Accounting for Growth: Comparing China and India

Abstract

Since 1980, China and India have achieved remarkable rates of economic growth and poverty reduction. The emergence of China and India as major forces in the global economy has been one of the most significant economic developments of the past quarter century. This paper examines sources of economic growth in the two countries, comparing and contrasting their experiences over the past 25 years. In this paper, we investigate patterns of economic growth for China and India by constructing growth accounts that uncover the supply-side sources of output change for each economy. Some of the results confirm themes that have emerged from the prior literature on the economic development of the two countries, however, some new findings emerge as well. In addition to decompositions of aggregate growth, we construct separate accounts for the three major economic sectors: agriculture; industry; and services. This level of detail enables us to highlight key differences in the development paths taken by China and India. In conclusion, we assess the prospects for future growth in each country.