Why the Indian Elephant is stronger than the Chinese Dragon?
When the discussion is about two of the most populated countries in the world, differing opinions come from all quarters with everyone and his/ her relatives having a theory on which country is more economically superior and stable! While at present the Chinese economy may appear to hold an edge, this article aims to cast light on why the Indian economy is much stronger and will make great progress in years to come.
Although it may be true that India’s economic growth in the last two decades or so has been more sluggish compared to its neighbour, India’s economy in terms of Gross Domestic Product (GDP) for the year 2014 shot up to about 11 percent of America’s GDP from a measly 4 percent back in 1990. Although China did experience a significant growth for the same period, India has never been an export-driven economy compared to China hence resulting in more stable growth, settling at 7.5 percent in 2015.
Another distinct advantage India has held over China is the massive domestic increase in manufacturing, which helped India as it never was export driven to the extent China is, thus not having the kind of detrimental impact that China had. On the flip side, India does have its fair share of problems – Corruption, Red-Tape issues, bureaucracy, sub-standard infrastructure to name a few and these have to be sorted out on a priority basis to ensure growth.
In spite of these drawbacks, India does hold an edge over China in a a number of categories. China’s one-child policy till 2015, would have its negative impacts as it would result in a diminished penetration into the labor force for years to come. Even though China already removed its One-child policy in 2015, it would take around 20 years for China to bridge the demographic divide and have sufficient adults. This would hinder growth prospects as the youth would have the tendency to be more active and versatile in terms of having the inclination to acquire new skills. When compared to India, which never had any population curbing initiatives, which would lead to a decline in the dependency ratio which represents the number of children and senior-citizens compared to the working-age population while the dependency ratio in China would only continue to rise thus resulting in slower growth in economy when compared to India.
Another very unlikely advantage that seems to come up for the Indian economy is the British rule. Yes, the very same rule that plundered India’s wealth by clever divide and rule policies also left a few good things behind, namely a system for the central government to function, the railways which serves as a lifeline for transportation of people and goods but arguably the most important aspect that has helped India is a presence on the global front – the English language, a key aspect which India’s neighbors would never come to benefit from.
In a world where English is the most prominent language where almost all business discussions, trade deals and economic decisions take place in English, India certainly has a lead over China thus propelling it onto the global front and also serving to unify a nation consisting of hundreds of languages and dialects.
All the above-mentioned factors can be considered as the attributes responsible for global companies to be established in India, the leaders being the TATA group, Reliance, Birlas, Wipro, Infosys, etc to name a few. These companies have not only taken India onto to the global front but have also invested in companies based in other countries, like TATA son’s acquisition of Jaguar Land Rover(JLR) which has truly put India on the world map thus ensuring its economy will always be shining bright and bringing in investments from all quarters.
To further expand on the above, a myriad of American and European firms have begun outsourcing their IT based jobs over to India, including but not limited to legal and medical devices as well thus pushing its outsourcing revenue upwards of 95$ Billion a year as India’s lower wages and English-speaking ability make it a lucrative source for investment. China, on the other hand, would admittedly lose out on outsourcing opportunities not only due to the above mentioned reasons but also because of its Communist outlook that it possesses and also the numerous restrictions of the Chinese government on free trade, Internet and other related services.
So, bringing things to a close, although both the behemoths that constitute India and China are progressing at their own steady rates, India appears to hold an edge and presents a much stronger case for itself in terms of attracting investments which would help boost its economy’s prospects.
We hope you enjoyed this article. For regular updates from the world of financial markets, subscribe us via email and we will deliver our next article, right in your mailbox!