Enter India,Exit China
India's growth rate is suddenly rivaling, even outpacing, China's. Can it sustain the momentum?
The progress of Asia's two giants, China and India, can be neatly encapsulated by the imagery used to portray them. China is usually characterized as a dragon, aggressive and slightly frightening. India, on the other hand, is often described as an elephant-big and powerful, but also lumbering and slightly ungainly. Unfortunately for India, the caricatures are all too accurate. For the past three decades, China has reigned as the world's premier emerging economy; India always plodded behind, stumbling in China's formidable wake. As China raced with fiery purpose from a poor, isolated nation into the world's second-largest economy, India's boundless potential remained mostly untapped, its people mired in poverty and its footprint on the global stage barely perceptible.
China Mention to an international executive and watch him salivate over 1.3 billion increasingly wealthy consumers. Mention India and listen to complaints about a bureaucracy that tramples free enterprise. That's why foreign investors plowed $124 billion into China in 2013, according to the United Nations Conference on Trade and Development, but only $28 billion into India. China Mention to an international executive and watch him salivate over 1.3 billion increasingly wealthy consumers. Mention India and listen to complaints about a bureaucracy that tramples free enterprise. That's why foreign investors plowed $124 billion into China in 2013, according to the United Nations Conference on Trade and Development, but only $28 billion into India. Granted, these eye-popping growth rates are the product of a controversial and confusing revision by India's statisticians of how they calculate GDP. But even before this, some economists had been predicting that India would start to grow more quickly than China over the next two years. That's because dramatic changes are afoot in both countries.
China's era of supercharged expansion looks to be coming to an end. In 2014 the economy sank to its slowest growth in almost a quarter century, and many economists anticipate its pace will decline even further. The International Monetary Fund expects growth to fall from 7.4 percent in 2014 to 6.3 percent in 2016. To return to health, Beijing's policymakers are trying to engineer a critical rebalancing from investment-led to consumption-driven growth-a tricky transition that's proving much harder than it sounds.
India, on the other hand, is still sitting on the launch pad, waiting for true economic lift off.
Even after two decades of solid if not spectacular growth, it's at an early stage of development compared with China. India's GDP is a fifth of China's. Nearly one out of four Indians remains trapped in absolute poverty, according to the World Bank, compared with only 6 percent of Chinese. Corporate India has scored a few impressive successes-most notably in IT services-but hasn't left as deep a mark on the global economy as Chinese industry.