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India & China - The Race to Become the Leader

Posted in Finance Articles, Total Reads: 1356 , Published on August 13, 2015

India and China, two of the Asian giants have locked horns against one another to become a world super power. Both countries are in a progress to make a huge mark in terms of development, Defense, international relations, technology and many more. The health of a nation is measured in terms of GDP (Gross domestic product).

Year 1990, both India and China were at par with per capita income and GDP. India’s GDP in 1990 was $ 326 billion against China’s $390 billion. India’s present GDP is $1.9 trillion compared to China’s $9.4 trillion. Today India accounts for 1/5th of China’s GDP. It proves a compounded Chinese growth over the 2 decades. With both India and China dreaming of becoming a world power, we face a question of will India’s emerge as a tiger and outpace the Chinese dragon in the next 15 to 20 years.

Image: Wikimedia

China the 2nd largest economy of the world leads today in terms of hard power. China’s military is modernizing faster than India’s. China’s geopolitical advantage is a huge beneficial factor and is summed for business. China shares border with 14 countries, the largest in the world. It shares 22000 km border with Russia, Vietnam, Myanmar, India, Bhutan, Hong Kong, Taiwan. China has very deep infrastructure linkages and commercial ties with its neighbors. It exports goods and imports raw materials. China has built a Trans national empire of raw materials and is today the world’s largest exporting market. China is also known for its competent and a secular government, basically a planned strategic government. With all these factors in mind China looks 2 decades ahead than India in terms of economic growth, social indicators and Infrastructure size.

India on the other hand is the 10th largest economy of the world. India leads china in terms of Soft power. Soft power today is a crucial factor to built international relations and peace in the world. Though China has a huge geopolitical advantage, India’s naval power cannot be neglected. It has a huge role to play as it is a passage to Middle East and Far East. Japan, England and Spain are a few examples of development due to maritime trade.

China’s development can b owed to its demographics. Mostly were working population and were inclusively contributing to China’s economic growth. India is entering at a golden phase from 2015 to 2045. Last 20 years number of children in primary education has grown by 58 %. India will be in phase where 60 % of population can inclusively work for India’s growth and prosperity. The major challenge lies in skill development and creating job opportunities for skilled labour. India can be looked as a relative pipeline of human capital coming soon.

China is ahead of India in terms of social, political sense. It adopted a system of either cover it up or crack it up. The government deprived people freedom by controlling the source of information through internet and TV stations. The present political system is proving a huge worry for china. It is being feared of a massive slow down or even collapse if its system fails miserably. India’s open political system looks nasty, messy. Its democracy and a current leadership change have changed world’s vision of looking India and foreign market is showing huge confidence in India.

58% of China’s economy is base on fixed investment into infrastructure. With an economy of more than $9 trillion, it is not easy to spend 58 % into infrastructure. Japan had a same economic model till 1980’s but it started misallocating this capital. China can either invest a huge 5 trillion $ into its own economy or it can inflow the capital into different countries. Investing in its own economy with a world class Infrastructure can be a waste and can lead to a slow down. It can also utilize its money by investing in world’s market. India by building a good relationship with China can utilize this capital and its world class technology can help India being a manufacturing hub with a world class infrastructure. It will help in bridging a huge gap in the GDP and India can prove its vitality by emerging as a strong leader and a super power in coming decades.


This article has been authored by Mayank Bhatia from IIM Kashipur








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