INDIA & CHINA

Relationship between India and China

[Writer's institute] Relationship between India and China

Introduction

From the very start of the 21st century, the analysts have been warning about the financial crises that the entire world has to face in the first few decades. The western economies are seen as the epicenter of all the financial disasters that the world has to witness during the first few decades. The 21st century is regarded as the Asian century as the economic growth in the Asian region has been phenomenal. Some of the proponents of globalization have changed the term and pronounce it as “Global-as-Asian”. The two major players in the Asian region are China and India that have astonished the world by showing a constant economic growth for a decade. The relationship between China and India has not been very convincing but the bilateral trade agreements between the countries have provided the foundations for a political harmony between the two countries, which will facilitate their economic growth by strengthening the strategic ties.

Discussion

India and Economic growth

Although, India claimed its independence in 1947, the policymaking entities were not in favor of liberalizing the economy. Until 1990s, the country did not offer any incentive to the foreign investors. The Indian government opted to run a closed economy, which did not allow its countrymen to rely heavily on imported items. This protectionist view actually was inspired by the socialist ideology. The government regularly intervened in the market mechanisms and set the price accordingly. The only thing that kept the country in the game was its focus on infrastructure development. The entire focus was over the development of a manufacturing base that can make the economy self-sufficient so that the local demands were fulfilled. In the early 1990s, the economy was liberalized and import and export barriers were lifted in order to encourage consumerism in the country. The foreign investors were invited to invest in the manufacturing sector. India attracted hundreds of billions of dollars by providing incentives to the foreign investors.

With a labor intensive economy, it became easier for the government to attract giant firms from the United States and other developed countries. These firms not only invested their capital in the manufacturing base but also shifted their manufacturing plants to the region in order to cut manufacturing costs by utilizing the cheap labor available in the country (Carl & Utz, 2005). Since 1991, Indian economy has grown at a constant pace. The growth has been phenomenal as the reports show a figure of 6% annual economic growth for the past 20 years. This figure, as compared to the U.S economic growth figures, is enormous because the U.S economy has been growing at an average rate of 2% for past few years. India is the third largest economy if its economic worth is analyzed by Purchase Power Parity (PPP) as its GDP by PPP stands at $4.4 trillion.

With more than 480 million people in the labor market, India possesses the capability to overpower Chinese labor in a few ...