Trade and Balance of Payments in India and China: A Comparative Analysis

Abstract

India and China are two large Asian countries experiencing rapid growth during the recent decades. For twenty years, India’s economic growth rate ranked second among the world’s large economies, after China, which it has consistently trailed by at least one percentage point. The present study aims to examine the impact of exports and imports expansion on the economic growth of India and China. As India and China are fastest growing countries of Asia, it is interesting to compare these economies. Selecting a period from 1981 to 2014, the comparative study has used Time series econometric techniques (Johansen Cointegration and Granger causality model) have been applied) to test the hypothesis. The comparison of economic parameters between India and China reveals that early and more efficient reforms are the reason for better economic performance of China. The study concludes that China performed better as compared to India. The difference in performance between India & China is not simply because of timings of changes in policies but the speed of reforms, implementation of policies and nature of political governance which also mattered.