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India-China economic gap can be bridged

NEW DELHI: How wide is the China-India economic gap today? We will be assessing this in four dimensions of economic progress: 1. Growth in GDP; 2. Globalisation; 3. Financial architecture; 4. Human Development Index.

After 1950 and up to 1980, the GDP growth rate of India and China was about the same i.e., 3.5% per year [see Subramanian Swamy: Economic Growth in China and India. University of Chicago Press, USA]. But between 1980 and 2004, the GDP growth rate of China was maintained at a much faster pace than India [12% per year versus 6% per year] that made for the widening economic gap with India.

During this period, typically the Chinese average growth rate was 100% higher than the Indian rate of growth because China abandoned the worldwide failed Soviet economic model, which, however, India clung on to until 1991. The gap that emerged since then has still not been closed although it has narrowed. The per capita income (which was almost the same in 1980 for both countries) diverged sharply in the two decades that followed—to China’s advantage.

Evaluated in purchasing parity terms (PPP), the gap is now 86% in favour of China, not only because of a higher growth rate of GDP but also because of a lower growth rate of population.

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