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Can India really be the 'next China'?October 27, 2015, 5:32 AM IST
The bulls say India is the 'next China'. Odds are they are right, if not today then within a decade or so. But even if this proves to be right in terms of growth, India is a very different country than China on many fundamental dimensions, demography and democracy being key. But most importantly, China has been built on infrastructure, investment and manufacturing, while India has barely scratched the surface on all three.
India began its economic reform in the early 1990s, more than a decade after China. But in the past 25 years, China has turbocharged its economy while India has languished in relative terms. Why?
Chinese growth has been driven by some of the world's highest investment rates. This has, in turn, made possible an infrastructure revolution of new cities, high-speed rail lines, airports and ports and manufacturing muscle that is the envy of the world. China has also been the world's factory for 20 years. Its ability to quickly and efficiently move what it produces domestically and around the world has been a critical ingredient in its growth miracle.
Today, India lags far behind China on all three dimensions. India invests about 30% of its GDP, compared with about 50% in China. Manufacturing is about 20% of the Indian economy, compared to China's about 30%. China has arguably the best physical infrastructure outside the western world. India's looks more like the poor country that it still is.
But this is a real opportunity for India. Increase investment. Improve infrastructure. Grow economic output. This is a tried and true path to growth, and it is one India is poised to follow.
Yet it seems that the private sector won't act until it is more confident about politics. Nowhere is India more different from China than in the world of politics. But this doesn't mean that India won't go on a growth charge the way China has. The raw material India has to work with is so rich. The challenge now is to catalyse it.
The writer is Dean, Wharton School of the University of Pennsylvania.
sent from samsung galaxy note3 neo, so please excuse brevity