India/China consumption models
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Indian GDP is composed of 70% service-based consumer driven and 30% industry-driven, whereas the Chinese GDP is composed of 40% consumer-driven and 60% industry-driven.
Services exports are roughly twice as important for India as for China. Within merchandise trade, both are
dependent on manufactures, with China much more strongly integrated into production networks through trade in parts and components.
Future Economic projection
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The current economic crisis clearly illustrated the importance of self-sustance. US and European countries have saved far too little and in US, clock went so much backwards to hit negative savings rate - inspite of increasing home prices in double digits.
Now, apparently after the recession, US and European consumers have started consuming less and saving more - a lot more in case of US. US currently extrapolated saving's rate is about 8%. This should continue for forseeable future until some normalcy is achieved. Dr. Rosenberg - famed economist and Dr. Roubini - economist at NYU projects that developed countries savings rate will cause the growth rates to be anemic in this recovery. China which is largely dependent on the export growth based model would either has to provide stimulus to its economy to maintain its growth. PIMCO's El-erian's suggests that world has changed and the newer projections would be a world where the developed countries will have higher unemployment rates (thereby lower consumption rates). India will also be impacted but since its growth is mostly internal driven, impact on it will lower (as 30% is the only industry base - of which a small percentage is used for exports).
China it is expected has a potential to be a star if it decides to provides some form of social security and better medical care to its people.
There is a joke in India regarding its own growth. "India grows when the government sleeps." Unless the government of India steps up on gas for infrastructure it will finds manufacturing only registering lower growth than its potential.
Primary differences between India and China in Industries
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Every economy in its initial stages are prone to more imitation. As the industry matures, more players are formed and innovations are made which leaps way forward.
Almost all major companies in China are state-owned/state-controlled/major share holder. There are only few exceptions like Lenovo, Ping Ann, BYD, . While many others are branches of foreign companies that use China as a base for making products rather than implementing design in China.
Whereas India except few (and mostly all) major profit-generating companies are owned privately or held publicly.
India does not compete with the hardcore Chinese manufacturing firms head on because it operates one of the most efficient and labor-rich industries. A case in point - Mukund Steel, an Indian firm develops only high-grade steel that meets the European standards, thereby enabling it to generate huge profit margins.
Indian movie arena is one of largest producers of movies of the world. There are more movies made in India, than the rest of the world combined. It is a self-driven industry in India.
Ofcourse, the popularly known Indian software giants like TCS, Infosys and Wipro are wholly home grown.
Innovation in automobile industry is not very known. India's Tata Nano had huge press becoming cheapest car. This car was designed and innovated completely in India. There is also Mahindra & Mahindra which are trying to make inroads in US competing with John Deere.
There are lot more examples. I think I left out Reliance Industries -- too much on this company.
Doubts about Chinese official growth numbers
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In the midst of the economic recession, in an economy that is entirely driven by exports and when consumption had been severly in all developed nations, Chinese government suggested it would register a 8% growth rate about six months in advance. After 6 months, it noted not 7.9% growth nor 8.1% growth, apparently as the clock work. This happened in the middle of 2008. At this time, there was a huge discontent among most competent economist about the truthfulness of the government issued growth rates.
There were also clearly reports on the trustfulness of Chinese GDP numbers in 2005 when the electric consumption has declined three years in a row, but Chinese export grew in double digits all the subsequent years.
If you want more details, I can provide more on this. For now, refer to #3 and #4.
Chinese FDI numbers- Why are they always so high?
Chinese top leadership has maintained a policy of higher growth and so each of the provinces are expected to perform and help grow faster. This is also incentivized by the leadership. This causes room for people to increase the numbers to get better privileges and benefits to quote higher numbers. There was also a report that had widely circulated on this.
Chinese calculation of FDI includes the amount of the money that could be reinvested from outside even by Chinese citizens and many Chinese living in mainland China do so as the FDI invested money is provided with special incentives and better taxation schemes.
How come China still has 2 trillion dollars in US bonds if the growth didnot happen?
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No one disputes whether Chinese growth didnot happen. The only thing people are talking of very high double digits that according to some famed economists cannot happen for a large country like China. The actual growth they predict are close to 7% rather than 9-11% quoted.
There is a wide held belief in economics community that China which had pegged its currency during the currency crisis in 90's is severly stretching the world economics. There is a wide held belief as well that the currency is way undervalued as much as 40% according to some reports. A free floating currency suggestion is up in the works.
The risk to Chinese holding 2 trillion dollars is strategically far too dangerous to US. The current crisis which is adding severe deflation to US currency because of the unwinding of the leverage is also causing the crisis to hit US very badly. Treasury had implemented minor plans to lower the value by increasing the supply of money to sustain and maintain the US economy. US debt is about 14 trillion and is growing. The only viable option which is easiest in a democracy is to decrease the value of the currency. China holds 2 trillion in US dollars, followed by Japan and Europe. This would help US to get out currency crisis issue.
How democracy is better?
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Yes, Having a one-party system has its advantages, like moving on things very fast. But that does not evade corruption. At some point in time, when there is a weakness in the leadership, people will demand the ability to change the ruling class and if there is no alternative in case of one-party system. This can cause crisis within.
So over long periods of time, democracy works. Because people feel that they can change the leaders that rule the country and a sense of ownership.
China as it stands now has very restricted media. Every one knows that it is better not to speak against the government else one could get in trouble.
So over the short run, democracy hinders growth but over the long term, it is a self-sustaining engine. Remember no civil wars/clashes provides better environment for growth. It is only because of continous wars in Indian and Chinese subcontinent which destroyed the country's per capita w.r.t. to the world during 1500-1950.
Upcoming population crisis in China.
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China's Moa of one-child has reduced the population and brought to complete stand still. China is going to have a rapdily aging population very soon. Rather than normal curve, Chinese population is expected to grow old before they become rich, though the Chinese GDP will be the largest in the world.
Can India do China
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http://www2.goldmansachs.com/ideas/brics/book/BRICs-Chapter19.pdf
I am tired of typing and so I am cutting it short, sorry guys.
References:
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1.
http://siteresources.worldbank.org/...916-1206974192224/Chapter3DancingWith2006.pdf
2. Historical and future expectation for India -
http://www.usindiafriendship.net/viewpoints1/Indias_Rising_Growth_Potential.pdf (Goldman Sachs report)
3.
http://www.pitt.edu/~tgrawski/papers2001/caveat.web.pdf
4.
chinagdpwithROW.jpg (image)
...all these can harm the development of the country
Give me a break. If China's growth were fake somehow, India's growth figure would have been the Mother of all fakes.
anyway, indians are naive people, they should be allowed to make such mistakes. at the end of the day, they are the person who will pay the bill and eat the crap generated by their "service" based economy. 
