India's command of the English language, IT technology, creativity, international business savvy, a younger population and argumentative democracy according to Amartyan Sen are often cited to support the notion that with her sustained top-speed growth in recent years, India is destined to overtake China by mid-century.
This is not without some foundation. India's IT sector now accounts about 17% of her growth and its contribution is expected to increase from 5% to 7% of her GDP by 2020. She has some 800,000 IT professionals and is providing a third of all IT engineers in the Silicon Valley. 48% of the world's business process outsourcing is undertaken by India. There is an impressive track record of epoch-creating inventions of Indian origin, including the Pentium chip (Vinod Dham) and Hotmail (Sabeer Bhatia). In addition, ArcelorMittal is now the world's largest steel maker and the ubiquitous Tata Group, having bought Jaguar and Landrover, is emerging as a global player in the automobile industry. The Bombay Stock Exchange now boasts of 6,000 listings, compared with some 1,000 of her Shanghai counterpart.
A more sober view, however, may be inclined to think that at least, the jury is still out:
(a) China's GDP is three times larger than India. In PPP terms, China's economy has been the world's second largest for some time. The annual growth of China's trade exceeds the total annual value of India's trade. China's exports are eight times larger. Her savings of $4,800 billion dwarfs India's $215 billion. Her Foreign Exchange Reserve underpinning the strength of the RMB is the largest the world has ever seen. Now exceeding $1.68 trillion, it is growing at a rate of $1.7 billion a day.
(b) Goldman Sach's graph projection (The Economist, June 30, 2007) shows that in nominal terms, while the India economy is expected to catch up with the US by 2050, China's economy will surpass the US in about a decade and will exceed both the US and India respectively in 2050, by as much as some 70%.
(c) Again, quoting research by the Brookings Institution, The Economist (January 27, 2007), highlights China's much higher Total Factor Productivity, at 4% compared with India's 2.3%. China's higher TFP is most marked in industry, at 6.2% compared with India's 1.1%. On the other hand, India enjoys much higher TFP in services (3.9%) compared with China (0.9%), but the higher percentage is largely confined to financial, telecommunications and business services, accounting for only 28% of India's economy.
(c) China has much more superior infrastructure, including a modern highway network only second to the US's interstate system. She is now steaming ahead with the world's largest railway project since the 19th century, from 78,000 km (carrying 25% of the world's freight with only 6% of the total length) to 100,000 km by 2020.
(d) Working with Credit Suisse, Jonathan Garner, in his book Rise of the Chinese Consumers - Theory and Evidence (John Wiley & Sons, 2005), concludes that with the appreciating RMB, the US dollar value of China's consumer demand would contribute more to global consumer growth than the US by 2014, thanks to the rapidly rising 'Chinese middle-class' expanding to second and third-tier cities.
(e) The Mckinsey Global Institute in March 2008 highlights China's explosive urbanisation, to grow by 350 million urbanites to 1 billion by 2025. On track are 221 cities each with a population over 1 million (35 such cities now in the entire EU), 15 super-cities each with a population of 25 million, and 11 hub-and-spoke conurbations each with a population of 60 million. Interestingly, the resultant efficiency of such concentration is expected to result in savings of 2.5% in government development expenditure and 35% emissions.
(f) Nicholas Lardy of the Institute of International Economics points out that China is now the largest trading partner of the EU, Japan and most countries in the Asian region (Beijing Review, 19 April, 2007). Added to this are China's increasing business investments in Africa, Latin America, and Central Asia, mainly but not exclusively confined to resources.
(g) Because of China's One Child Policy, India is set to have the world's largest pouplation in about 4 decades. Notwithstanding India's stellar performance in the IT and business outsourcing sector, the employment generated by this is miniscule compared with her teeming millions, including a vast pool of uneducated young children. To generate sufficient jobs for the masses, India, like China, has to industrialize much more extensively. In doing so, she has to overcome various barriers including bureaucratic bottlenecks, rigid labour laws and inadequate infrastructure.
Needless to say, China has to grapple with huge internal and external challenges ranging from energy inefficiencies, pollution, inequalities, corruption, perceived deficiencies in the rule of law, human rights and civil society, lack of checks and balance in governance, economic and regional imbalance, rising international protectionism, and stirring ethnic separatism. She is home to 20% of mankind but is endowed with only 7% of the world's arable land and a third to a quarter of the world's per capita water availability, much of which is polluted. China's GDP per capita still ranks below 100 in the world, amongst the world's poorest nations.There has already been a dramatic sea change in China's progress and development and these will gather momentum in the years and decades ahead. But as Premier Wen famously said, 'Don't over-estimate China, for you have to divide your estimate by 1.3 billion. Don't under-estimate China, for you have to multiply it by 1.3 billion'.
It is obvious that both China and India cannot afford to go on any ego trip. Perhaps this comparison misses a very important dimension. There is so much that both China and India can learn and benefit from each other, now and in the forseeable future. In an increasingly inter-dependent world, there is much more to be gained in cooperation than competition.
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