India moves forward on firm competitiveness

By Far Eastern Economic Review, March 2006, Vol 169 No 2 Wednesday, 26 April 2006

China's macroeconomic pre-eminence relative to rival India is well-rehearsed. China has produced faster GDP growth, has twice the per capita income, has faster growing and much higher volumes of exports, and attracts 10 times as much foreign direct investment (FDI). But less attention has been paid to microeconomic comparisons, which portray India in a much more successful light.

China may produce more, but India may be more efficient. World Economic Forum rankings put China ahead on overall country competiveness but behind India on business competitiveness, including company operations and strategy.

That China's corporate performance has been poor is underlined by the failure of the Shanghai share index to keep pace with other emerging markets. The average Indian firm had a 16.7% return on capital in 2004, against 12.8% for Chinese companies. While China was way ahead of India in economic liberalisation, reforms have started to stall since the late 90s. By contrast, India has continued to move forwards.

Source: The microeconomic rise of India
Yasheng Huang
Far Eastern Economic Review, March 2006, Vol 169 No 2

Review by Steve Lodge