ABSTRACT
This chapter discusses the independent variable, i.e. the difference in the relative power of India and China and the intervening variable, i.e. the difference in the political economy of India and China. The chapter is divided into five sections. Section I discusses in brevity Sino-Indian relations since the end of the Second World War. It provides the context which facilitates the comprehension of the subject matter, especially the role and the significance of the independent variable. Section II discusses the difference in the economic, political and military power of India and China. To gauge the difference in the economic power, it uses indicators like GDP, GNI and other development indicators like IMR, life expectancy, etc. To measure the difference in the political power, it uses the permanent membership of the UNSC as a dummy variable or parameter, and the perception of leaders, government officials and bureaucrats. Section III briefly discusses the different economic systems and the analytical framework chosen to distinguish the political economy of India and China. Sections IV and V discuss the difference in the political economy of India and China since their independence, the trajectory of reforms introduced in the two Asian neighbours and how it has transformed their economic and industrial structure.
