Since the start of the global crisis in 2008, India and China have been on a somewhat similar ground when it comes to economic and policy matters. Both have been in the grip of so-called policy paralysis because of domestic factors. China is transiting to a leadership change with different factions jousting for power, and the Indian government has been hit by a series of corruption scandals and hamstrung by resistance to change from allies and the opposition—a situation the ruling Congress party is trying to shake off. Both countries are trying to change their economic growth drivers—China is trying to boost consumption and India trying to kick-start investment. Thirdly, macroeconomic conditions are worsening in both countries, with recent economic growth numbers several percentage points off their peaks in 2007 or so. Then, why have the Indian and Chinese stock markets behaved so differently over the past half a decade?

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