Everybody assumes China is positioned to be the next Superpower after the United States.
However, there’s a compelling argument that India has a chance to surpass China over the next 20 years.
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Let’s look back at the evolution between the two countries:
- China’s GDP – $100 billion
- India’s GDP – $50 billion
- China’s GDP – $360 billion
- India’s GDP – $326 billion
- China’s GDP – $17.7 trillion
- India’s GDP – $3.1 trillion
So, what happened?
China joined the World Trade Organization in 1991 and India did not join the WTO in 1995. This gave China a significant head start in participating in global trade. Even though India joined the WTO, it missed out on the initial Foreign Direct Investment that allowed China to build the infrastructure needed to be the world’s factory.
Another factor that gave China an advantage is that it ranks 32nd in Ease of Doing Business while India ranks 62nd according to Worldbank.org.
India’s regulatory environment
- Has been characterized as complex and somewhat unpredictable.
- The bureaucracy can be difficult to navigate, and policy changes can be slow and inconsistent.
- Infrastructure projects often require approvals from multiple government departments and agencies at the central, state, and local levels.
- This can be time-consuming and difficult to navigate, especially for foreign companies unfamiliar with the system.
China’s regulatory environment
- China’s political system allows for centralized decision-making, which expedites infrastructure projects.
- Once a project is approved, it can move forward quickly without many of the local-level obstacles that might slow down similar projects in other countries.
- Many of the companies involved in infrastructure development in China are state-owned, which means the government can directly control their operations and investment decisions.
These factors have led to slower economic growth for India, lower literacy rates, and a less capable workforce incapable of performing advanced tasks.
Here’s what India has in its favor
The average age in India is 28 years old while the average age in China is 38 years old. China’s demographic problems are the most severe in world history, as a result of the 1 Child Policy.
India simply needs to make it easier and more desirable for countries to do business with them. If India starts making policy that is attractive to foreign countries its economy will take off like a rocket.