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China's Macros vs India's Micros

The question of India vs. China – who will win the race has become a commonplace one now. Everyone has an argument. Until a few years back it was a no-brainer. Who could even say that China could be overtaken. But over the last few years Indian elephant seems to be catching some steam. The Macros and the Infrastructure is still very shaky compared to China. But the Micro-level indicators reflect a completely different story!! And that is India’s strength. Here, Huang – MIT Sloan School Prof – argues along the same lines. To me nothing brought out this comparison as starkly as the Forbes List of Billionaires. The list had 28 Indian citizens and China had 8!

India need not emulate China when it comes to infrastructure development. India’s growth is more productivity oriented and crucial for a sustained growth for a country than the investment model adopted by China, says, Yasheng Huang, associate professor of International Management, US-based MIT Sloan Sc_ hool of Management.

Talking about ‘Policy Framework and Development Strategies: India and China, a presentation organised by the Confederation of Indian Industries, southern region, Huang said western economists and analysts only saw the hard infrastructure in terms of sophiscated airports, ports, huge buildings in China.

In terms of macro economic indicators such as gross domestic product, FDI, development of roads, ports and airports, China had overtaken India.

But in terms of microeconomic parameters such as return on capital, development of domestic entrepreneurship and corporate governance, India is ahead of China, which is more essential for long term growth, he added.

Huang pointed out that macroeconomic performances depend on microeconomic foundations. If China boasts of huge infrastructure, it has been a result of enormous resources and capital being spent on them, which meant diverting of resources from rural and primary education.

FDI is the result of growth and not the cause for China’s growth

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Desh Kapoor

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