India could pass China in economic power

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Soon after winning an absolute majority in the Indian parliamentary elections, prime minister-elect Narendra Modi promised “to make the 21st century India’s century.”

GWYNNE DYER

If he can avoid tripping over his own ideology, he might just succeed.

“India’s century” is a misleading phrase, of course, because no country gets to own a whole century.

It wasn’t ever really going to be “China’s century” either, although China is a huge country with an economy that has grown amazingly fast over the past three decades. What Modi meant was that India, the other huge Asian country, may soon take China’s place as the fastest growing large economy — and it might even surpass China economically, in the end.

At first glance this seems unlikely. India’s gross domestic product is currently less than a quarter of China’s, although the two countries are quite close in population (China at 1,36 billion and India at 1,29 billion). Moreover, the Chinese economy’s growth rate last year, although well down from its peak years, was still 7,7%, while India’s grew at only 4,4%.

But China’s growth rate is bound to fall further for purely demographic reasons. Due partly to three decades of the one-child-per-family policy, the size of its workforce is already starting to decline. Total population (and hence total domestic demand) will also start to shrink within five years. And this doesn’t even take into account the high probability of a financial crash and a long, deep recession in China.

India’s growth rate has also fallen in recent years, but for reasons like corruption, excessive regulation and inadequate infrastructure, which are a lot easier to fix. And the reason that Narendra Modi’s Bharatiya Janata Party (BJP) won by a landslide was precisely that voters thought he would be better at overcoming these obstacles to growth than the worn-out and deeply corrupt Congress Party.

Modi did not win because a majority of Indians want to pursue divisive sectarian battles that pit Hindus against India’s many minorities, and especially against Muslims.

That has always been part of the BJP’s appeal to its core voters, but its new voters were attracted by Modi’s reputation as the man who brought rapid development to the state of Gujarat, which he has ruled for the past 13 years.

They want him to do the same thing nationally.

The BJP’s absolute majority in parliament means that Modi will not be constrained by coalition allies like previous BJP governments were.

This could lead to a leap in the Indian growth rate if he uses his power to sweep aside the regulations and bureaucratic roadblocks that hamper trade and investment in India.

Modi also has a golden opportunity to crush the corruption that imposes a huge invisible tax on every enterprise in the country. Unfortunately, his extraordinary political freedom also means that he will find it hard to resist the kind of sectarian (anti-Muslim) measures that the militants in his own party expect.

He cannot use the need to keep his coalition allies happy as an excuse for not going down that road. Nobody knows which way he’ll jump, but it might be the right way.

What might that mean over the next decade? It could mean a politically stable India with a growth rate back up around seven or eight percent — and a China destabilised by a severe recession and political protests with a growth rate down around four per cent.

While neither political stability in India nor political chaos in China are guaranteed in the longer run, by 2025 the demography will have taken over with a vengeance. China’s population will be in decline, and the number of young people entering the workforce annually will be down by 20% and still falling.

India’s population will still be growing, as will the number of young people entering the job market each year.

That will give India a three or four per cent advantage in economic growth regardless of what happens on the political front.

In the long run both countries may come to see their massive populations as a problem, but in the medium term it looks increasingly likely that India will catch up with and even overtake China in economic power.

Dyer is a London-based freelance journalist.

2 thoughts on “India could pass China in economic power”

  1. Chris Veremu says:

    Might the reason be that the Indians have a superior political philosophy than the Chinese? Those who are free to think as they please tend to be more creative and will work their behinds off to achieve ‘their set goals….’They are happy pay back the latitude they are granted as payback for the confidence entrusted on them by their leadership. This arms a well oiled citizen be ready play a part in the machine that is society. Without fail ( as he owns the process) the citizen does his part and more to propel it forward. This leaves a glowing feeling all around. And there is nothing base Utopian about this, but cold reality! It is empowating to be allowed to freely create, discuss and evaluate your actions. It is unproductive to force your citizens to spend half their waking and sleeping hours looking over their shoulder in case one idiot representing authority abuses it to stifle and destroy valuable creative space! Disciples of Deng architect of China’s, who by the way, appear to be on the ascendency will not allow dogmatic authoritaniasm to stifle China’s ‘made in heaven’ explosion of beuatiful growth to go back to yesterday. Those who have tasted the sweet fruits of economic freedom are looking for more freedom not go back to last decades’ pain. They will defend their gains with everything at their disposal after all theirs is God’s fight. If God created man in his image his desire was for man to be free as he says he is a jealous God one God.. Those who seek to usurp this holy and royal authority will come short. History is littered with these ‘misadventure’ seekers.

  2. Chris Veremu says:

    Apologies…above should read “empowering”

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