Despite having comparable populations, China's economy is significantly stronger and more advanced than India's.
Here we will try to explain why this is so.
China and India are the two most populous nations in the world, and yet India remains flooded with Chinese products.
Chinese products have flooded the Indian market, and they are competing with products made in India.
The Government of India has tried to level the playing field between these countries by introducing policies and schemes like Make in India.
The 'Make in India' initiative was launched to bolster Indian industry and promote domestic products, however, progress has been slower compared to China.
In 2018, China was the world's largest exporter, boasting a staggering $2.1 trillion in exports, significantly surpassing the United States at $1.453 trillion and Germany at $1.340 trillion.
What's truly surprising is that Chinese products are often significantly cheaper in India than comparable Indian-made goods.
While price is a significant factor for many consumers, it's an oversimplification to say that people "prefer cheaper alternatives regardless of quality."
Why Does India Struggle to Compete with China in Manufacturing?
China possesses significant geographic advantages, including extensive coastline and a central location, and boasts abundant natural resources. Furthermore, China's manufacturing sector is characterized by advanced machinery and technology far surpassing that of India.
Low wages can be a contributing factor to low productivity in some sectors of the Indian economy. However, other factors, such as poor working conditions, lack of training, and inadequate infrastructure, also play a significant role in determining worker efficiency.
While rising wages can be a factor in increasing worker productivity, it's not the sole determinant.
A combination of factors, including improved working conditions, investments in technology and worker training, effective management practices, and competitive pressures, all play a crucial role in driving productivity growth.
Why is China More Developed Than India?
China has a higher urbanization rate than India. While a significant portion of the Chinese population still resides in rural areas, the country has experienced rapid urbanization in recent decades. In contrast, a larger proportion of India's population continues to live in rural areas, although urbanization is also occurring in India.
Those villages are quite scattered, often inaccessible.
That is why the availability of electricity is a primary problem in India.
Many factories have electricity for a limited time, which means that they cannot operate at full capacity and do not produce goods all the time.
This makes mass production impossible.
Banking and judicial system
Strengths of the Chinese System
- Easier Access to Credit:
- Chinese companies, particularly large ones, often have easier access to loans, enabling them to invest in large-scale production, research & development, and expansion.
- This access to capital allows them to achieve economies of scale, driving down production costs.
Challenges Facing Indian Companies
Limited Access to Credit
- Indian companies, especially SMEs, often face difficulties in securing loans from banks.
- High interest rates: When loans are available, interest rates can be high, increasing the cost of borrowing.
- Collateral requirements: Banks often demand significant collateral, which can be a barrier for many businesses.
- Risk aversion: Foreign investors may be hesitant to invest in India due to perceived risks, such as political instability, bureaucratic hurdles, and infrastructure challenges.
Impact on Production Costs
- Limited access to capital hinders investment in technology, efficient production processes, and expansion.
- This can lead to higher production costs for Indian companies compared to their Chinese counterparts.
Impact on Pricing and Competitiveness
- Higher production costs translate to higher prices for Indian goods.
- This makes Indian products less competitive in both domestic and international markets, reducing demand.
Important Considerations
- Oversimplification:
- While access to credit is crucial, it's not the sole factor determining a country's manufacturing competitiveness.
- Other factors like infrastructure, skilled workforce, government policies, and market access play significant roles.
The slow pace of the judicial system and bureaucratic delays can significantly impact the growth and competitiveness of India's manufacturing sector. While the government is taking steps to address these challenges, further reforms are necessary to create a more efficient and business-friendly environment.
China does not have this problem and reforms that mean potential progress are being introduced quickly.
Corruption is a significant obstacle to economic growth and development. While China has taken some steps to address this issue, corruption remains a more significant challenge in India.
Practice of illegal coupling between business and government results in loss, general loss and uncompetitiveness of business and Indian products.
Although India boasts one of the fastest-growing economies globally, it lags behind other nations in crucial areas like workforce satisfaction and anti-corruption measures.
However, India is a potential new great power that is trying to develop its production and sales of products, it also has its own www.indiamart.com which is equivalent to Alibaba and Made-In-China sites.
IndiaMART
IndiaMART is India's largest B2B online marketplace that connects buyers with suppliers.
With a 60% B2B market share in India, IndiaMART focuses on providing platform services to SMEs, large enterprises as well as individuals.
Established in 1996 with the idea of facilitating business with Indian companies. Although it was created before Alibaba, today in terms of size they cannot be compared.
Inida March today has
98 million+ customers | 5.9 million + suppliers | 66 million + products and services
IndiaMART for Buyers
- Convenience of connecting with sellers anytime, anywhere
- Wider marketplace with a range of products and suppliers
- Payment Protection Program
IndiaMART for Suppliers
- Enhanced Business Visibility
- Access to over 1 Million Customer Inquiries
- Increases credibility of your brand
- Payments through the IndiaMART system
In 2019, IndiaMART had 3,373 employees in 77 offices across the country.
* All listed data are from December 2019
Indiamart is basically an intermediary between buyers and sellers.
Even though the app/website there says that the sellers are verified, there are also verified sellers who are scammers, so before you buy anything, before you pay, ask about the details of the company and the seller.
If possible never make payment before product delivery.
Be sure to use Indiamarts new free payment insurance service, and never pay directly to sellers, as many forums mention that Indiamart has a number of verified fraudsters.
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