Opinion Paper dragon

In 1978, India’s GDP of $140 billion wasn’t far behind China’s at $148 billion. Even in 1990, when India was about to embark on economic reforms that China had already initiated some 12 years earlier, there was not much difference between the GDP of the two countries ($327 billion versus $357 billion, respectively). In fact, India’s annual per capita GDP, at $376, was higher than China’s at $314. But in 2014, the International Monetary Fund’s (IMF’s) GDP estimate for China, at $10.36 trillion, is five times that of India’s at $2.05 trillion. What’s more, its per capita GDP of $7,572 is now way ahead of $1,626 in India.

The above numbers are worth taking note of when the Chinese economy has expanded by 7.4 per cent in 2014, its lowest in 24 years, and the IMF projects India’s GDP growth at 6.5 per cent in 2016-17, to surpass China’s 6.3 per cent. Prime Minister Narendra Modi has projected his own vision of India becoming a $20 trillion economy. What these essentially suggest is a magnitude of possibilities. There is no doubt the Chinese economic machine has slowed down. This is partly a statistical inevitability: average annual growth of 9-10 per cent for over three decades has to, at some point, fall to 6-7 per cent or lower. China has clearly reached that stage where it cannot build too many new steel mills, aluminium smelters or even airports, expressways and high-speed rail networks. India, by contrast, is short of all these and more. Its economy did grow by an average of 8.3 per cent a year during 2003-04 to 2011-12, but we know how this was eventually derailed by policy paralysis, fiscal irresponsibility and infrastructure bottlenecks.

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India could well aspire to grow for the next 20 years at rates China achieved over the last 30 years, which saw it lift some 700 million people out of poverty. But India, unlike China, faces practical challenges of being an argumentative democracy. Growth has to be a shared enterprise, taking people along — what Modi calls “sabka saath, sabka vikas”, though this may not find resonance with many within his larger parivar. Second, China’s scorching pace of growth was largely powered by exports and a booming world economy. The external environment today may not be that favourable. India’s economic strategy, therefore, will necessarily have to be different — it must focus more on large-scale infrastructure investments. These, by themselves, will create enormous growth opportunities, including for making in India.