The study finds that while the two countries achieved high economic growth over the 1990-2008 period, their growth patterns differed in three aspects: (i) economic growth accelerated for India between the first 6-year subperiod 1990-1996 and the last subperiod 2002-2008, while this trend was reversed for Vietnam; (ii) the service sector was the major driver of Indias growth performance, while the industrial sector played this role for Vietnam; and (iii) Vietnam relied heavily on capital investment, while India relied on TFP growth for sustaining high growth in GDP and in labour productivity. The paper suggests different sets of policy priorities for India and Vietnam as they focus on sustaining economic growth. The priority for India is to foster capital investment, especially in infrastructure, and to increase result-oriented social expenditure, while for Vietnam, it is to enhance the efficiency with which capital and labour are employed. Indias urgent need for fostering capital investment suggests three policy priorities: improving business environment, upgrading infrastructure, and more result-oriented social expenditure, particularly in education and health. For Vietnam, the imperative for enhancing the efficiency of growth, which means it needs to achieve higher growth from each unit of capital investment. This strategic refocus advocates three policy priorities: improving the quality of governance; being more efficient and prudent in making investments and more selective in attracting FDI; and promoting the growth of the services sector.
Khuong Vu and Mukul G Asher, India-Vietnam: A Comparative Analysis of Economic Performance, Working Paper No: SPP09-03, Lee Kuan Yew School of Public Policy, February 2009