Analysing The Factors of Economic Growth with Respect to Sector Diversification: A Comparison Between India and China

Abstract

The understanding of sectoral dynamics of economic growth is essential for developing efficient development strategies, especially in emerging markets like China and India. This paper provides a comparative econometric analysis of the contributions of agriculture, industry, and services to GDP growth in these two countries from 1984 to 2023. Despite significant literature on specific countries, there is still a research void in long-term comparison assessments that employ consistent time series approaches. To fill this gap, the current study adopts a structured econometric framework that incorporates Augmented Dickey-Fuller (ADF) unit root testing for stationarity and Ordinary Least Squares (OLS) regression modelling to assess sectoral influences on GDP. The analysis determines that in India, the services sector has the greatest impact on GDP, followed by agriculture and industry, showing a shift toward a service-oriented economic model. In contrast, China's growth pattern represents a more balanced contribution from all three sectors, which is consistent with the country's historically industrial-led development plan. The findings have important policy implications: India should increase service sector productivity and modernize agriculture to enable long-term growth, whereas China should preserve sectoral balance to ensure long-term stability. The study adds empirical insight to the literature, aiding targeted policy decisions in emerging economies.