Chasing the Dragon – Elephant Chasing Dragon | Economic Analysis between India and China

Chasing the Dragon | Elephant Chasing Dragon | Economic Analysis between India and China|GDP per capita and GDP growth rate of China |GDP per capita and GDP growth rate of India

Chasing the Dragon

This is one of the most popular and widely used slang phrases which was originated from Hong Kong. It is widely used by the economist of various countries to explain the country’s economic condition. Relating the phrase with the Indian Economy and the Chinese Economy, we can say that the Elephant is Chasing the Dragon. Although the economy of India is growing slowly like the speed of Elephant that does not reflect that the country’s growth is unsatisfactory. China’s economy is flying like a Dragon as compared to the Indian economy because of its massive investment in infrastructural development as well as because of the authoritarian political ideology followed by the Chinese government.

Around the world, many of the economic agencies at the international level predict that in future India is considered to be the fastest-growing economy (Jerry Li, 2018). There has been so many hoax and prediction regarding whether the economy of India will catch up with the Chinese economy in the upcoming days (Richardison, 2017). Many predictors believe that India is still very inside the technological frontier which indicates that the country has the potential to high growth compared to China who has touched the condition of the technological frontier.

 

GDP per capita and GDP growth rate of India

Figure 1: GDP per capita of India

Figure 2: GDP growth rate of India

From the above figure 1 and figure 2, we can see the trends in the GDP per capita and GDP growth rate of India over the years. Figure 1, exhibits a positive growth in the GDP per capita of India in the past years. The increase in GDP per capita has been increased because of the increase in the Gross Domestic Product of the Country. The trade surplus and government spending on various sectors has led to an increase in the GDP per capita of the country.

If we look at the GDP growth rate over the years there is a huge rise in growth rate and suddenly started falling. The higher growth rate was because at that period they just started using technology and other aspects and later but after some point, the country will get hit by technological frontier (Saturation) which leads to a slow growth rate.

 

GDP per capita and GDP growth rate of China

Figure 3: GDP per capita of China

Figure 4: GDP growth rate of China

From the above figure 3 and figure 4, we can see the trends in the GDP per capita and GDP growth rate of China over the years. Figure 3, exhibits a positive growth in the GDP per capita of China in the past years indicating a rise in the living standard of people in the country. The increase in GDP per capita has been increased because of the increase in the Gross Domestic Product of the Country.

If we look at the GDP growth rate over the years there is massive fluctuation in the growth rate of the country. The higher growth rate of China was because at that period they just started using technology and other aspects and later but after some point the country hits by technological frontier (Saturation) which leads to a slow growth rate. As compared to India, China is more prone to use technology to its full potential. 

Reasons behind the Chinese Economy’s Rapid Expansion compared to Indian Economy

As compared to the Indian economy, the Chinese economy has expanded rapidly over these years. Some of the major reasons behind the rapid growth of Chinese Economy are explained below in the following points:

Huge Investment in Infrastructure

One of the key decisions made by the Chinese Government is a huge infrastructural investment which has helped to create employment opportunities for millions of people in the country. When people are employed, it develops their spending capacity or in other words, we can say financial status gets improved. As a result, the industrial sector are also benefited.

If we look at India’s average infrastructural investment in these 50 years, then it shows that India is actually required to invest around 6.5% of the GDP to its infrastructural investment but it is only spending 3%.On the other hand, China is actually required to invest around only 6.5% of the GDP to infrastructural investment but it is spending 9%.

Concerned about Energy

For any of the country, energy sources determine the progress and survival of the country. Not every country is blessed with the unlimited amount of conventional energy sources that can fulfill the demand of the population for the long term as the conventional energy sources are limited in number.

Developed countries are very much focused on shifting towards alternate energy sources and China also has to some extent reduced its dependence on coal and started green energy promotion (Solar Energy), and is the second-largest producer of solar energy in the world (Mantu Kumar Mahalik, 2016).On the other hand, India has been started using solar energy but still, it has a massive level of oil imports which has impacted the Indian economy.

 

Use of Water Resources

India has an excessive amount of freshwater (more than four times) compared to China but still, the country is exposed to huge scarcity which can be seen from the Chennai water shortage news (Mesfin M. Mekonnen, 2016). China has been working systematically to teach the farmers for using a small number of water resources without creating any impact on its agricultural productivity.

The Chinese government imposes fines on the businesses & industries that use groundwater in a huge quantity. Along with this, the penalty is also imposed on the business units that pollute rivers and ponds.

 

Political System

China follows autocratic leadership where the country is governed by the Chinese Communist Party. Those countries that have an authoritarian political system can conduct developmental activities at a rapid scale because of fewer barriers.

On the other hand, India is a democratic country which contains regional parliaments and a federal parliament with many assemblies (Desai, 2015). The decision regarding any developmental activities at different states requires a certain level of permission from the parliament yielding to the lengthy process of decision making. The tax reform bill was passed by the Indian Parliament in almost 16 years.

 

Population growth

One of the important components behind the rapid growth of China is the massive level of urbanization (Brian C.O’Neilla, 2012). If we look at the historical data of 1969 then we can see that the percentage of people living in city areas of China was 17.5% whereas India was 19.5%. But in today’s date, the percentage of people living in city areas of China was 58% whereas India was 37%.today, the urbanization rate is 58% in China and roughly 37% in India. The city areas do provide higher wages to the workers which led the people to shift from the agricultural sector to the industrial sector.

 

Conclusion

China’s economy is flying like a Dragon as compared to the Indian economy because of its massive investment in infrastructural development as well as because of the authoritarian political ideology followed by the Chinese government. Although the economy of India is growing slowly like the speed of Elephant that does not reflect that the country’s growth is unsatisfactory. Many of the economic agencies at the international level predict that in future India is considered to be the fastest-growing economy. Many predictors believe that India is still very inside the technological frontier which indicates that the country has the potential to high growth compared to China who has touched the condition of the technological frontier.

 

References

Brian C.O’Neilla, X. R. (2012, December 13). The effect of urbanization on energy use in India and China in the iPETS model. Journal of Energy Economics, 34(3), 339-345.

Desai, M. (2015). India and China: An Essay in Comparative Political Economy. London: Palgrave Macmillan.

Jerry Li, A. S. (2018, July 9). Dragon Vs Elephant . Retrieved from Your Story: https://yourstory.com/2019/09/indian-economy-china-gdp

Mantu Kumar Mahalik, H. M. (2016, September 19). Energy Consumption, Economic Growth and Financial Development: A Comparative Perspective on India and China. Bulletin of Energy Economics (BEE), 2(3), 72-84.

Mesfin M. Mekonnen, A. Y. (2016, February 5). Four billion people facing severe water scarcity. Journal of Science Advances, 2(2), 58-65.

Richardison, A. (2017, July 17). Chasing China: Can India Bridge the Gap? 7(2), 46-49.

 

 

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