India and China are frequently mentioned in the same breath nowadays as if they were twin stars in the global economy. And so we get headlines such as ‘India, China lead robust Asian recovery: IMF’ from the Economic Times of India.   It is perhaps inevitable that India is automatically compared with China. Their populations are the largest in the world, and of similar size. They are both giant economies: India is edging Japan to become the world’s third largest economy and China, already number 2,is chasing the United States for 1st place.  They are also seen, outside Asia at least, as sharing a perceived ‘Asian-ness’ although in reality their common heritage is limited and very unlike that of, say, Europe. Asia has traditionally been a European definition of ‘the other’, that half-known, half-imagined land to the east.  Much of what they have in common (apart from Buddhism) comes not from themselves but from broadly similar experiences of the impact of imperialism; their early commitment to import substitution and self-reliance is an expression of that. India and China are also lumped together as ‘emerging economies’, or more specifically as two of the BRICs –an acronym for Brazil, Russia, India and China.   In 2005 the Indian economist and politician Jairam Ramesh coined the neologism ‘Chindia’, since popularised by the American magazine BusinessWeek. . Most importantly, both of them have had an increasing impact on world trade, especially in recent decades (Fig 1)

A comparison of India with China has more than academic significance. Whilst large companies must engage with both, for small companies it may be a matter of choosing between one or the other. A few key statistical comparisons gives a useful, if limited, picture of the similarities and differences; the similarities are fairly obvious but the differences are not so evident and need exploring.

We look at two sets of statistics.  The first relate to their status in the global economy and will present a familiar picture; the Chinese economy is bigger and growing faster than India’s.  What may be less familiar are the data on trade in commercial services. We see India as an ‘IT country’, the country of Business Process Outsourcing (BPO) and call centres (made famous in the movie Slumdog Millionaire). By contrast, China is seen as the ‘manufacturing centre of the world’.  Both these perceptions are true, but inadequate.  India is a major manufacturer and China is fast catching up in services.

The second set of statistics will be perhaps less well known.  There are, of course, a huge number of statistics to choose from, but the ones selected here do pick up some of the key points of comparison in demographic structures.  Finally, as an illustration of the diversity of India, a diversity which is greater than, and different from, that of China we look at literacy in a selection of Chinese cities and provinces, and Indian states.

India and China in the global economy
Let us start with a brief look at the current status of the two countries in the world economy, with a focus on trade (Tables 1-3).  The date is from the latest Trade Profiles of the World Trade Organization(WTO) and Korea and the United States are included as benchmarks. The figures speak for themselves so for the sake of brevity the commentary will be brief. 
 

China’s GDP, whether by exchange rate calculation or purchasing power parity (PPP) is very much larger that India’s. India has a deficit on current account while China has a strongly positive balance – hence the ongoing argument with the United States, which has a huge deficit, on the appreciation of the Chinese yuan.   China’s trade per capita is some for times that of India, but still far below that of the US, let alone Korea.  China’s trade orientation (trade to GDP ratio) is much higher than India’s but lower than Korea’s.  Both countries have a substantially higher trade orientation than the US.

Although China’s merchandise exports and imports are significantly greater than India’s the rate of growth of both imports and exports over the period 2000-2008 was roughly the same. This was in contrast, as might be expected, with Korea (about half the Chinese rate) and the United States (about one third).

One set of reasons for confidence in India’s trade performance is her strong showing in services and, as part of that, strengths in Information Technology (IT) production and exports, and in Business Process Outsourcing (BPO).  International trade in services is seen as a huge growth area.  As Table 3 shows, India has a substantial surplus in trade in commercial services ($14.2 billion in 2006), whereas China has a deficit ($11.6 billion). According to the InvestinIndia.com the countries software exports are expected to grow 13-14% in FY2010-11.  This is an important area for international companies, However, there are clouds even on this particular horizon. Firstly China. China overtook the United States in 2004 as the world’s leading exporter of IT goods.  Although India is still far ahead in software exports, Chinese exports were already $3.6 billion in 2005 and growing fast. Moreover, although China is currently running a deficit in services, her exports of commercial services are substantially greater than India’s. Secondly, there is a growing backlash around the world, from the United States to South Korea, against offshore outsourcing of BPO over concerns of the loss of white collar and skilled jobs.  Most recently we have seen the Ohio ban on outsourcing, which is causing concerns in India.

The social structures
Let us now turn to the societies themselves because that is what their participation in the global economy is built upon. Firstly population because these, after all, are the two largest countries in the world.
 

In 1950 China’s population was 555 million, 22.0% of the world total, and considerably bigger than India’s 358 million (14.2%). By 2030 it is predicted by the United Nations that India will overtake China and by mid-century with have 200 million more people (Table 1).

Two aspects of demographic change which are of particular relevance here are age distribution and urbanisation.  The age distribution of a population has important implications for economic growth and social policy but it also has consequences for business since many goods and services, from baby foods to geriatric care, are age specific. The most important single variable for indicating age distribution is the median age, the year which divides the pollution into two, one half older and the other younger (Table 5). 
 

In 1950 India was a ‘young country’, a reflection primarily of high birth rates, with a median age of 20.4 years, below the world and Asian medians, and China. Developed countries, which tend to have lower birth rates (but also, as a partial counterbalance, immigration which usually dampens ageing). A century later India will be much older (38.7 years), and roughly at the world/Asia level, but will still be younger than developed countries and, significantly, China.   

Urbanisation is of special interest to exporters. For agricultural exporters it represents a shift from competition, and advocacy of protectionism, to market consumption, and preference for cheap imports.  For producers of manufactures, and increasingly of services, it represents market growth. City dwellers, however poor, have to purchase what they consume rather than, as they might have done in the village, produce it themselves. Table 6 gives data for urbanisation from 1995 to 2030. Definition of urban area vary from country to country (and perhaps within countries in the case of India and China). Moreover, a substantial number of people move back and forth between city and country depending on work availability, harvests, and planting.
 

In 1995 just over a quarter of Indians lived in urban areas, and a slightly larger percentage of Chinese were classified as urban. This was in stark contrast to developed areas such as Europe, and countries such as the UK. By 2030 over 40 percent of Indians will live in urban areas, a considerably smaller proportion than the world average (60.8%). China, on the other hand, will be on that average.

This brief macroeconomic survey of India, both in its own right as an emerging economy, and in comparison with China, is clearly of very limited value as a practical guide to action. Much depends on the specific industry, or indeed the specific company and its resources, organisational culture and international experience. India is a much more diverse country than China in so many ways including languages, culture, religion and political-economic structures.   The Chinese Communist Party provides a unifying and standardising elite governance across the country that complements government structures and there is nothing comparable in India where Union and State governments can be, and often are, at loggerheads. In China there is a relatively uniform gradient of wealth and its attributes such as literacy and wages from the richer east coast through to the poorer western interior. Table 7 shows the top four coastal cities/provinces and the bottom five provinces. The central government has a policy of developing the west and companies, foreign or Chinese, understand that and can utilise its relative predictability as they seek lower production costs or market openings.   
 

India, by contrast, is a patchwork, varying state by state (and within states), but not changing with distance from the coast, or capital. Although the word ‘diversity’ is one of the most frequent terms applied to India by foreigners and Indians alike, statistics on this are curiously difficult to pin down.   Many statistics are collected and published by state governments and not easily comparable across states. For instance, ‘Human Development Reports’, modelled after the United Nations Development Programme’s international one, have been released by seventeen states, with five more under preparation.  Data from national bodies, such as the Central Statistical Office, tends not to give statistics at state level.

Table 8 represents an attempt to give some statistical substance to this diversity. ‘State-wise’ (in the Indian phrase) data on literacy is easy to come by, though dated, coming from the 2001 census.   Kerala has long been the state with the highest level of literacy (and the best gender proportion). Bihar has the lowest literacy (47.5% falling to 33.8% for women), while Punjab and Karnataka are both medium level in terms of literacy but reputedly ‘rich states’. Karnataka, incidentally, is the home state of Bengaluru (formerly Bangalore ) one of the main centre of Indian IT. The contradiction between Bengaluru’s IT status, and the relatively low literacy of the state of which it is the capital, illustrate just how difficult India can be to interpret.

Nevertheless, Table 8 does suggest ways in which India’s diversity and complexity varies from that of China. In particular, Karnataka, whose capital Bengaluru is one of the centres of the India IT industry, has a significant lower literacy than Kerala, and its women have a literacy rate only three-quarters of the men, yet the earnings of factory workers in Karnataka are very much higher than in Kerala. In China, by contrast, while provincial inequalities are considerable (but decreasing) they are strongly linked to geographical location. In 2003 the Human Development Index for coastal Shanghai was 0.909, while that for Tibet in the far west was 0.586.

It is impossible to capture the diversity of India in a few pages and similarly we can just touch on the differences that distinguish it from China.  Nevertheless it is important to understand that, whatever the superficial similarities, they are certainly not twins.  Brothers perhaps? Back in the 1950s, before India’s disastrous border war with China, there was an Indian slogan  Hindi, Chini, bhai bhai – Indians and Chinese are brothers.   They have been estranged since then but like brothers, they constantly compete with each other and Indians, in particular, tend to measure themselves in comparison with the other. The Commonwealth Games of October 2010 held in Delhi brought frequent, and unfavourable, comparisons with the Beijing Olympics of 2008.  

Hopefully the animosity between India and China will dissipate and there will be a growing recognition that if they are brothers they were raised in different households – their histories are so very different.  They live in the same neighbourhood and share many challenges and opportunities.  They have much to gain from cooperation and mutual learning, and the outside world needs to engage fully with both.  But this cooperation and engagement should  be built on an awareness of the differences between the two.
 

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"Indian IT and Software industries continue to grow ". InvestinIndia.com 2010.
Maxwell, Neville. India's China war. London: Cape, 1970.
Singh, Satbir. "Delhi 2010: Where did it all go wrong?" Open Democracy (2010).

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1)   "India, China lead robust Asian recovery: IMF," Economic Times, 7 October 2010.
2)   Robert Fogel, "$123,000,000,000,000* *China’s estimated economy by the year 2040. Be warned. ," Foreign Policy  (2010).
3)   See, for instance, Edward W. Said, Orientalism (New York: Vintage Books, 1979). However life imitates art and in initiatives such as the East Asian Summit we may be seeing the beginnings of a creation of an Asian identity.
4)   Dominic Wilson and Roopa Purushothaman, Dreaming With BRICs: The Path to 2050 (New York: Goldmann Sachs, 2003).
5)   Jairam  Ramesh, Making Sense of Chindia : Reflections on China and India (New Delhi: India Research Press, 2005).;  Pete Engardio, ed., Chindia: How China and India are revolutionizing global business (New York: McGraw-Hill, 2007). Curiously the cover of the book features a rather old map of India, where Mumbai is still Bombay.
6)   Sewell Chan, "Geithner to Signal Tougher Stance on China Currency," New York Times, 15 September 2010.
7)   Suhit  Anantula, "Is Outsourcing Good for India?," OhmyNews, 24 May 2006.
8)   "ICT-enabled Globalisation of Services and Offshoring," in OECD Information Technology Outlook 2006 (Paris: Organisation for Economic Cooperation and Development, 2006), "Offshoring services: recent developments and prospects," in World Trade Report 2005 (Geneva: World Trade Organization, 2005), Arvind Parkhe, "International outsourcing of services: Introduction to the special issue " Journal of International Management 13, no. 1 (2007), UNCTAD, World Investment Report 2004 The Shift Towards Services (New York and Geneva: UNCTAD, 2004).
9)   "Indian IT and Software industries continue to grow ", InvestinIndia.com 2010.
10)   "China overtakes U.S. as world’s leading exporter of information technology goods," OECD press release, 12 December 2005.
11)   Alan S. Blinder, "Offshoring: The Next Industrial Revolution?,"  (2006), Jee-hoon  Lee, "Your Job Is Being Exported to India," Chosun Ilbo, 20 April 2007, David Wessel and Bob Davis, "Pain From Free Trade Spurs Second Thoughts," Wall Street Journal, 28 March 2007.; Tim Beal, "Offshoring of services and the mounting challenge to the Washington Consensus " in European International Business Association (Catania: 2007).
12)   Rupa Chanda, "India-Ohio outsourcing ban," East Asia Forum  (2010).
13)   Gender, or rather gender imbalance, is also hugely important.
14)   Interestingly, according to these UN projections, the United States will remain a relatively young country, younger than other developed countries, and China. This is presumably due to expectations of continued immigration and high birth rates among Hispanics.
15)   The repeal of the British Corn laws in 1846 is the classic example of this process but when, or whether, it will be replicated in India is another matter.
16)   On language see, for instance, Gauri Kartini Shastry, "Speaking English in a Globalizing World: Information Technology and Education in India" (paper presented at the IZA/World Bank Conference Employment and Development, Bonn, 8-9 June 2007).
17)   Alex H F Chu, "Chief Executive Trade Group, Dah Chong Hong," Interviewed by Tim Beal, 16 March 2006.
18)   See, for instance, Srirupa Roy, "Divided we stand: Diversity and national identity in India " (PhD, University of Pennsylvania, 1999).
19)   "N Korea 'fraud' dispute continues despite ruling," Insurance insider, 9 August 2007.
20)   For example, Central Statistical Organisation, India in Fig.ures (New Delhi: Ministry of Statistics and Programme Implementation, 2005), Central Statistical Organisation, "Monthly  Abstract of Statistics," August 2006, Central Statistical Organisation, Selected Socio-economic Statistics India 2006 (New Delhi: 2006), Central Statistical Organisation, Statistical Abstract of India 2004 (New Delhi: Ministry of Statistics and Programme Implementation, 2004).
21)   "Literates and literacy rates-2001 census (provisional)," National Literacy Mission-India 2001.
22)   China Human Development Report 2005,  (Beijing: United Nations Development Programme (UNDP)  China, 2005). Fig.ure 1.5 Human Development Index by Province in 2003
23)   Neville Maxwell, India's China war (London: Cape, 1970).

24)   Satbir Singh, "Delhi 2010: Where did it all go wrong?," Open Democracy  (2010).