POVERTY REDUCTION…..

Nations Committee on Economic, Social and Cultural Rights has

defined poverty as "a human condition characterized by the sustained or chronic deprivation of the
resources, capabilities, choices, security and power necessary for the enjoyment of an adequate
standard of living and other civil, cultural, economic, political and social rights." The challenges facing
the two nations would be even more serious if this broader definition of poverty were to be considered.
Significant Reduction of Income Poverty but Not Enough Both India and China have been able to cut
income poverty rates (share of population living below US$1/day in PPP terms) at a reasonable pace
over the past 15 years. The World Bank estimates the two countries have witnessed significant declines
in income poverty rates over the past 1015 years. A reduction in poverty is dependent on income
growth in a country and the extent to which that income growth is distributed to the poor. Acceleration
in growth has been the key factor that has allowed the two countries to Poverty Rate (% of population
living below US$1 PPP per day)lower their poverty levels, particularly in China. According to World Bank
data, in China the poverty rate declined to 17% (212 million people) in 2001 from 33% (375 million) in
1990. Similarly, the poverty rate in India dropped to 36% (359 million) in 1999 from 42% (357 million) in
1990. Despite this reduction, India and China together accounted for about 55% of the world’s poor in
2001. An improvement in the poverty rate should have continued even after 2001 but the absolute size
of the population below the poverty line in both countries is likely still to be huge (in the range of 250 to

Welfare Indicators of India and China As compared to India, China also scores higher on welfare
indicators such as living standards, poverty ration, female adult literacy and life expectancy by a wide
[Link] 1990, China has tripled per capita income and has eased 300 million out of poverty. While
India still presents a picture of extreme poverty, Indians are playing invaluable roles in the research and
development centers of global tech giants, sprouting all over India. Indian companies are also excelling
in producing high-quality goods and services at very low prices, competing for a global marketshare.

Growth Focus for India and China Technical and Managerial skills in both China and India are becoming
more important than cheap assembly labor. China will continue to dominate mass manufacturing and is
still investing in building multibillion-dollar electronics and heavy industrial plants. While India is a
leading force in software, design, services and the precision industry. A huge and demanding consumer
class is also pushing through innovation in India and China. Chinese and Indian consumers want the
latest technology and features. China and India, are set to transform the global economy of the 21st-
century, through its young, dynamic and driven workforce, powering worldwide growth and change in a
range of industries.

ConclusionThe two countries can develop similar position on international negotiations to counter
pressure from lobbies that would make developing countries bear much of the cost of moderating the
climate change created by current develop nations. At the same time , promoting technology and
renewable energy based solutions will mitigate the need for intense future competition over energy. SO
IT COULD BE CHINA AND INDIA IN THE FUTURE, NOT CHINA VERSUS INDIA.

 
Infrastructure Is Key to a Strong Growth Cycle

India’s Infrastructure Spending Is One-Seventh of China’s We believe that the single most important
macro constraint on the Indian economy, limiting its average growth rate, is the low spending on
infrastructure. We estimate India is currently spending a miniscule amount compared to its needs. Our
analysis reveals that China is spending seven times as much as India on infrastructure (excluding real
estate) in absolute terms. In 2005, total capital spending on electricity, railways, roads, airports,
seaports and telecoms was US$201 billion in China (9.0% of GDP) compared with US$28 billion in India
(3.6% of GDP). We believe that India needs a national plan to increase infrastructure spending to 7-8%
of GDP, from an estimated 3.6% of GDP in 2005, to push the economy onto a sustained growth path of
8-9% a year. Glaring Deficiencies in Infrastructure Except for telecoms, the cost of most infrastructure
services is 50-100% higher in India than in China. For instance, average electricity costs for
manufacturing in India are roughly double those in China. Railway transport costs in India are three
times those in China! Similarly, the average cost of freight payments as a percentage of imports is about
10% in India versus around 5% in developed countries and an overall global average of 6%. High costs
aside, the lack of basic infrastructure facilities is impeding the efficiency of production. The gap is
evident in almost all areas of infrastructure: roads, airports, seaports, railways, electricity and industrial
clusters/estates (SEZs). Infrastructure Is Key for Job Creation India’s strengths of a huge skilled and semi-
skilled work force, entrepreneurial expertise and natural resources are currently being inadequately
utilized because of lack of infrastructure. The UN estimates that India will be the largest contributor to
the additional working-age population globally over the next five years, accounting for 23% of the
worldwide increase. We think infrastructure is, in many ways, the key to unlocking underutilized
manpower. Efficient and low-cost infrastructure is the key facilitator of globalization and labor
arbitrage. India has been able to make major inroads into software services IT-enabled business process
outsourcing exports (ITES) because of the availability of high-quality telecom facilities, the infrastructure
backbone for these exports, at a reasonable cost.
FDI has helped the Indian economy grow, and the government continues to encourage
more investments of this sort - but with $5.3 billion in FDI in 2004 India gets less than 10%
of the FDI of China.

Foreign direct investment (FDI) in India has played an important role in the development of the
Indian economy. FDI in India has - in a lot of ways - enabled India to achieve a certain degree of
financial stability, growth and development. This money has allowed India to focus on the areas
that may have needed economic attention, and address the various problems that continue to
challenge the country.

India has continually sought to attract FDI from the world’s major investors. FDI investments are
permitted through financial collaborations, through private equity or preferential allotments, by
way of capital markets through Euro issues, and in joint ventures. FDI is not permitted in the
arms, nuclear, railway, coal & lignite or mining industries.

The comparative performances of India and China in the FDI arena have been studied
extensively. In these shores, we have either gone into manic depression after looking at the
bare data or have patted ourselves on the back for our ostensibly creditable
accomplishments.

The ground reality, as usual, is somewhere in between. However, recent studies on FDI in China
have come up with interesting perspectives. Normally, the huge flows of FDI into China are
projected as positive indicators for the Chinese economy; some credit rating agencies have even
suggested that FDI is a reflection of that country's creditworthiness.