What India has to Learn from China

In 1970 China had a per capita income which was half that of India. In around thirty years the position has been reversed with the Chinese per capita income becoming eighty per cent higher than that of India. The remarkable turn around can be explained by a much higher rate of growth of GDP in China combined with greater restraints on population growth. The former has been facilitated by an investment rate, which greatly exceeds the Indian rate and faster growth in human capital stock. Governance is not a significant explanatory variable of the difference in economic performance as the Indian performance in governance has been marginally better than that of China. However, it must be remembered that the Chinese have paid for their better economic performance in terms of a more polluted environment.