Also, in terms of regional disparities, there was a significant broadening of the disparities in terms of poverty reduction and in terms of growth in both the countries. Also within the countries, there exists a huge disparity in income growth owing to the rural-urban gap. In terms of state wise growth, it was found that Delhi grew at the fastest rate of 2.5 times as compared to Kerala (the slowest growing state). In China, there was a deliberate choice of policy by the government to concentrate on the development of special economic zones (SEZs) to ensure faster growth of the country. Whereas, there was no such choice of policy was available in India during the period of reform.
The real reason behind the slow growth was not only extending income disparity but whether the policies and the reforms were in place with the structure of the economy. The real concern was that if the forces in place would enable the growth in the lagging regions to converge over a period of time. On this note, if the cross-regional growth in India and China is studied, there would be hardly any aspects of convergence. This could put the sustainability of a stable democratic India and the communist party in China in doubt.
During the recent years, because of the changes in the global environment, Indian economy is adversely impacted. The Sovereign debt crisis in Eurozone, especially in Spain and Greece, has created uncertainty across the world. The major impact of this crisis has been on the confidence of investors in the world, wherein the foreign institutional investors are reluctant to supply fund in the country. This has resulted in reducing the quantity of capital flows coming into the Indian economy. There is uncertainty even in terms of meeting the current account deficit of the country. In addition to this, the world demand for exports of goods is slackening and further the emanating oil prices has led to creation of imbalance in the current account since in 2012-2013.