Comparative study of services sector in India and China

Abstract

Software and telecom services gave India a global brand image. But there are several other high potential areas such as tourism, hospitality sectors that can aid in the growth of employment and manufacturing sector. GDP of India and China are likely to grow in different ways. In the coming years India will have superior investor returns as the augmented institutional development in India is higher and more efficient than that of China. In general, China spends much more in its infrastructural facilities than India. IT revolution has contributed massively to the growth of GDP in India while Chinese GDP is the manufacturing industry based. The share of service sector in India’s GDP is 60% while its share in China’s GDP is 46%. For the period 1992-2005, India and China have witnessed average annual growth rates of 6.2% and 10.2% respectively. Indian software sector is more export oriented whereas Chinese software industry serves primarily domestic demand. Despite these differences in the Indian and Chinese service sectors, most of China’s lessons can be applied to ensure the success of the Indian economy. Both India and China have earmarked two different development paths. Each has leveraged its strengths in different ways to develop its industries. While India has been successful in the services sector, it has fallen short in the manufacturing sector. To develop its manufacturing sector, India would need to develop its human capital, improve its infrastructure, and provide preferential treatment to increase FDI to foster industrial development. China has now become India's largest trading partner with more than US$60 billion worth goods being traded. Indian and Chinese companies are setting up operations in the other’s area to serve their global markets. India is China's fourth largest trade partner while China is India's largest trade partner. The main aim of the two nations should be to develop a win-win cooperation. Therefore, we will look to find the similarities in both the economies, the service sectors –composition and contribution, and try to find learnings for Indian context.