India vs China Economic Growth

China vs India: Economic Growth Comparison Across Various Data Points

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China and India are the two most populous countries in the world. China was the most populous country with approximately 1.42 billion people in 2018. India was the second largest country by population with approximately 1.35 billion inhabitants in 2018. China and India together account for 36.28% of total world population 7,632,819,325.

We have compiled various macro economic growth indicators of the two countries to understand what led to rapid growth of China vs India.

Economic growth: The rate of change of real GDP of India vs China (%)

Economic growth: The rate of change of real GDP of India vs China (%)

Capital investment as a percent of GDP

Capital investment as a percent of GDP

Inflation in India & China: percent change in the Consumer Price Index

India’s GDP growth rate in the last 17 years has averaged 6.61% CAGR while China’s GDP growth rate has averaged 9.28% CAGR. China’s capital investment as a percentage of GDP which is proxy for Investment as a percentage of GDP has averaged 43% while India’s investment as a percentage of GDP has averaged 34.2% in the last 17 years. 

Subdued investment as a percentage of GDP has led lower India’s GDP growth rate while China has maintained investment rate. Indian economy growth rate will rise when capital investment rises for which we will need bigger government and private spending.

Population density of India vs China (people per sq KM)

Population density of India vs China (people per sq KM)

It is projected that by 2024, India will have more people than China with approximately 1.44 billion people. Currently, China’s population growth rate is 0.39%, while India is growing at 1.11%. 

In 1950, the population of China was 554 million. While the population of India was 376 million. China crossed one billion mark in 1981 and India in 1998. By 2029, India will cross the 1.5 billion mark.

Population density of India is 455 people per square km compared to 148 of China. So, India is 2.96 times denser than China. China is 4th and India is the 7th largest country in terms of area.

GDP per Capita: India vs China, constant 2010 Dollars

GDP per Capita: India vs China, constant 2010 Dollars

India’s GDP per capita has lagged to China’s GDP per capita. India grew its GDP per capita at 5.31% CAGR between 2000 and 2017 while China grew its GDP per capita at 8.71% CAGR. 

Female Labour Force Participation Rate %

Female Labour Force Participation Rate %

China’s GDP per capita in constant 2010 dollars grew from $1,767 in 2000 to $7,308 in 2017 translating a 8.71% CAGR while India grew its per capita GDP from $826 in 2000 to $1987 in 2017 at 5.31% CAGR. Slower per capita growth in India is partially because of lower female labour force participation rate ~23% while China has reported closer to ~60% female labor participation rate.

New passenger car sales in India vs China, numbers per year

New passenger car sales in India vs China, numbers per year

When you have such high population densities ~455 people per sq KM in India, your travelled distance declines, therefore an average family in India would need at most one 4 wheeler or none while in China an average family would travel more because of lower population densities ~148, further with rising GDP per capita incomes, your disposable income rises and you also have female workforce participation rising which enables an average Chinese family to purchase second 4 wheeler in the house.

China has cumulatively sold ~18.4 crore passenger cars between 2005 and 2017, while India sold ~2.9 crore passenger cars in the same period. China has ~45 crore households and India has ~25 crore households. Passenger cars have 40% penetration in China while ~11.6% in India.  

India may never sell as many passenger cars as China did due to higher population densities and lower female labour force participation rates. 

New commercial vehicle sales in India vs China, numbers per year

New commercial vehicle sales in India vs China, numbers per year

Exports as a Percentage of GDP of India vs China

Exports as a Percentage of GDP of India vs China

High Technology Exports (% of Manufacturing Exports)

High Technology Exports (% of Manufacturing Exports)

Imports as a Percentage of GDP of India vs China

China’s GDP growth was export led while India is still trying to generate trade surplus. China’s export as a percentage of GDP in 2006 peaked at 36% then it has gradually fallen and in 2018, China’s export as a percentage of GDP was 19.7%. 

China has increased share of high technology exports as a percentage of total manufacturing exports averaging 21% while India delivered 6.4% in the last 25 years. High technology exports makes China competitive and it becomes a supplier which is difficult to replace vs other nations whose exports are commodity in nature.

Patents Filed in India vs China

Patents Filed in India vs China

Any nation will want to build superior technology so that it garners the biggest share in the world economy, to build superior technology you need innovation which should translate into patents. In the last 17 years, China has increased patent filing, while India has not been able to come anywhere close to the number of patent applications by China. In 2017, India filed ~14,000 patents while China and USA filed 1.2 Million and 0.3 Million patents respectively.

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