India vs China: Who is the next economic giant?


Among the emerging nations of the world, although both China and India are trying to outdo each other in trying to become the future economic leader of the world, but the truth is that China is far ahead of India in terms of economic growth and development. China and India had similar development strategies until they deliberately broke away from their insulation from the global economies and ushered economic reforms to keep pace with globalization. In fact, foreign investors consider China as a more favorable destination than India, despite of less transparent investment policies of an authoritarian Chinese government. China had received around $700 billion worth foreign direct investment compared with only $68 billion cornered by India. China is also making inroads into the foreign economies at a faster pace than the domestic Indian companies are with 3 times more direct investment abroad than India. The market capitalization of the 10 largest companies in China is $1.8 trillion whereas the same in India is only $0.5 trillion.

China’s Gross Domestic Product is three times that of India with 55 percent of the Chinese labor force employed in industry and services compared with only 40% of Indian labor force in the secondary and tertiary sectors. Despite of a lower total acreage of arable land and lesser number of people employed in agriculture, China’s agricultural productivity is higher than that of India.

China has outpaced in terms of global integration. According to the estimate made by R Gopalan, Joint Secretary (East Asia) in the Commerce Ministry, labor productivity of a Chinese worker is higher than that of an Indian worker by anywhere between 30 percent and 180 percent depending on the product. Gopalan has further found that the Chinese goods have a greater cost advantage than the Indian goods. Although, China’s service and merchandise exports far outpaced the average growth of world exports but its merchandise exports grew much faster than service exports. In contrast, India’s service exports are growing at about double the rate of its merchandise exports and if this trend continues then the share of service exports in total exports will be over fifty percent in this decade. India is five to seven years ahead of China in the software sector. India is also far ahead of China in pharmaceuticals with UN buying more than half of its vaccines from an Indian company. China’s vaccine production does not meet international standards.

India seems to have a brighter future prospect compared to China with a population that is growing younger and will continue to supply young work force for a long time compared with the aging Chinese population, the result of the Chinese government’s family planning strategies and rapid rise in life expectancy of the Chinese people.