A tale of two Asian nations

How China and India compare economically, demographically<br>

Aug. 9, 2012, 5:45 p.m. Published in Magazine Issue: Vol.: 06 No-. 04 July 27-2012 (Shrawan 12,2069)<br>

China and India are the two countries most often compared with each other among the economic grouping known as BRIC nations - Brazil, Russia, India and China.


Many are speculating which of the largest and second largest populous nations will become the winner in the information technology era.


Comparing the two countries' gross domestic products, average annual per capita incomes, PC shipments, basic infrastructure and IT spendings, China nearly always comes out on top.


"India's PC market development is at least five years behind China," said Amar Babu, managing director of Lenovo India, who has been working in India's IT industry for more than 23 years.


However, even though the Chinese economy historically has outpaced India's by just about every measure, who will win the IT war in the future?




As the only two countries in the world with populations exceeding 1 billion, China and India share many common points.


Surging GDP growth, an emerging middle class, rising urbanization, increasing small and medium-sized enterprises and the number of female company owners have all provided big opportunities for the two countries' information technology development.


Both of the countries have sustained the world's highest annual GDP growth in the past 10 years - 9 percent for China, about 7 percent for India. After the 2008 financial global crisis, the two have been said by global financial experts to be "among the world's most successful in weathering the challenges of the global economy's great recession".


According to the most recent censuses of each nation, China's National Bureau of Statistics reported that there were 1.266 billion people in China in 2000 while the Registrar General and Census Commissioner of India said the country had 1.029 billion in 2001.


However, according to the International Monetary Fund, China's GDP was $6,988.47 billion in 2011 while India's was only $1,843.38 billion. The figures and data showed that back in 1990, China and India's annual average per capita income were both around $350 - with India's slightly higher.


The situation started to change after that. In 2009, the gap increased to $2,410 per person, but the order was reversed. The annual average per capita income in China reached $3,590 in 2009, while India's was only $1,180 in the same year.


Income differences

The economic growth and situation are like barometers to a country's IT spending and development. Comparing the two countries' economic figures and IT spending, India is far behind the Middle Kingdom.


According to the IMF, India's level of income per capita in 2009 was achieved by China nine years ago. However, the organization did not say Indians will necessarily be as wealthy as Chinese people are now in the next nine years.


China's exports made up about 35 percent of GDP compared with only 24 percent for India in 2008.


Because of the GDP difference and economic gap, according to the US-based IT research company IDC, China's IT spending is about four times more than India's, at about $30.2 billion in 2011 and expected to grow at an average annual rate of 21.3 percent to $65.3 billion by the end of 2015.


In the personal IT market, the gap is even more significant. Taking the PC market for example, China's shipments were about seven times more than India's in 2011. PC shipments were 10.6 million units in India in 2011 and about 73 million units in the Chinese market.


"IDC data indicate that India's PC market size in 2011 is similar to China's in 2002. Even five years later, the India market will still stay at China's 2004 level," said Wang Jiping, senior research manager of IDC China. "In recent years, more and more companies have asked the questions: 'Is India really the next China?'"


In 2004, China's PC shipments were 18.2 million units. The company predicted India's PC shipments will reach 16.78 million in 2016 from 10.6 million last year.


China's National Bureau of Statistics data show that the urban population in the nation currently accounts for about 51 percent of the total population. Compared with 2000, the number increased about 14 percentage points.


However, in 2011, India, with about 247 million households, had an urban population of about 30 percent.


"With an urban population smaller than China and an even sharper gap between rich and poor, the development difference between the two countries is accelerating," said Wang.


Economically speaking, the IT industry has become one of the biggest economic growth drivers for India. According to Prashant L. Rao, the editor of India's long established IT publisher Express Computer, the SME slice of the Indian PC market works out at about 27 percent of the total PC market.


According to a survey made by the International Labour Organization, the average monthly salary was $295 in India last year and $656 in China. A child's chance of surviving more than five years after birth is the same in India today as it was in China in the 1970s.


During the financial crisis, more so than with China, India's domestic economy provided a cushion from external economic pressures. Private domestic consumption contributed 57 percent of GDP in India compared with only 35 percent in China. Despite this, "potential IT purchases are significantly less than in China," said Wang.


International firms


There are many Lenovo Group stores - the biggest Chinese PC company - in India. However, there is not a single Indian PC exclusive store or Internet mobile maker in China.


Last year, the top two PC vendors in India were Dell Inc with 16.4 percent market share and HP with 12.8 percent. In the first quarter of this year, Lenovo became the largest PC company in the Indian market for the first time.


Dell entered India in 1998, six years later than it entered the Chinese market, and built its first factory in the nation in 2007.


China, as the largest market for Dell outside the United States, contributes about 10 percent of Dell's global sales now, while India contributes about 2 percent and is in the No 10 slot, according to Amit Midha, president of Dell Asia-Pacific and Japan, chairman of Dell global emerging markets.


At Dell's Dell Women's Entrepreneur Network event which was held in New Delhi from June 17 to 19 this year, he mentioned that although the investment Dell puts into the Chinese market is more than it puts into the Indian market, it employs three times more people in India than in China. That is because the employees not only service the Indian market but also the US market.


Currently the company has 27,000 employees in India and can cover 88 percent of the nation with sales and delivery.

HCL, the largest local PC maker in the Indian market, has never entered the Chinese market.



India has been one of the fastest growth trade partners with China in the last few years. In 2011, bilateral trade between China and India reached $78.9 billion in infrastructure, finance and technology, said Peng Gang, commercial counsellor of China's embassy in India.


As a consequence of the global financial crisis, exports of both countries have encountered difficulties, causing GDP growth to slip.


India's GDP growth was 5.3 percent in the first quarter of this year, the lowest in the past 10 years, as was China.


The common point between the two economies is that they have a huge domestic demand. Peng said that the Indian government has enforced many policies and rules to boost domestic demand.


However, compared with China, India's economy doesn't depend on exports that much.



IDC data shows that because India's official languages are Hindi and English, in the past 10 years India IT services have made rapid progress.


"Service outsourcing is the most impressive industry in India worldwide," Wang said.


He mentioned that India IT services and software were almost double the size of China's. Spending on operations management software is higher in India, with China measuring 59.2 percent of India's output in 2011.


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