RABAT ¨C What is the most reliable development path for an increasingly fragmented global economy? China and India, the world¡¯s two most populous countries, each represent a different answer. But can other countries emulate them?
With its traditional manufacturing-first development model, China has sought to keep manufacturing¡¯s share of gross domestic product at nearly twice the advanced-economy benchmark, whereas India has leapfrogged into a services-led growth model, eschewing a manufacturing base. Yet a side-by-side comparison based on a decade of data from the OECD¡¯s Trade in Value-Added database is sobering. Neither approach, it seems, is a plug-and-play solution. Each contains structural weaknesses that contemporary developing countries must anticipate.
China and India entered the 2012¨C2022 decade at opposite extremes. China was the world¡¯s dominant exporter of manufactured goods, with manufacturing accounting for roughly 32% of its GDP ¡ª more than twice that of advanced European economies. Services, meanwhile, accounted for 44% of GDP, an unusually small share given China¡¯s income level. In India, by contrast, services already generated about half of GDP, owing to the country¡¯s internationally competitive information-technology and software exports. Manufacturing, at 18% of GDP, was small and shrinking and half of India¡¯s workforce remained in low-productivity agriculture. Public infrastructure remained underfunded and reforms were highly contested.
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