INDIA AND CHINA :

India and China are two fastest growing economies of the world. During all this meltdown these countries have done good and their economies have grown at a relatively better pace than the rest of the world. Of these two China has fared better but India is the largest democracy on the earth, has edge over China in English speaking workforce, etc.

India and China are two world most populated countries, each having population of over one billion - China 1.33 billion and India 1.14 billion. The two countries have different political and economic systems. India follows multi-party democratic system and is the world´s largest democracy on basis of its population while China is under one party dictatorship.

Economic systems of two countries vary to a great extent. Though China initiated the process of adjusting to the new global liberalized order earlier than India under the garb of "economic reforms" , it was limited to inviting foreign direct investments (FDIs) in select areas, more particularly in consumer durables. There are reports that China was successful in attracting more FDIs than India, a considerable chunk of which was from non-resident Chinese residing in other parts of the global. After the advent of recent global recession flight of capital from China is also noticed.

In China the state plays a dominant role in managing its economy and private sector participation, though minimal, is strictly under state supervision. The situation in Hong Kong and Macao are however different from mainland China. Allowing such a situation to prevail in the erstwhile British and Portuguese colonies, the Chinese government has said "it one country with two different systems" This applies also to Chinese Taipei which claims to be independent of China. But China asserting its influence have been successful in withholding recognition of Taipei by other countries as a separate country.

Unlike India, China is not a soft state in dealing with insurgencies and in its external policies. Given the different political and economic system prevailing in two countries, it is difficult to strike a comparison.

China, being almost a closed country, it is difficult for an outsider to assess the real economic situation there. Only source is to depend upon the official data of the Chinese government.

China is a new entrant to the WTO than India and as a new entrant is required to fulfill some commitments. China export earnings are more than that of India due to abundance of cheap labour and conditions imposed by the state and the deliberate manipulation of its currency exchange rate.

UNCTAD has added a new dimension for disciplining multilateral trade by a new code of conduct to prevent manipulation of exchange rate, wage rate, taxes or subsidies.

It said that changes in the nominal exchange rate that deviate from fundamental (such as inflation differentials) affect global trade in exactly the same way as do changes in tariffs and export subsidies.

Consequently, such real exchange-rate changes have to be subject to multilateral oversight and negotiations. Reasons for the deviation from the fundamentals and the necessary size of the correction have to be identified by an international institution and enforced by a multilateral body, it said

In its Trade and Development Report-2007, UNCTAD further said that such rules could help protect all trading partners against unjustified overall losses or gains from competitiveness and developing countries could systematically avoid falling into trap of overvaluation that has been one of the major impediments to prosperity.

UNCTAD´s suggestion is relevant when negotiations on multilateral farm deal are already under way in Genava and the WTO has already initiated a formal investigation intoallegations by US and Mexico that China is unfairly subsidising exports tax breaks and other initiatives.

Indian exporters have also complained that artificial exchange rate in China has given an added advantage to that country.

The UNCTAD report has said that commodity exchanges in China and India are becoming major players in the global commodity trade.

Even though interest in commodities as financial asset remained strong in 2006, there are some indications of a possible change in the attitude of financial investors vis-à-vis commodities, reflected in the market correction of January 2007.

It further said that China would continue to play a key role in commodity markets, not only from the demand side but also from the supply side.

UNCTAD has suggested that developing countries should strengthen regional cooperation amongst themselves, but proceed carefully with regard to North-South bilateral preferential trade. It suggested that multilateral trade arrangement as a better option than FTAs and RTAs.

The report noted that South Asia Association for Regional Cooperation (SAARC) conceived in 1985 has not been followed up by fast growth in regional trade.

Trade flows may be driven not only by formal agreements, but also by de facto regional networks.