dependency Ratio• Education Attainment, All• Education Attainment, Females
26
Poverty Levels…India, China
China
India
02
04
06
08
01
00
De
clin
e,%
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: XX
5 Yr Avg, 1962-02Share of Population Living Below $1/Day
27
Poverty Levels…India, China
China
India
20
40
60
80
10
0D
eclin
e,%
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: XX
5 Yr Avg, 1962-02Share of Population Living Below $2/Day
28
Poverty Levels…India, China
10
.03
0.0
50
.0H
CR
1980 1985 1990 1995 2000 2005Year
Household Survey
20
.04
0.0
60
.0H
CR
1980 1985 1990 1995 2000Year
Household Survey, World Bank
0.0
20
.040
.060
.0H
CR
1980 1985 1990 1995 2000 2005Year
India China
Survey, 1987 S/NA Ratio
Headcount ratio, different estimates of growth
29
Poverty Levels…India, China
• Poverty levels in India and China in the year 2003 are the same.
30
Infant Mortality Levels…India, China
China
India
50
10
01
50
20
0L
eve
ls
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1952-02Infant Mortality Levels
31
Infant Mortality Decline…India, China
China
India
-6-5
-4-3
-2-1
De
clin
e,%
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1952-02Infant Mortality Decline
32
Fertility Rates…India, China
China
India
23
45
67
De
clin
e,%
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Fertility Rate Decline
33
Dependency Ratio…India, China
China
India
55
60
65
70
Po
pu
latio
n 1
5-6
4,%
1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Age Dependency Ratio
34
Education Attainment…India, China
China
India
12
34
56
No
. o
f Y
ea
rs
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Education Attainment
35
Education Attainment Female…India, China
China
India
12
34
5N
o.
of
Ye
ars
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002Year
Source: WDI 2004
5 Yr Avg, 1962-02Education Attainment, Female
36
Conclusion
• Undervaluation of exchange rate is a very important theoretical and empirical contributor to the Chinese growth performance. •Each 10 percent appreciation of the yuan would lower China’s growth rate by 1.4 percent per annum.•India growth rate is expected to be higher than China by 2010.•Poverty levels ($ a day poverty line) are the same in India and China (circa 2003).
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