The Battle of the Two Asian Big Cats: Can India Beat China Economically?

Photo Credit: (AP Photo/Skidmore News) By Bryn Hsu '16

Can India surpass China? The two countries, which together make up half of the continent of Asia, both have risen to power in the last few years and have grabbed international attention. China has stayed ahead of India in terms of economic growth and development of the country, but will this gap be sustainable in the future? China may be strong now, but India may have even more potential due to its different strategy, as the country focuses more on long-term governmental and economic strategies for growth.

India has not grown as quickly as China, but the much-loved former Indian Prime Minister Jawaharlal Nehru famously stated decades ago that India did not need to grow quickly, as long as it grew steadily. Whilst China has rushed to the top in terms of economy growth and country development, India has focused on the application of longer-term strategies that are low-risk and has encouraged more stable and steady economic growth. It is likely that India will soon emerge as a formidable opponent.

India has encouraged the growth of high numbers of private companies. China, on the other hand, focused on exporting, but this left the country with no world-class companies because they only manufactured products. This could potentially cripple China’s future for years to come. India, on the other hand, has invested in white-collar jobs through creating companies competing internationally with the best that Europe and the United States have to offer, allowing India to sustain their growth long-term. Clear evidence for this is seen through the fact that Forbes 200 ranked 13 Indian firms as the world’s best small companies.

What the citizens of the two countries invest in also differs, and the focus of these 2.5 billion people potentially has massive effects on their nation’s economies. Chinese citizens purchase housing and property whenever they can, since they believe that housing prices always increase. This is known as China’s housing bubble, and if it were to collapse, that would heavily disrupt the economy, slowing down the country’s growth and decreasing its GDP.

Indian citizens, on the other hand, invest in gold. Culturally they love gold, and see it as an infallible currency that also symbolizes wealth and prosperity. Gold, unlike housing, is easily marketable. Gold is also low risk, as it is internationally desired. Thus, it is low risk because the price of gold will never drop as dramatically as housing prices could, assuring India that its economy will not be heavily influenced by market fluctuations.

Fortune believes that the most important aspect of India’s infrastructure is its human capital. India’s population is so valuable because of its large pool of young workers—65 percent of India’s population is 35 or under, while China’s population ages rapidly every year due to its only recently loosened one-child policy. China may become the world’s most aged society by 2030, whereas India’s population is still growing and likely to remain young and active in the workforce.

Most telling of all is Forbes’ recent report that India’s GDP is now growing faster than China’s. This increase in growth in India is expected to keep rising, as government consumption growth and investment growth are both on the rise and private consumption is expected to improve at a steady pace.

Governmental regime also appears to be an important factor for assessing where India and China will stand in the future. To support its private companies, India has had to develop methods that allow its markets to operate with greater efficiency and transparency than China’s do (China Now Magazine). China imposes substantial legal and regulatory constraints on private firms, limiting the potential of these companies. China’s government favours its own state-owned companies and discourages entrepreneurs. The lack of transparency and the focus on state businesses limits China’s potential. In the long-term, India seems to have more room and freedom for economic growth.

India and China adopted drastically different strategies in their economic and governmental policies. China’s strategy is now facing imminent problems, the most potentially damaging of all being the housing bubble that could disrupt the country’s economy. India’s strategies have taken longer to take off, but as of February 2015, they have begun to pay off as India takes the lead in the fight towards becoming the fastest growing country. India may be on the rise more slowly, but as a country, they take less risks and steadily progress, while China has been running fast for decades and has recently appeared to be a little out of breath.

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