China and India, two fast growing economies in the world with largest and second largest populations respectively, have all eyes on them. The world looks to the east and sees the sun rise on these two nations. But the relationship between two economies has been competitive and complicated at its very best. Armed with a communist/authoritarian regime, China plays by rules much different than those of India. While the intellectuals vehemently spoke of the benefits of a dictatorship and that a dictator would be able to get more out of its populace in forms of taxes and labor and thus give rise to a richer economy, India held democracy close to its heart and managed to prove that the road to growth does not have to be stained with the blood of its people.
Today India’s GDP stands at approx 6% of World GDP, while that of China stands at approx 16% of World GDP. But the difference can be accounted for. While the Chinese dragon started breathing fire in 1980, Indian tiger started roaring around early 1990s. Given the head start and the repressive regime policies, Chinese economy soared high. But now the times are a-changing. Recently the IMF forecast predicted that Indian economy will grow faster than that of China in the next fiscal year. Though Chinese economy is already much bigger than that of India and this comparison doesn’t really matter, it is a good news for India. We might not be there yet but the signs are showing good times ahead and India seems prepared to grab the silver lining.
While China will have to deal with an aging population in the coming decade, India will have the world’s largest young/working population. China’s ‘One child policy’ has done great damage to its economy. It is left with a very large aging population that cannot contribute to its economy and a relatively small working population to support it. On the other hand, India placed no such restrictions and very soon will reap the benefits of it (at least from an economic standpoint). While the Chinese economy is showing lowered manufacturing activity, India is all set to increase it with various government schemes such as Make In India in place. Indian manufacturing sector has a lot of potential as it can provide employment to relatively less educated/uneducated population in the form of manual labour. With the current government’s emphasis on brining in FDI, the economy is set to benefit in the long run as better investment will lead to better infrastructure, employment and growth.
Apart from Internal factors, there are a lot of external factors that will affect both the countries in the coming years. One of them being US President Elect, Donald Trump. His disbelief in Chinese government might influence the future policies that US makes with China and could hurt the Chinese economy. India is not safe either as our highest FDI Inflows come from US and Donald Trump is inclined towards reshaping US to a protectionist form of economy. Donald Trump is not the problem, it is the will of people of US and other countries in the west. During US presidential elections 19 out of 20 candidates supported protectionism in the markets. Brexit occurred as a result of people wanting to close their borders, even if it came at the expense of economic growth. These events are a window to the mindset of people in west. With such a disaster looming on global front, both India and China will have to prepared to reduce their dependence on other countries and If possible, use it as a golden opportunity to rise as leading global economies.
China is already making efforts to make its presence felt globally. Chinese currency Yuan was recently added to SDR ( Special Drawing Rights) basket at IMF, making it part of the elite group. The ambitious CPEC (China Pakistan Economic Corridor) and OBOR (One Belt One Road) will improve trade connectivity of China and improve its trade prospects by facilitating smoother/faster trade via land and water. While CPEC is being seen as an act of strategically side stepping India politically, it has more to do with the economic health of China. It will facilitate its exports and give a boost to its economy.
On the other hand, India is trying to improve its global prospects by improving its strategic relationships with countries. It has launched schemes such as Jan Dhan Yojana to pull its poor out of poverty. Schemes like Make in India, Digital India are revolutionary and have the potential to uplift our economy. With focus shifting to cashless fair/transparent economy in the wake of Demonitization, there is no doubt India is leaving no stone unturned to ensure its people rise with the country.
While things look quite bright for India, there is still a lot of work to be done. China has a large proportion of its female population in the workforce while the corresponding numbers in India are very low. India also lags behind china when it comes to Infrastructure and education/literacy rates. For India to do well in the longer run, it will have to improve on all these fronts. Encouraging women empowerment and education, improving investment in roads/railways and imparting quality education to all will work to India’s benefit. We have indeed come far, but we still have a long way to go.
Democracies fail when they ask too little of their people. India needs to call its people to participate in this wave of growth and play their part well. We all need to contribute to ensure our country achieves its true potential. Given the right strategy, India Tiger will rise against odds and will emerge as a winner irrespective of how many dragons breathe fire on its way.