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Sluggish Growth Or Premature Decline? A Comparative Study Of Indian Industrialization With China

Author

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  • Meenakshi Shekhar

    (Centre for Advanced Financial Research and Learning (CAFRAL))

Abstract

Indian manufacturing has remained stagnant in terms of its share in value-added and employment. While India and China started their growth journeys around the same time, China underwent rapid industrialization, whereas India’s manufacturing sector stagnated, and its services sector boomed. This paper uses a dynamic open economy general equilibrium model with endogenous capital accumulation and income and price effects to compare the structural transformations of India and China. The findings reveal that India’s sluggish manufacturing is largely due to slow productivity growth and low investment rates. However, Indian manufacturing has not prematurely declined but has yet to take off. If India’s TFP had grown at the same rate as China’s, the manufacturing share would have increased by 1.5-fold, and per capita income would have risen by more than double. Export-promoting industrial policies and increased investment could drive further growth in the manufacturing sector.

Suggested Citation

  • Meenakshi Shekhar, 2025. "Sluggish Growth Or Premature Decline? A Comparative Study Of Indian Industrialization With China," Working Papers 022257, Centre for Advanced Financial Research and Learning (CAFRAL).
    • Handle: RePEc:ris:cafral:022257
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    Keywords

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    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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