India and China-Development Experiences: NBSE Class 12 Economics

India and China Development Experiences nbse 12
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Here, you will find summaries, questions, answers, textbook solutions, pdf, extras etc. of (Nagaland Board) NBSE Class 12 (Arts/Commerce) Economics Chapter 11: India and China: Development Experiences. These solutions, however, should be only treated as references and can be modified/changed.

Introduction

The chapter compares India and China’s development experiences since independence. It discusses various indicators like GDP growth, per capita income, FDI inflows, poverty levels, etc.

Both India and China adopted five year plans for development after independence. However, China focused more on heavy industry and public sector while India had a mixed approach. China’s GDP has grown faster than India’s due to its manufacturing-driven export-led growth strategy. India is now catching up.

China attracts much higher FDI inflows compared to India, indicating its dominance in manufacturing. On a PPP basis, China’s per capita income is over 2 times higher than India’s, indicating a higher standard of living.

Poverty levels are much lower in China with 11.2% population below $1.90 per day poverty line compared to India’s 27.2%. China spends a higher share of GDP on R&D and has better internet penetration.

India has an edge in services like IT but lags in manufacturing. Going forward, India needs to boost manufacturing, exports, FDI inflows and infrastructure to catch up with China’s rapid economic growth. Tackling poverty and creating jobs also remain big challenges.

Textual questions and answers

A. Very short-answer questions (answer in one word/one sentence)

1. Name of Growth indicators of India and China.

Answer: GDP, per capita income, growth rate of GDP, structural composition of GDP, foreign trade, inflow of FDI, availability of foreign exchange reserves, level of poverty, occupational structure of population etc.

2. Name any two indicators of comparative development.

Answer: GDP, per capita income

3. Name the two areas of development where India is in lead.

Answer: Information technology sector, services sector

4. In which sector of the economy, is china ahead?

Answer: Manufacturing sector

5. Compared with India, lower density of population in China has contributed to its faster GDP growth. Comment on it.

Answer: True

6. Is it true ? “India has failed to tackle poverty as much as China”.

Answer: True

7. Heavy dependence on exports has led to slow – down of the Chinese economy . True /False.

Answer: True

B. Short-answer questions-I (answer in 30-50 words)

1. What was the strategy of development adopted by India after independence?

Answer: India adopted the strategy of planned development after independence. It launched 5 year plans for planned growth and development. The public sector was given the responsibility to develop infrastructure and basic heavy industries.

2. What was the strategy of development adopted by China?

Answer: China followed a socialist heavy-industry-development strategy after the establishment of People’s Republic of China in 1949. The government took control of a large part of the economy and redirected resources into building new factories.

3. Write any two points of comparison between India and China in terms of GDP growth.

Answer:

  • The growth rate of GDP of both India and China is higher than the world average.
  • As per IMF projections, India’s growth rate will overtake China’s growth rate in the coming years.
C. Short-answer questions-II (answer in 60-80 words)

1. Discuss the condition of India and China.

Answer: India and China both started their journey of development after getting independence in late 1940s. Both have adopted planned development. However, since 1991 India has liberalized its economy and allowed private sector to lead growth. China also started reforms in 1978 and moved towards market-oriented economy. Despite some similarities, China has grown at a much faster rate compared to India in terms of GDP growth, per capita income, poverty reduction, etc.

2. How China’s GDP is growing faster than India’s?

Answer: China’s GDP has grown at an average rate of 9-10% in the last 30 years. This high growth rate is attributed to rapid industrialization, high savings and investment rates, adoption of latest technologies, huge FDI inflows, stable political system, etc. India’s growth rate has been around 6-7% due to slow reforms, not enough public investment in infrastructure, rigid labor laws, etc.

3. What are the strategies adopted by China to speed up its trade?

Answer: Some key strategies adopted by China to boost its trade are – adoption of export-led growth model, huge incentives given to exporters, development of Special Economic Zones for exporters, favorable exchange rate policy to promote exports, investment in latest technologies and R&D to make products globally competitive.

4. How on the basis of PPP, were the development prospects almost the same in 1991?

Answer: In 1991, the per capita income of India and China calculated on purchasing power parity (PPP) basis was almost same – around $1150 for India and $1090 for China. This showed that the standard of living and development prospects were similar for both countries in 1991 when economic reforms began.

5. What makes China a more developed nation than India?

Answer: Some factors that make China more developed than India are – higher per capita income, higher share of industry and services in GDP, higher literacy rate and life expectancy, lower poverty rate, higher exports and FDI inflows, better infrastructure, political stability and so on.

D. Long-answer questions-I (answer in 90-120 words)

1. Why is China considered as a stronger economy than India?

Answer: China is considered a much stronger economy compared to India due to the following reasons:

  • China’s GDP growth rate has averaged 9-10% over the last 3 decades compared to 6-7% for India.
  • Per capita income of China is nearly 2.5 times that of India based on PPP calculations.
  • Share of industry and services in China’s GDP is much higher than that of India indicating a more modern, industrialized economy.
  • China’s total exports and FDI inflows are nearly 4-5 times higher than India showing its stronger global economic integration.
  • Poverty rate in China is around 11% compared to nearly 22% in India as per World Bank estimates.
  • China spends a lot more on infrastructure development, R&D and latest technologies which enhances productivity.
  • Literacy rate and health indicators like life expectancy are better in China indicating better human capital.
  • Politically, China has a centralized system which helps in quick decision making and policy implementation.

2. Make comparison between India and China on the basis of PPP and Growth rate of GDP.

Answer: Based on PPP calculations, China’s per capita income in 2014 was around $13,170 compared to just $5,630 for India. So China’s per capita income is more than double that of India indicating a much higher standard of living.

In terms of GDP growth rate, China has grown at an average of nearly 10% in the last 3 decades whereas India’s growth has been around 6-7% during the same period. China’s high growth has been driven by high savings and investment rates, rapid industrialization and urbanization, large FDI inflows and focus on infrastructure. India’s growth has been constrained by various structural bottlenecks and policy limitations.

However, IMF projections show India’s growth rate exceeding China’s in 2016 and 2017 as the Chinese economy is slowing down and undergoing a structural transformation. But China still remains far ahead of India in terms of overall economic development and per capita income.

3. How is China’s trade expanding more than India’s?

Answer: China’s total trade (Exports + Imports) is around $4.1 trillion as of 2014 which is nearly 5 times higher than India’s trade of around $0.8 trillion. Some key reasons for China’s larger trade expansion are:

  • Adoption of export-led growth strategy with incentives to exporters.
  • Development of Special Economic Zones, cheap land and infrastructure for exporters.
  • Large FDI in export-oriented manufacturing boosting exports.
  • Government support forlatest R&D and technologies to make exports globally competitive.
  • Favorable exchange rate policy by keeping Yuan undervalued to promote exports.
  • Low cost and abundant availability of labor, land, power, transportation for export production.
  • Strong banking system providing easy trade financing and credit to exporters.

So China’s supportive government policies and emphasis on building export competitiveness has enabled its rapid trade expansion.

4. What is the condition of FDI in China and India?

Answer: China attracts nearly 10 times more FDI compared to India. China’s FDI inflows were around $129 billion in 2014, while India’s FDI was $34 billion. Some factors that have enabled higher FDI in China are – favorable investment policies like tax breaks, easy approval processes, cheap and abundant factors of production like land and labor. Also, the infrastructure in China is far superior making investments more viable. Furthermore, China is closely integrated with global supply chains especially in sectors like electronics, machinery which boosts FDI. India’s FDI is constrained by bureaucratic hurdles, infrastructure gaps as well as restrictive labor laws. However, with reforms being undertaken, India’s FDI is expected to grow robustly in the coming years.

E. Long-answer questions-II (answer in 130-200 words)

1. “FDI flows are higher in China than in Indian” Discuss.

Answer: It is true that China receives significantly higher FDI inflows compared to India. As per UNCTAD data, China’s FDI in 2014 was around $129 billion which is nearly 4 times the FDI received by India at $34 billion. Some key reasons for higher FDI in China are:

  • China initiated economic reforms and opened up earlier than India, which gave it a head start in attracting FDI.
  • The overall investment environment in China in terms of infrastructure, logistics, approval processes is much more favorable.
  • China offers very attractive incentives like tax holidays, low-cost land, subsidies to foreign investors to set up manufacturing facilities.
  • Abundant availability of low-cost skilled and unskilled labor in China enables competitive manufacturing.
  • China is closely integrated with global supply chains especially in electronics, automobile and other engineering industries which boosts FDI.
  • The large domestic Chinese market also attracts market-seeking FDI.
  • China’s political stability and effective bureaucracy also facilitate large FDI inflows.

However, India has certain advantages in terms of English speaking manpower and strength in services like IT, finance. With the Indian government reforming land and labor laws and easing FDI restrictions, India’s FDI is expected to see robust growth in the coming years.

2. Discuss the occupational structure of Indian and Chinese population.

Answer: India has a higher share of employment in the agricultural sector accounting for around 49% of total employment as of 2012. This indicates that India is still in the early stages of structural transformation with surplus labor engaged in low productivity farming. On the other hand, China’s share of agricultural employment was around 33% in 2012 showcasing the faster transition of labor from farm to non-farm sectors.

In case of industrial employment, China again has a higher share at around 29% compared to India’s 25% in 2012. This highlights China’s greater success in expansion of labor-intensive manufacturing that has enabled mass employment and rapid growth.

For services, India has a marginally higher share at around 26% compared to China’s services share of around 38%. India’s strength in services like IT, finance and skill-based services has enabled the higher employment in this sector. But China is also rapidly catching up in tradable services.

Going forward, India needs to accelerate job creation in manufacturing and tradable services to productively employ its young population and reap the demographic dividend.

3. Compare India and China by population below Poverty line.

Answer: As per World Bank data, the percentage of population living below $1.90 per day poverty line in 2011 was 11.2% for China and 21.3% for India. Using the $3.10 per day line, the poverty ratio was 21.3% for China and a much higher 58% for India.

This shows that despite rapid economic growth, India continues to have a much higher incidence of extreme poverty compared to China. Some factors for lower poverty in China are:

  • Higher per capita income and higher average consumption expenditure of households.
  • China’s growth has been more broad-based covering both rural and urban areas. India’s growth has been uneven.
  • Lower inequality levels in China compared to India where growth has been uneven.
  • China’s poverty alleviation programs like dibao have been very effective in reducing poverty. India’s programs have faced issues in targeting and leakages.
  • Higher public investments in health, education and basic amenities in China compared to India.

For India to reduce mass poverty, it needs to focus efforts on increasing rural incomes through land reforms, better irrigation, diversified livelihoods and allied activities. Urban poverty also needs focused attention.

4. Discuss about the “population below poverty line” in India and China.

Answer: As per World Bank estimates, around 21.3% of India’s population was living below the $1.90 per day poverty line in 2011 while 11.2% of China’s population was below this extreme poverty line.

Using the $3.10 per day poverty line, a wider measure of poverty, 58% of India’s population was below this line compared to around 21.3% of China’s population in 2011.

Some key reasons for lower levels of poverty in China are:

  • Higher overall income and consumption levels driven by rapid economic growth over the past decades.
  • More balanced regional growth with both rural and urban areas benefitting. In India, growth has been uneven among states.
  • Lower inequality levels in China compared to India where benefits of growth have accrued more to the rich.
  • More effective poverty reduction programs in China e.g. Minimum Livelihood Guarantee Scheme.
  • Higher public spend by Chinese government on health, education and basic amenities for the poor population.

To reduce mass poverty, India needs reforms in areas like agriculture to raise rural incomes. Urban poverty also needs specialized programs for slum rehabilitation and skill development for steady jobs. The Public Distribution System needs revamping to effectively target subsidies.

5. What makes India different from China?

Answer: There are several significant differences between the Indian and Chinese economies:

  • China’s political system is Communist with a centralized structure while India has a decentralized democratic structure.
  • China’s growth strategy in the initial years was manufacturing-led while India focused more on services.
  • India has grown at a slower pace of 6-7% compared to China’s average of 9-10% growth.
  • China has a much higher investment and savings rate compared to India.
  • India has more stringent labor laws compared to China. Land acquisition is also tougher in India.
  • India has lagged in development of infrastructure like power, roads, railways, ports etc compared to China.
  • India has a more balanced regional spread of growth while China’s growth is more coastal region focused.
  • In foreign trade, China has followed an export-led strategy while India focused earlier on self-reliance.
  • India has a more developed financial markets system while China’s banking system dominates.
  • India has demographic dividend of a young population while China’s population is aging.
  • Consumption expenditure accounts for a larger share in India’s GDP compared to China.

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