Foreign Policy Watch: India-China

India-China consumption comparison


From UPSC perspective, the following things are important :

Mains level: Data related to consumer size and consumption expenditure

Why in the news?

In 2023, India became the world’s most populous country, contrasting China’s declining birth rate. This prompts a comparison of their consumption patterns and geopolitical implications.

Consumer size of India and China 

Private Final Consumption Expenditure (PFCE):

  • India’s PFCE as a percentage of GDP is significantly higher than China’s, with India spending over 58% of its GDP on consumption compared to China’s 38%.
  • Final consumption, including government expenditure, constitutes 68% of India’s GDP and 53% of China’s GDP.
  • Despite China’s larger economy, its PFCE is only about 3.5 times that of India’s, indicating a higher contribution of consumption to India’s GDP.

Expenditure by Categories:

  • India’s consumption expenditure is characterized by higher spending on food, clothing, footwear, and transport, typical of a developing market.
  • In contrast, China’s consumption basket represents a relatively developed market, with higher spending on housing, white goods, recreation, education, and healthcare.
  • India spends approximately half of what China spends on food, transport, and clothing and footwear, despite being a fifth of China’s economy.
  • Real growth rates of individual consumption categories in India often outperform nominal growth rates observed in China.

Conclusion: India’s higher PFCE as a percentage of GDP reflects a greater reliance on consumption-driven growth compared to China.The composition of consumption expenditure in India and China highlights differences in market maturity and consumer behavior.Despite China’s larger economy, India’s consumption expenditure is relatively significant, indicating the potential for continued growth and economic development.

Mains PYQ

Q The time has come for India and Japan to build a strong contemporary relationship, one involving global and strategic partnership that will have a great significance for Asia and the world as a whole. Comment. (UPSC IAS/2019)

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