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ASIA: "Globalizing Indian Manufacturing" report

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back to index backASIAtalk June,  2005

China and India: The race to growth

China and India are both developing quickly but with vastly different approaches. China's growth has been driven by manufacturing, and the country's planned economy has tapped into domestic savings and foreign investment to build an impressive infrastructure. India, by contrast, owes much of its progress to private businesses.

Without much assistance from the government, they serve companies in the West's knowledge-based industries, such as software, IT services, and pharmaceuticals. The difference between the two models prompts debate about whether one country has a better approach to economic development than the other and which will eventually emerge as the stronger.

The take-away

A series of essays on the Chinese and Indian economies sheds light on the particular advantages and difficulties of each. Tarun Khanna, the Jorge Paulo Lemann professor at the Harvard Business School, wonders whether China, unlike India, might have shackled its entrepreneurs—to the detriment of the economy's long-term health. Jonathan Woetzel, a director in McKinsey's Shanghai office, believes that the Chinese government has chosen the only method available to kick-start the economy. Diana Farrell, the director of the McKinsey Global Institute, argues that the performance of the two countries should be compared only at the sector level. In her view, sectors that escape heavy-handed regulation are the ones most likely to thrive.

Source: McKinsey Quarterly - GAI

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