Slide1 : Economic Reforms, External Opening
and Growth: China and India T.N. Srinivasan
Samuel C. Park, Jr. Professor Economics, Yale University and Non-Resident Senior Fellow, Stanford Center for International Development, Stanford University Presentations at:
India Policy Forum / National Council for Applied Economic Research
New Delhi, India, July 17, 2007
Asian Development Bank
Manila, Philippines, July 23, 2007
APEA Conference, Hong Kong SAR,
China, July 26, 2007
Slide2 : Introduction
Reform and Growth Process
External Opening: Foreign Trade and Capital Flows
Summary, conclusions and Future Prospects 2
Slide3 : 1. Introduction China and India: Two Fastest Growing major Economies since 1980 - Table 1A
Optimistic forecast of Fogel for 2040.
Economic Reform, External Opening and Growth: mere association or deeper causal connection?
Complexity of Counter Factual Analysis
Analytical Description 3
Slide4 : The Reform and Growth Process: Inclusiveness Poverty Eradication as the overachieving objective of development in India.
Growth never viewed as having an intrinsic value in and of itself
Instrumentality of sustained, rapid, and inclusive growth for poverty eradication
Naoroji, 1873
National Planning committee 1938
Adequate standard of living – an irreducible minimum of Rs.15 – Rs. 25 per capita, per month
Doubling to tripling of National Wealth in 10 years (Average growth at 7.5% and 12.5% per year)
Objective Tests including nutrition at 2,400 to 2,800 Kcals per day per adult.
4
Slide5 : The Reform and Growth Process:
Inclusiveness, continued... Plan in 1962 for providing a minimum level of living (Rs. 20 per capita per month)
Three points from history:
A: Rapid growth always viewed as a “Pull-up” strategy for Poverty eradication
B: Emphasis on inclusiveness
C: Only those suffering from amnesia will view the current emphasis on inclusive growth as a new vision!
Question about distribution of benefits of growth in the first two five-year plans – Appointment of a Committee on distribution levels of living. 5
Slide6 : Sad story is not lack of a vision of inclusive growth, but an utter failure to deliver growth, let alone inclusiveness, during 1950-80 - Table 2
China’s Per capita income below India’s by 25% in 1950
. Merely caught up with India during 1950-80
Excesses of Great Leap Forward and the Cultural Revolution The Reform and Growth Process:
Inclusiveness, continued... 6
Slide7 : The Reform of Growth Process: Origins of Reforms China ripe for reform in 1978 when Den Xiao Ping took over
India – no pressure for systemic reform during 1950-80
1966 Crisis and brief flirtation with liberalization
Piecemeal reforms and fiscal profligacy in the eighties
Macroeconomic crisis of 1990-91 and initiation of systemic reforms
Collapse of the Soviet Union in 1991 and rapid growth of China since 1978
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Slide8 : The Reform and Growth Process: Characteristics of Reforms: Are Chinese reforms gradual?
Origins in the crisis of 1990-91 and World Bank-IMF conditionalities determined the contents of Indian reforms
Indian reform “Top-Down”
Reform of Institutions of fiscal federalism and Planning are yet to take place
“Xiaokong Society” in China, another phrase for inclusiveness of growth? 8
Slide9 : The Reform and Growth Process:
Sources of Reforms: Importance of Total Factor Productivity growth for sustainability.
Bosworth and Collins (2007) – Table 1B
Herd and Dougherty (2007) – Table 1C
Other studies – Table 1D
TFP growth in both countries went up after reforms. 9
Slide10 : Foreign Trade and Capital Flows:
Perspectives: National Planning Committee’s emphasis in India on self-sufficiency and complete neglect of comparative advantage
‘Vent for surplus’
Ideal in GATT/WTO
China in GATT/WTO
Accession to WTO in 2001
China’s rationale for accession 10
Slide11 : Foreign Trade and Capital Flows:
Trade Barriers in China and India 2005-06: Tariff Barriers on imports – Table 3A
Tariff barriers faced by exports – Table 3B
Anti-Dumping measures – Table 3C 11
Slide12 : Foreign Trade and Capital Flows:
Outcomes: Shares in world merchandise exports – Table 4, Part I
Shares of merchandise trade in GDP – Table 4, Part II
Service trade – Table 4, Part IIIA
IT services – Table 4, Part IIIB
Composition of Foreign Capital Flows – Table 4, Part IVA
Shares in GDP of capital flows – Table 4, Part IVB
External Debt – Table 4, Part V
Disaggregated performance prior to 2001 12
Slide13 : Foreign Trade and Capital Flows:
Outcomes, continued: Recent shifts in China’s pattern of exports
Review of China’s and India’s trade policies in WTO
China and India: as proliferation of regional trade agreements (RTAs)
RTAs consistent with WTO rules – an oxymoron
Sunset clause on RTAs
Surprising low key role of China in contrast to the aggressive posture of India in Doha. 13
Slide14 : Summary, Conclusions and Future Prospects Inclusiveness of growth as a vision in both countries
China has liberalized trade far more than India
India – one of the most protected countries in the developing world
China’s embrace of openness and its purposive use in accelerating domestic reform process
Reluctant opening in India
SEZs in China and India
Rising Inequalities: Regional and individual
India: Democracy as a safety valve
China’s authoritarian systems still depends on repression 14
Slide15 : Summary, Conclusions and Future Prospects, continued... Infrastructure issues
Reforms of agricultural sector and shift of labour away from it, a challenge in both
Financial Sector reforms
China’s inefficient investment 15
Slide16 : Table1A: Growth of Real GDP (Average, percent per year)
Back 16
Slide17 : Table1B: Sources of growth of Productivity/worker: 1978-2004 Source: Bosworth and Collins (2007), Tables 1 and 2 17
Slide18 : Table 1C: Analysis of factors behind growth in China and India Source: Herd and Dougherty (2007) 18
Slide19 : Table 1D: Other pre-Reform TFP Estimates a: Manufacturing only Back 19
Slide20 : Table 2: Poverty
(proportion of population below poverty line) 20 Back
Slide21 : Table 3: Trade Barriers
A. Tariffs (summary). CHINA IMPORTS Part A. Source: WTO (2007a) 21
Slide22 : Table 3: Trade Barriers, continued A. Tariffs (summary), INDIA IMPORTS Part A. Source: WTO (2007a) 22
Slide23 : Table 3: Trade Barriers, continued A. Tariffs (summary), CHINA EXPORTS Source: WTO (2007a) 23
Slide24 : Table 3: Trade Barriers, continued A. Tariffs (summary), INDIA EXPORTS Source: WTO (2007a) 24
Slide25 : Table 3: Trade Barriers, continued B. Tariffs (details), All Products Source: WTO (2007a) 25
Slide26 : Table 3: Trade Barriers, continued B. Tariffs (details), Agricultural Products Source: WTO (2007a) 26
Slide27 : Table 3: Trade Barriers, continued B. Tariffs (details), Non-Agricultural Products Source: WTO (2007a) 27
Slide28 : Table 3: Trade Barriers, continued C. Anti-Dumping Measures AD Measures Reported, January 1, 1995 - December 31, 2006 Source: http://www.wto.org/english/tratop_e/adp_e/adp_stattab7_e.xls 28
Slide29 : Table 3: Trade Barriers, concluded. D. Anti-Dumping Measures as reported versus Exporting Country Source: http://www.wto.org/english/tratop_e/adp_e/adp_stattab3_e.xls 29 Back
Slide30 : Table 4: Foreign Trade and Investment Indicators, continued... I. Share in World Merchandise Trade by Region and Economy (percent) Source: WTO (2006a), Tables II.2 and II.3 (http://www.wto.org/english/news_e/pres07_e/pr472_e.htm#appendix_table3), Appendix, Table 3. 30
Slide31 : Table 4: Foreign Trade and Investment Indicators, continued II. Share (%) of Merchandise trade (imports + exports) in GDP Source: World Bank (1997, 2007a), Table 6.1 31
Slide32 : Table 4: Foreign Trade and Investment Indicators, continued IIIA. Trade in Commercial Services: Total Exports Source: World Bank (1997, Table 4.10; 2007a, Table 4.6)
WTO http://www.wto.org/english/news_e/pres07_e/pr472_e.htm#appendix_table5), Appendix, Table 5 32
Slide33 : Table 4: Foreign Trade and Investment Indicators, continued... IIIB. Share of computer, information, and communication and other commercial Services (%) Source: World Bank (1997, Table 4.10, 2007a, Table 4.6) 33
Slide34 : Table 4: Foreign Trade and Investment Indicators, continued IVA. Foreign Capital Flows ($ Millions): Composition Source: World Bank (1997, Table 5.2, 2007a, Table 6.8) 34
Slide35 : Table 4: Foreign Trade and Investment Indicators, continued IVB. Foreign Capital Inflows: Share in GDP Source: World Bank (2007a), Tables 6.1 35
Slide36 : V. External Debt ($ Billions) Table 4: Foreign Trade and Investment Indicators, concluded Source: World Bank (1987, 2007a, Table 4.16) Back 36