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Participants at the Asian Development Bank's annual meeting in Spain said today that India must grow its infrastructure spending and change its labour market like China has done, if it wants to grow as fast as China. Economist Bibek Debroy, who has studied both the countries, said that China's success has got a lot to do with the infrastructure of the country that is better than that of India.
According to the Chief Executive of India's Infrastructure Development Finance Co. Rajiv Lall, in the year 2005 India spent equivalent to 5.9% of its Gross Domestic Product (GDP) on infrastructure while China spent 14.6%. Moreover, half of the funds for the infrastructure projects of China came from state owned enterprises. This framework, according to Lall could not be copied in India. Debroy said that China, in the 1990s carried certain labour reforms which benefited it immensely. It allowed for the greater use of contract workers in the labour market. Compared to India, China's labour market is very flexible. He also felt that the labour reforms in India are talked about but very rarely actually implemented.
According to Standard and Poor's, while India's economy grew by 9.4%, China's growth was 11.9% for the year 2007. While China attracted 74.7 billion dollars in Foreign Direct Investments (FDIs), India managed to capture about 24.7 billion dollars in the same year.
