china, india and the world economy.docVIP

China, India and the World Economy T.N. Srinivasan Introduction Among countries with at least 10 million people in 2003, China and India have been growing very rapidly since 1980. The World Bank (2005, Table 4.1) reports that China’s GDP grew the fastest at an average rate of 10.3% per year during 1980-90, while India’s grew at 5.7%. Of the five countries that grew faster than India during this decade, none did so subsequently during 1990-2003. In the latter period, China’s GDP again grew fastest at the rate of 9.6% on an average per year, while India and Malaysia, at 5.9% per year, were the third most rapidly growing countries, with Mozambique at 7.1% being the second. In 2003-04, India’s GDP growth rate jumped to 8.5%, fueled by recovery from a severe drought in the pervious year. The estimated growth rate for 2004-05 is 7.5% and the projected rate for 2005-06 is 8.1% (CSO, 2006; RBI, 2006). China’s GDP growth rates, based on revised data, were 10.1% and 9.9% respectively in 2004 and 2005 and the projected rate for 2006 is 9.2% (World Bank, 2006, Table 1). Thus both countries continue to grow rapidly. In terms of absolute level of Gross National Income (GNI) at Purchasing Power Parity (PPP) exchange rates in 2003, China, with $6.4 trillion in GNI, was second largest in the World, second only to the United States at $11 trillion. India with $3 trillion in GNI was fourth after the U.S., China and Japan (3.6 trillion) (World Bank, 2005, Table 8.1). It is likely that in 2005, India replaced Japan as the country with the third largest GNI. IMF (2005, Box 1.4) estimates India’s share in global output at PPP exchange rates to have risen from 4.3% in 1990 to 5.8% in 2004, and India’s growth during 2003 and 2004 to have accounted for one-fifth of Asian growth and one-tenth of World growth, as compared to China’s contribution respectively of 53% and 28%. It should cause no surprise then that the rapid growth of China and India has had significant impact on the