Any recent study of world economies will invariably result in a comparative analysis of the two Asian neighbors – India and China. While China is much ahead in the race with its fast-acting government, better infrastructure and superior growth rate, India is nipping at its heels to equalize and eventually overtake.
Whenever the two economies are compared, China emerge winner, winning applauds from one and all. However, the latest studies of the two economies open up newer perspectives. These new revelations give India a definite advantage over China in the economic growth race. The advantage comes from the differences in the economic structure of the two countries.
Both countries went all out with stimulus packages to revive their economies. While China’s stimulus programs stand at 6% of GDP, India could mange only 3% of GDP. The surprising fact is Indian economy managed to weather the economic storm much better than China, though the present growth rate for India (6.4%) is less than China’s (8.7%).
Limited exposure to international markets was always thought of as India’s shortcoming. However, this turned into an advantage and paved way for its fast recovery. China relies more on export than domestic spending, which is pegged at 35%. India’s domestic spending is a healthy 57%, which cushioned its fall during recession and helped it rebound with ease.
China almost doubled its credit growth and relied on infrastructure development and tax benefits, which led to unprecedented increase in property prices in Chinese cities. This has placed the country’s banking system on shaky grounds, which raises the question whether China’s amazing growth is sustainable.
India on the other hand managed to survive the crisis without risking its banking sector. This, according to economists, will place India in a better position during 2010.
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