- Posted January 17, 2013 by
The future of global economic supremacy: China and India
In the post-depression era, who will be the global economic super-power? Will the U.S retain its position as the numero uno force in the universe? Will Japan and the Euro Zone nations survive the fiscal tsunami that hit their shores and dominate the world economy? A report from the National Intelligence Council predicts that the world, in all probability, will face a "tectonic shift" with the Chinese economy expected to outgrow all its competitors. Apart from China, another major player here is India. In the coming years, can one of these countries turn out to be the Big Boss of world economy?
People's Republic of China and India - a comparative study of their economic climate
China - The second largest economy in the world, the undisputed leader of major developing nations, the neo-economic imperialist. With 41% votes, it topped a survey (conducted by PEW Research Center in 14 countries), which predicted China as the new economic superpower. But PRC does need to fix a few issues before throwing its weight around:
• Chinese economy, unlike India's, is primarily export driven. Just 38% of the GDP is accounted for by the internal consumers. It's a proven fact that export driven economies do not generate top jobs. The Chinese Government is trying to bring in some balance by increasing public expenditure, but the people of China are too reluctant for generous spending because China still doesn't offer social security and basic medical facilities for free. On the other hand, a large consumer base and consequently, a large domestic market keeps India a step ahead.
• The next concern is about the cost of setting of production facilities in China. Also, multi-national corporations are sceptical about technology transfers to China. There is a growing sense of insecurity about violation of intellectual property rights in the country.
• People's Bank of China is hopelessly under the control of the Chinese government, but the Reserve Bank of India works independently. In fact, the strong democratic set up in India is quite encouraging for industrial growth. The one party system in China, more often than not, makes people uncomfortable. From press to monetary decisions, politicians call the shots in the Chinese territory.
• Unlike India, China still lacks enough english speaking skilled labors. A quarter of India's exports (about $69 billion) come from outsourcing services. The British colonial rule, along with all its toxic inputs, gave India one major edge in the global market - it left a large volume of English speaking natives. India clearly beats China by a large margin in terms of confident English speaking population.
• Finally, India's political and economic alignment with the west is an added advantage. Not too many developed countries of the West are comfortable collaborating with China.
The other side of the story
India - Population remains poor, but the country enjoys rapid growth. World's fourth largest economy is rising, though it has experienced some stagnation lately. To surpass or join China as a major economic force, India needs to remove some serious stumbling blocks in its way.
• India is an attractive proposition in terms of cheap labor, but it needs to enhance labor skills by developing centres of excellence. Not a single Indian university ranks among the top 200 universities in the world. This will change in the future, but the change needs to come sooner than expected.
• The British built an extensive railway network in India but post-independence the Indians have done little to take it forward. Indian railway, with crawling speed and dirty interiors, is a perfect example of a clumsy, half-hearted effort. The high speed Chinese railway system can compete with the best in the world. The point is that India lags a dozen miles behind the Chinese in terms of infrastructure and cutting-edge technology.
• Independent surveys indicate that corruption in India is higher compared to China. Six decades of independence and democracy has not resulted in enough progress in this direction. Democracy isn't the panacea of all economic problems it would seem.
Both China and India are struggling with some serious challenges. The Chinese may face problems arising from political crisis while India is stuck with infrastructure and corruption issues. Both the countries lack the global political dominance of the U.S (the United Nations, the IMF, the World Bank are all located in the U.S). Probably, it will be some time before we witness a "Chinese miracle" or an "Indian Economic Revolution".
Reported by Debasubhra Banerjee