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Playing Catch-up With The Dragon: Will India Be Able To Beat The Chinese Economy?

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By Pradyut Hande:

The bustling Asian theatre has borne witness to the startling ascendancy of the two neighboring behemoths — India and China — over the past few decades. The two oldest and perhaps greatest civilizations of the world have certainly come a long way, traversing a course of history distinctly disparate and yet uncannily similar at some intertwined level. The rapid socio-economic progression of both nations has sparked multitudinous debates and often unfair comparisons from myriad quarters. Many uninformed Indians may be rankled by such comparisons as the usually dormant “patriotic beast” surfaces on such occasions. However, the truth be told — the industrious Chinese are miles (probably an understatement that!) ahead of India. A cursory glimpse at the following figures is enough to drive the point home:

  1. The Chinese economy, backed by an amazingly efficient manufacturing backbone and an artificially cheap currency, is four times larger than that of India’s — both in terms of absolute and per capita GDP.
  2. The Chinese foreign exchange reserve coffers presently hold more than $3000 billion — approximately 10 times the size of India’s foreign exchange reserves.
  3. The Chinese military budget for the year 2009 was $80 billion compared to India’s $22 billion.
  4. For every ton of steel India manufactures, China manufactures a whopping 10 tons — a testament to their far superior infrastructural competencies.
  5. China’s literacy rate is pegged at an impressive 95% whilst only 65% of India is literate.
  6. China bagged an incredible 100 medals at the Beijing Olympics while our country basked in the ecstasy of winning just 3.

Sobering? These are merely a few figures that are sufficient enough to dampen the spirits of the most pro-India supporter. The “are we ever going to surge past the Chinese” question seems more rhetorical than practicable and ergo, ought to be replaced with the more germane question — Are we ever going to catch up with the Chinese? Yes, the tortuous road ahead lies strewn with myriad obstacles waiting to “topple India’s socio-economic cart” but the fact is that India’s future prognosis appears more bright than bleak. Some economists are of the firm opinion that India’s growth rate could overtake that of China’s by the year 2013. Many also believe that India could become the most rapidly developing economy over the next 25 years. I shall attempt to elucidate three major factors that could potentially fuel India’s future growth and arm it with an almost tangible edge over the Chinese.

Factor 1: Favorable Demographic Dynamics:

The ruthlessly efficient execution of the contentious “one-child policy” by China will soon begin to have major impacts in the not-so-distant future. While these projected ramifications are undoubtedly beneficial on the one hand; these are liable to be deleterious on other levels. With an ageing workforce, China’s population will witness a decline that could work in India’s favor. 60% of India’s present population is below 30 years of age. This percentage is only likely to increase in the years to come. Endowed with a young, vibrant workforce; the Indian economy would greatly benefit from this demographic dividend. Also, India’s dependency ratio (the ratio of children and the elderly to the working-age population) is most favorable and regarded as one of the strongest the world over. Ergo, India’s long term economic progression hinges significantly on its favorable demographic dynamics.

Factor 2: Democratic Governance:

There have been worthy arguments regarding the efficacy of a democratic government in accomplishing far ranging objectives. The misplaced notion that democracy often retards rapid development of developing nations has taken root over the past few years. Hence, the entire concept of democracy has taken a major hit in the face of elected governments often pandering to popular public sentiment or interests of vested factions. There is no denying the fact that a democratic system of governance has its own pitfalls, as is plainly evident in India. That theory is of course put to test when one cites the instance of China’s authoritarian State-controlled government. The Chinese top-brass has succeeded in adopting a proactive holistic developmental strategy that takes cognizance of its citizens in the long run. Nothing appears to scupper their chances or stand in the way of their policy executions; unlike India where even the most urgent matters are put to endless and often fruitless debate. However, democracy does have its fair share of merits that promise to hold India in good stead provided that there is a strong Central government in power.

Factor 3: Sound Corporate Setup-

India may be plagued with a plethora of issues with visibly adverse effects; but boasts of an ever-burgeoning private corporate sector that has gone from strength to strength; working feverishly fueling India’s economy. Scores of result-driven entrepreneurs have taken flight in the unforgiving domains of the corporate kingdom. Many have scripted unparalleled success stories, metamorphosing into major global players. These companies are less dependent on state patronage as compared to China. Additionally, the seamless transaction of ideas in India cannot be replicated in China where the corporate realms remain shrouded in the omnipresent cloak of secrecy and state censorship.

The above factors are sure to be major determinants of India’s long term socio-economic success, capable of propelling us “closer” to the Chinese economy. However, one ought to look at the larger picture here. Comparisons with our industrious neighbors serve absolutely no purpose if we fail to learn from their success and failure alike… if we fail to leverage our own strengths to our advantage. For now, the Chinese appear to be running away with it. But alas! All that could change in the future.

The writer is a Correspondent of Youth Ki Awaaz and a business student with wide ranging interests and strives to address myriad issues of national and global consequence.

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You must be to comment.
  1. M. Guha Rajan

    True. China is miles ahead of India, few more points to add.

    i. Chinese foriegn exchange reserve is in trillions of dollars, while India reserve is in billion.

    ii. US government is desparately asking Chinese government to allow appreciation of Chinese currency Yuan against USD, this means US is much worried about China rather than India.

    iii. Recently read article published by Asian Development bank, it states the possibility of chinese currency becoming the global reserve currency in the near future.

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