Friday, January 26, 2007

Breaking Down GDP Growth

This article in The Economist this week discusses the high GDP growth rates of India and China. They argue that China's growth is more impressive because it is due to greater increases in productivity, while India's GDP growth is due more to increased employment levels without those workers becoming more productive. Therefore, since China's growth is more associated with productivity increases, it is more likley to sustain itself.

The article also discusses how the growth in each country has been in different sectors:
According to conventional wisdom, Chinese workers have shifted largely from farming to factories, whereas India's growth has been driven largely by services, from call centres to writing software. In fact, jobs in services have expanded more strongly in China than in India. Since 1993 the rate of increase of China's service-sector jobs has been four times that in industrial jobs and has exceeded that in India. China's real output of services has not only grown almost as fast as its industrial output, but also faster than India's services. Indeed, a larger proportion of workers is employed in services in China than in India. However, the share of services in GDP is much smaller in China (33%, against India's 50%), because Chinese industry is so much more productive.
This article provides a deeper look at increases in GDP and a little background on the rapid growth of India and China.


Anonymous said...

It is really interesting to see China compared to India in service industry and production indrusty because this is international buisness. If both countries were major leaders in productivity or service goods then I believe their total GDP would be lacking what they both are now because they would be competing against each other in those areas very. I do understand both countries do overlap in areas of industry, but not as much as they could be overlapping. I believe there is always a demand for service jobs and a demand for production so i do not see in the future one country switching more efforts of industry in another direction.

seth weiland

Anonymous said...

I think it is very interesting to see how a country's economy style can determine its GDP success. China, which is considered a more production style economy, has a booming GDP, and so does India, which is a more service based economy. The United States is based off a service economy too just like India. Both of these countries are very close in location, and agreeing with my esteemed college Mr. Weiland, they could be in direct competition with each other. But since they are based off two different styles they can co-exist without much competition. Both of these countries have booming economies, and they got this way by using different styles of economic success.

-Chris Templin

Anonymous said...

We must keep in mind, when comparing these vastly different countries, that there are factors in both countries’ economies that cannot be considered in GDP alone. India has a huge, but somewhat rural, populace; while many are working in the newly-service-based economy, plenty of Indians still engage in small-scale or subsistence farming and home production of just the goods and food they need to survive, therefore buying little and contributing little, in turn, to the consumed and sold goods that are factored into GDP. With its increasingly urban and factory-laboring population, China, however, has a huge number of domestically-sold and exported products that can contribute to a much higher GDP. When considering the question of how credible GDP growth is in countries like China and India, one must first consider how much reliable production is not counted in using such a possibly restrictive gauge.

Anonymous said...

That was Nicole. Oops.