China has moved far ahead of India in economic growth over the last four decades. China’s GDP per capita is four times that of India, but India is catching up fast.
India’s economic growth is expected to hit more than 7 percent this year and that sort of pace looks sustainable over the next few years. That means India has finally outpaced China in growth clip.
In my observation, India has missed several major opportunities, especially when you compare its economic development process with that of China and several other nations in East Asia. The good news is that things are moving in the right direction, finally.
In the past, in view of its over-restrictive labor rules, India has missed the chance of growing its economy by relying on exports of manufactured products.
But as costs rise and amid concerns about US-China trade tensions, many factories are moving their production facilities out of China. Vietnam and Bangladesh have emerged as some of the biggest winners.
But compared to China, these smaller countries do not have enough manpower. By contrast, India’s workforce increases by 6 million a year, while only creating about 4 million jobs. India should be able to further exploit this advantage. Local production of Samsung and Xiaomi phones, for example, attests to this positive trend.
India has a very strong IT sector, with leading players like TCS, Infosys and Wipro. Indian universities like IIT and IIM have long served as cradles of talent for Silicon Valley.
However, India has failed to create major internet firms of its own due to a limited domestic market and its poor telecoms infrastructure.
Realizing the potential, India’s largest conglomerate Reliance is now using its strong revenue from its oil and chemical business to support new investments in retail and digital services.
The company has invested over US$40 billion in building optic fiber and wireless networks. The number of users is expected to reach 400 million to 500 million from 300 million within one year.
Sales of Reliance’s Jio mobile phone have seen rapid growth. I believe Reliance has the potential to become the Indian version of Samsung, SoftBank and Amazon all rolled into one.
Poor infrastructure is another huge bottleneck in India.
For instance, a cargo takes up to nine days to travel from Mumbai to Chennai on the east coast.
But the government has realized the importance of infrastructure investment.
It’s building another new airport in Mumbai and constructing 11 subway lines. It is also set to build the country’s first high-speed railway to link Mumbai and Ahmedabad.
In terms of long-term performance, India’s stock market has been among the top globally, and far better than that of China.
I think its long-term outlook is getting ever brighter as India’s economic growth accelerates.
This article appeared in the Hong Kong Economic Journal on Feb 19
Translation by Julie Zhu
[Chinese version 中文版]
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