The Economic Growth Ceiling: A Comparison of Economic Development of China and India
Mentor:David Woolgar, Professor of Business Sciences, Irvine Valley College
Known to be the world’s most populous nations, China and India have large and increasing resources in human labor. In considering the immense labor force as an asset to each of the two countries’ economic development, some economists have expected the two developing nations to rise to be among the most economically powerful nations in the near future. However, despite the nations both having an advantage in human labor, studies have shown that China has been drastically surpassing India in economic growth since China’s economic liberalization. The purpose of this study is to examine the role of government regulations in regards to China and India’s economies over the past three decades. A comparison of the two nations’ economic freedom allowed by the government is made to further understand why China’s economy has been expanding faster than India’s economy. Findings show that in contrast to India, China is rapidly developing a thriving economy in previous years as it gains more freedom to use its labor force in the areas of privatization, foreign investment, and international trade. A review of the literature reveals that with more stringent government restrictions, the economy becomes less competent to achieve economic growth with its available resources, as if there were a ceiling preventing further growth. Even if a nation had an unmatched advantage in resource, the resource cannot be contributed toward that nation’s economic growth as long as the government sets an “economic growth ceiling” that limits efficient economic choices to be made. Discussion focuses on the impact government regulations have had on China and India’s economies that have affected them to be where they stand globally today.