1 CHINA AND INDIA The New Economic Powerhouse? CHARLES DHANARAJ KELLEY SCHOOL OF BUSINESS INDIANA UNIVERSITY.

11

CHINA AND INDIACHINA AND INDIAThe New Economic Powerhouse?The New Economic Powerhouse?

CHARLES DHANARAJCHARLES DHANARAJKELLEY SCHOOL OF BUSINESSKELLEY SCHOOL OF BUSINESS

INDIANA UNIVERSITYINDIANA UNIVERSITY

22

33

44

55

66

77

88

99

1010Source: Dreaming with BRICS, Goldman Sachs Paper, 2003.

1111

CHINA & INDIA:CHINA & INDIA:Change Triggered by similar circumstances Change Triggered by similar circumstances

but…but…Two Radically Different Paths To ProsperityTwo Radically Different Paths To Prosperity

POLITICS

ECONOMICS

SOCIOLOGY

China

USA

India

1212

CHINA

INDIA

0

10

20

30

40

50

60

1960 1970 1980 1990 2003

0

10

20

30

40

50

60

1960 1970 1980 1990 2003

Distribution of Economic ActivityDistribution of Economic Activity China vs. India China vs. India

AGRICULTURE MANUFACTURING SERVICES

CHINA INDIA

1414

What are the implications for US?What are the implications for US?

• The unfortunate polarization in response to global reality– “Business as usual” vs. “Confront them now”

• It is not a zero-sum game– Prosperity abroad begets prosperity at home (vice versa)

• The dynamics of comparative advantage– The case of textile industry in the UK– The shifting distribution of US output

1810: Agriculture 84% Manufacturing 3% 1960: Agriculture 8% Manufacturing 25% 2005: Agriculture 2% Manufacturing 16%

1515

There is a tide in the affairs of men, There is a tide in the affairs of men, which taken at the flood leads on to fortune; which taken at the flood leads on to fortune;

omitted, all the voyage of their life is omitted, all the voyage of their life is bound in shallows and miseries. bound in shallows and miseries.

On such a full sea are we now afloat, and On such a full sea are we now afloat, and we must take the current when it serves, or we must take the current when it serves, or

lose our ventures.lose our ventures.

Shakespeare in Shakespeare in Julius CaesarJulius Caesar

1616

A Roadmap…A Roadmap…

• Succeeding in China– Cummins Story

• The Economic Growth in India– The Healthcare and Pharma Industry

• Innovation in an Asian firm– The story of Tata Consulting Services (TCS)

• Questions