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INDIA & CHINA: The Future Bazaars…

Prologue: China & India are two global giants in terms of both population and land area. However, despite their size and despite the fact that both play large roles on the world stage, the reality is that they are just starting to experience their eventual impact on the world. But both of these enormous emerging countries have equally-giant challenges facing them in terms of population size, infrastructure, regional differences, literacy, poverty, and more. They have lately received a lot of international attention being viewed as emerging giant economies.

The phenomenon of globalization has however affected both these countries. Given their large populations, big land mass and abundant resource bases, they have both relied on indigenous capabilities to a large extent. For most Chinese and Indians alike, economic life is hard despite the fact that reforms and globalization have created various new opportunities and as such both countries have witnessed an emerging middle class with western tastes and preferences.

This paper outlines some of the factors that have influenced the turnaround process in China and India, while analyzing their commonalities and differences in their approaches. While this research paper centers on the growth process in China and India, with respect to the paper industry scenario. It encompasses new avenues developing with increasing human migration and communication which favor economic and technological change.

India INDIA

India’s diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India’s output with less than one third of its labor force. Slightly more than half of the work force is in agriculture, leading the government to articulate a rural economic development program that includes creating basic infrastructure to improve the lives of the rural poor and boost economic performance. The government has reduced controls on foreign trade and investment. Higher limits on foreign direct investment were permitted in a few key sectors, such as telecommunications. Privatization of government owned industries remains stalled and continues to generate political debate; populist pressure from within the government had restrained needed initiatives.

The economy has posted an average growth rate of more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. India achieved 9.6% GDP growth in 2006, 9.0% in 2007, and 6.6% in 2008, significantly expanding manufacturing sector through late 2008. India is also capitalizing on its large number of well-educated people skilled in the English language to become a major exporter of software services and software workers. Strong growth combined with easy consumer credit, a real estate boom, and fast-rising commodity prices fueled inflation concerns from mid 2006 to August 2008. In the long run, the huge and growing population is the fundamental social, economic, & environmental problem.

Environment (current issue)

Deforestation; soil erosion; overgrazing; desertification; air pollution from industrial effluents and vehicle emissions; water pollution from raw sewage and runoff of agricultural pesticides; tap water is not potable throughout the country; huge and growing population is overstraining natural resources.

Total Area: 3,287,263 sq km, compared to the world it is at 7th position

Land: 2,973,193 sq km

Water: 314, 070 sq km

Population: 1,166,079,217 (July 2009 est.), compared to world:2nd largest

GDP (Purchasing Power Parity) $3.304 trillion(2008 est.), compared to world: 6th

China CHINA

China’s economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in global economy.

The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2008 stood as the second largest economy in the world after the US, although in per capitaterms the country is still lower middle-income.

The Chinese government faces numerous economic development challenges, including: (a) strengthening its social safety (b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force, (c) reducing corruption and other economic issues; (d) con-taining environmental damage and social strife related to the economy’s rapid transfor-mation; and (e) seeks to add energy production capacity from sources other than coal and oil.

The global economic downturn began to slow foreign demand for Chinese exports for the first time in many years. The government vowed to continue reforming the economy and emphasized the need to increase domestic consumption in order to make China less dependent on foreign exports for GDP growth in the future.

Environment (current issues)

Air pollution (greenhouse gases, sulfur dioxide particulate) from reliance on coal produces acid rain; water shortages, particularly in the north; water pollution from untreated wastes; deforestation; estimated loss of one-fifth of agricultural land since 1949 due to soil erosion and economic development; desertification; trade in endangered species

Total Area: 9, 596, 961 sq km, compared to the world it ranks 4th

Land: 9,569,901 sq km

Water: 27, 060 sq km

Population: 1,338,612,968(July 2009 est.), ranks 1st position in the world

GDP (Purchasing Power Parity) $7.992 trillion (2008 est.), compared to the world it stands 3rd.

SWOT ANALYSIS OF INDIAN INDUSTRY

Strengths

Highly skilled, young, educated & English speaking human resources.

Big democracy, big market & free media.

Very rich in natural & living resources.

India Strategic position at various platforms.

IT & software superpower.

Weaknesses

Absence of requisite infrastructure and technology impetus.

Regulation, protection and restriction: not effective.

Lack of trained & skilled work force.

Lack of Transparency-Trust-Responsibility.

Opportunities

Booming retail, education, tourism, health sector, food processing sector.

Balance between competition – cost – quality – service.

Rural economy development & social transformation.

Improving Research & Development capability & resource building capacity.

Need for modernization of infrastructure.

Threats

A feeling of unstable government and self centered political leadership.

Corruption, Ignorance & Complacency.

Depleting natural resources & missing sustainable approach.

Imbalance in diversity.

SWOT ANANLYSIS OF CHINESE INDUSTRY

Strengths

The Chinese Communist Party, which has governed China for the past 57 years, remains secure in its position as the sole political party in China.

With its vast supply of cheap labor, the country remains the top destination for foreign direct investment (FDI) in the developing world.

China’s economy grew by 10.4% in 2005 and by 10.7% in 2006, making it the fastest-growing major economy in the world.

The country’s economic policymakers have proved themselves hugely capable, and will continue their methodical approach to reforming the economy.

Weaknesses

As with any other dictatorship, China’s political system is inherently unstable and unable to respond to the wider changes taking place in Chinese society.

Current levels of investment could lead to over-capacity in the future, which might in turn lead to the re-emergence of deflationary pressures.

China to defend itself against anti-dumping duties.

Opportunities

The trends shows that economic growth is moving towards becoming more broad based, with consumption and net exports contributing more to growth, although growth in fixed-asset investment remains rapid.

The Chinese government is giving more protection and encouragement to the private sector, which is now the most dynamic in the economy and accounts for most of the country’s job growth.

Threats

There are fears that the current high growth rate is unsustainable, and a soft-landing for the economy is still not assured.

Growing corruption, widening inequalities.

Increasing rural poverty and environmental degradation have led to an increase in social unrest in recent years.

Conclusion

We have given the comparison of India and China as a country and as an economy with emphasis on each of their S-strengths, W-weakness, O-opportunities, and T-threats wherein providing the reader with a series of analytical thoughts. It provides the insight of the business environment and a vivid understanding of the growth drivers and the factors affecting the developments. Since 90’s Chinese economy has witnessed a tremendous growth and simultaneously its paper industry has also flourished. However, Indian economy along with paper industry has also registered a high flyer growth, but still a sea change in the paper industry is foreseen.

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