Download India China - CESifo Group Munich

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
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 Delhi
Email: [email protected]
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 Delhi
Email: [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 Delhi
Email: [email protected]
4
Objectives
• Compare China and India performance on a
variety of indicators – past, present, and future
5
Growth Performance…India, China
GDP Growth
10
5 Yr Avg, 1962-02
China
-5
0
5
India
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: WDI 2004
6
Growth and Undervaluation
60
-5
20
40
0
5
Undervaluation
80
10
100
GDP Growth and Undervaluation
1950
1960
1970
1980
year...
GDP - India
UV - India
1990
2000
GDP - China
UV - China
7
TFPG…India, China
Productivity Growth
6.0
5 Yr Avg, 1962-02
2.0
4.0
China
-4.0 -2.0
0.0
India
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: WDI 2004
8
Investment/GDP…India, China
Investment-GDP Ratio
35
40
5 Yr Avg, 1962-02
25 % 30
China
15
20
India
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002
Year
Source: WDI 2004
9
Industrial Production…India, China
Industrial Production
15
5 Yr Avg, 1962-02
5
10
China
-10
-5
0
India
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: WDI 2004
10
Interest Rates…India, China
Real Lending Rate
10
5 Yr Avg, 1972-02
5
India
-5
0
%
China
1977
1982
1987
1992
1997
2002
Year
Source: WDI 2004
11
Inflation…India, China
Inflation, CPI (1993)
India
0
10
20
30
1962-2002
-10
China
1962
1967
1972
1977
1982 1987
Year
1992
1997
2002
Source: WDI 2004
12
Savings Rate
40
5 Yr Avg, 1962-02
25
30
35
China
20
India
15
% of GDP
Saving…India, China
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: WDI 2004
13
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
14
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
15
Governance Indicators…India, China
Comparative Performances, 1997-2002
China and India
0
20 40 60 80
Rank
20 40 60 80
Rank in 2002
0
Rank
Rank in 1997
CO
GE
PS
RL
RQ
China
VA
India
CO
GE
PS
China
RL
RQ
VA
India
0
-20 -10
Rank
10
Change in Rank, 1997-2002
CO
GE
PS
China
RL
RQ
VA
India
16
Corporate Tax Rates…India, China
Corporate Tax Rates
20
1991-2004
India
0
5
%
10
15
China
1990
1992
1994
1996
1998
Year
2000
2002
2004
Source: Datastream
17
Foreign Direct Investment…India, China
Share of FDI in GDP
5
5 Yr Avg, 1967-02
1
2
%
3
4
China
0
India
1972
1977
1982
1987
Year
1992
1997
2002
Source: WDI 2004
18
Foreign Direct Investment…India, China
Share of FDI in Investment
15
5 Yr Avg, 1967-02
5
%
10
China
0
India
1972
1977
1982
1987
Year
1992
1997
2002
Source: WDI 2004
19
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.
20
…Undervaluation of Currencies
Undervaluation w.r.t USD
100
5 Yr Avg, 1962-02
40
60
80
Yuan
20
Re
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: WDI 2004
21
…Undervaluation of Currencies
Undervaluation w.r.t USD
5
10
5 Yr Avg, 1962-02
0
Yuan
-10
-5
Re
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: WDI 2004
22
…Undervaluation of Currencies
100120
50
100
40 60 80
150
Undervaluation w.r.t US$
1950
1960
1970
1980
Year
1990
Germany
2000
1950
1960
Japan
1970
1980
Year
Korea
2000
Malaysia
Singapore
40
60
80
25 30 35 40 45 50
100
United Kingdom
1990
1950
1960
1970
1980
Year
Chile
1990
2000
1950
1960
Brazil
Mexico
1970
Poland
1980
Year
1990
2000
Hungary
Russia
Note: Undervaluation value of 100 means fair valuation.
Undervaluation of 20 means that the productivity level is 5 times the cost.
23
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.
24
Living Standards…India, China
• Poverty Levels
• Infant Mortality
• Fertility Rate
• Dependency Ratio
• Education Attainment, All
• Education Attainment, Females
25
Poverty Levels…India, China
Share of Population Living Below $1/Day
60
80
100
5 Yr Avg, 1962-02
20
40
China
0
India
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: XX
26
Poverty Levels…India, China
Share of Population Living Below $2/Day
60
80
100
5 Yr Avg, 1962-02
40
India
20
China
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: XX
27
Poverty Levels…India, China
Headcount ratio, different estimates of growth
Household Survey, World Bank
10.0
20.0
HCR
30.0
HCR
40.0
50.0
60.0
Household Survey
1985
1990 1995
Year
2000
2005
1980
1985
1990
Year
1995
2000
Survey, 1987 S/NA Ratio
0.0
HCR
20.040.060.0
1980
1980
1985
1990 1995
Year
India
2000
2005
China
28
Poverty Levels…India, China
• Poverty levels in India and China in the year 2003 are
the same.
29
Infant Mortality Levels…India, China
Infant Mortality Levels
China
100
India
50
Levels
150
200
5 Yr Avg, 1952-02
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002
Year
Source: WDI 2004
30
Infant Mortality Decline…India, China
Infant Mortality Decline
-1
5 Yr Avg, 1952-02
China
-6
-5
-4
-3
-2
India
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002
Year
Source: WDI 2004
31
Fertility Rates…India, China
Fertility Rate Decline
4
5
6
7
5 Yr Avg, 1962-02
3
India
2
China
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: WDI 2004
32
Dependency Ratio…India, China
Age Dependency Ratio
70
5 Yr Avg, 1962-02
65
China
55
60
India
1962
1967
1972
1977
1982
Year
1987
1992
1997
2002
Source: WDI 2004
33
Education Attainment…India, China
Education Attainment
5 Yr Avg, 1962-02
5
6
China
1
2
3
4
India
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002
Year
Source: WDI 2004
34
Education Attainment Female…India, China
Education Attainment, Female
5 Yr Avg, 1962-02
4
5
China
1
2
3
India
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002
Year
Source: WDI 2004
35
Conclusion
• Undervaluation of exchange rate is a very important
theoretical and empirical contributor to the Chinese
growth performance.
•Each 10 percent appreciation of the yuan would lower
China’s growth rate by 1.4 percent per annum.
•India growth rate is expected to be higher than China
by 2010.
•Poverty levels ($ a day poverty line) are the same in
India and China (circa 2003).
36