The Next China

Published on Author haj18

Since the early 1980s, China has consistently been the most rapidly growing economy on earth, keeping an average annual growth rate of 10%. Its unprecedentedly rapid growth makes China as a country with unrivaled economy. However, along with recent dire forecasts on Chinese economy, it has been proposed that economic growth and potential of India would eventually match China’s economy.

In 1990, India’s economy has a history of being eclipsed by China’s mainly due to its strict regulation and hostile environment for trade and investment. Now, in terms of size and per capita income, economists projects that India’s economy is near to where China’s was in 1990s.

India’s strength as a new China lies in low urbanization and Prime Minister Narendra Modi’s new “Made in India” that aims to make India a manufacturing hub in the world. With China’s high urbanization and losing edge in domestic production due to rising labor costs, India is paving its way to step up as the next China.


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2 Responses to The Next China

  1. One big issue with India’s economy is, like we saw in China in the past 30 years, is a infrastructure that cannot keep up with the population and economic growth. India’s road system is outdated and only 75% of India has access to electricity. These problems can be huge deterrents for international companies trying to open up factories within India. Another issue is that the literacy rate in India is only 62%. The smaller government in India is having trouble providing necessities important for India’s development.

  2. Be careful with your hyperbolic modifiers. I myself overstate (implicitly if not explicitly) the uniqueness of China in growing rapidly; South Korea and Taiwan did really well, and Germany and Japan and Italy after World War II. It’s economy is not “unrivaled” — we and Europe are the same order of magnitude in size. As to “dire forecasts”, those are all too plentiful but I’ve been careful to stress that 7% growth is not such a bad outcome.

    As it happens, I was at Columbia University for the launch of their India Center. There are many reasons for cautious optimism that India is growing consistently. There are many reasons — as Zack notes — why 10% growth seems unlikely. (I’d add less favorable demographics, we’ll look at the Chinese case of favorable demographics later this term.)