Managing China

For that, India must first recover growth momentum, invest in human capabilities

There is no gainsaying the fact that managing the rise of China is the single most important challenge for India. (PTI) There is no gainsaying the fact that managing the rise of China is the single most important challenge for India. (PTI)
Published on:March 14, 2014 2:43 am

The rise of China is no longer news. The recent deceleration of India’s economic growth is also not news. Yet, it is important to remind ourselves every day of the yawning gap between the world’s largest nations and its significance for India’s relations with the world.

A single good visual can often capture the essence of a thousand words. The picture that comes to mind when looking at a graph of the levels of national income (gross domestic product) of China and India from 1990 to 2012 is the open mouth of a crocodile. Joined at the jaw in the early 1990s, wide open by 2010.

If India had sustained the 9 per cent annual rate of growth that it logged in 2003-09 into the last five years, the lower jaw would have risen up and the crocodile would have looked less ominous. India’s growth deceleration of recent years, even in the face of China’s own decelerating growth, has widened the gap dramatically.

Consider the numbers. In 1990-92, the GDPs of both Asian giants were almost the same in US dollar terms, about $500 billion. By 2000, China’s GDP, at over a trillion dollars was already double that of India’s. China’s GDP began to accelerate after that. India’s GDP crossed the trillion dollar mark in 2007, by when China was close to five trillion. Already, the gap was significant and daunting. India did manage to move quickly from a trillion dollar economy to a two trillion dollar economy by 2011, but by then China had hit nine trillion.

After that, both countries slowed down, but that is hardly any consolation for India. At the end of the Cold War, while China and India were at a similar level of development, there were striking and important differences in the structures of their economies and capabilities of their people. These differences have enabled China to emerge, a quarter century later, as a global power.

China’s rise has divided the world into two camps: those who celebrate it — countries that are economically benefiting from its rise and don’t feel militarily threatened, and those who worry about it — countries that may be benefitting economically but worry about competition from China for power and markets. India remains in the middle. It has not yet been a major economic beneficiary of China’s rise, given the high and yawning trade gap — the trade balance graph looks more like the mouth of a hippopotamus than a crocodile — and the low level of Chinese investments in India. On the other hand, India worries about the secular loss of influence and markets within its neighbourhood, within wider Asia and within the world, and about China’s growing military capability.

Managing China’s …continued »

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