Shirish Sankhe, partner, McKinsey and Company, said at a seminar organised by CII on Tuesday that replicating the lessons of China's success would be an effective way in improving India's competitiveness in the world economy.
He said labour productivity in China grew by 8.9 per cent from 1990 to 1999, which had been a major driver of the country's gross domestic product growth during the same period.
Comparing with India, Sankhe said that China's growth was driven by the existence of a large domestic sector. In fact, the domestic economy accounted for two-thirds of the difference in Indian and Chinese per capital GDP.
The study said that China's high domestic consumption levels were a result of low prices, which were lesser by 20 per cent to 40 per cent than Indian prices across most products.
Dismissing the belief that Chinese products were of low quality, the McKinsey official said the reality was that products of several Chinese manufacturers were of world-class quality.
Some of the Chinese companies were enjoying high market share in the world, which would not have been without good quality product, he pointed out.
McKinsey's piece of advice for Indian manufacturers was that they would have to hit at a lower price point to encourage domestic consumption and increase labour productivity.
Talking about tax reforms, he said there were distortions in the Chinese taxation system. However, the Chinese government had taken important steps to do away with these distortions and the country at present has a uniform value added tax regime.
On Chinese exports, he said foreign direct investment was a major driver, with foreign-invested enterprises accounting for more than 50 per cent of all exports in 2000.
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