The factors in India’s favour include demography with 'the outlook for the working age population is superior to that of China', the report said
India needs to refocus on 'domestic policy flaws which have held India back, and in finding the energy and intellectual capacity to address them,' it said
New Delhi: Despite China’s runaway economic growth, there are possibilities for India to achieve extremely rapid growth over the next 20 years or so that will allow it to compete directly with its giant northern neighbour, says a summary of a paper brought out by a Pune based think tank.
The factors in India’s favour include demography with “the outlook for the working age population is superior to that of China, where the one-child policy of 1979-2015 coerced households into a premature `baby bust’" says the Pune International Centre in its paper.
“We must of course be cautious about the extent to which persons in the working age translates into persons who are working and producing GDP," it says.
“This maps the underlying problem of igniting private investment that can get the labour force participation rate up from the present levels of about 43% to Chinese-style values of about 70%," it says.
A second factor in India’s favour is that the “Indian financial system allocates capital better than the Chinese financial system. This gives India an edge in translating the flow of investment into increased GDP and thus reduces the consequences of the gap between investment in India vs. investment in China," the paper says.
The third factor in India’s favour is that the “Chinese exports are fragile to the extent to which they have been led by state interventions, the extent to which they are shaped by distortions in finance, exchange rates and subsidies. This raises questions about sustainability of the level and the growth," the paper says.
Put together by a group including Aji Ranade, President and Chief Economist at Aditya Birla Group and India’s former ambassador to China Gautam Bambawale, the paper looks at “How India can rise to the China challenge." It comes against the backdrop of tensions between the two countries that touched a rare high in decades with a bloody clash that resulted in the first casualties in more than four decades.
“In the history of global economic growth, latecomers have achieved faster and faster catchup to the global frontier of knowledge; there are such possibilities for India to achieve extremely rapid growth over the next 20 years or so," the paper notes.
“China has embarked on the course of having conflicts with a large number of countries. There is the risk of over-reach. India’s position in foreign policy, in contrast, is much more equanimous, with good relations with many (though not all) of the natural partners…These differences suggest that the notion of `strategic patience’ is not just wishful thinking. There is reason to expect that at a future date, India will have the economic, commercial, intellectual and cultural might to compete directly with China," it says.
What India needs to do is to refocus on “domestic policy flaws which have held India back, and in finding the energy and intellectual capacity to address them," the paper advocates.
Currently, the difference in China’s growth and India’s is large, the paper says.
“In nominal terms, Chinese GDP is at $14.9 trillion while India is at $2.6 trillion. Expressed in comparable PPP terms, China is at $24.2 trillion while India is at $8.7 trillion. Looking forward, reasonable scenarios for Chinese growth involve growth rates like 3, 4 or 5 %. Reasonable scenarios for India’s growth involve growth rates like 4, 6 or 8 %," it says.
“If India is able to address domestic policy flaws, then growth rates like 6 or 8 % become more feasible" and “there are many scenarios over the next 20 years or so where the comparison becomes less unequal."
If for example, India grows at 8 % and China at 4 % for the next 20 years or so, the two GDP values in comparable PPP terms emerge in 2041 at $53 trillion for China and $40 trillion for India, it predicts.
Given the tensions between the two countries, New Delhi has been looking for “levers" to ramp up pressure on China economically, the paper says.
India’s aim, it advocates, should be to “think at a strategic level, to build India into an advanced economy."
There are three areas where “there is a case for a retreat from engagement with China," the paper argues making a case for “introducing restrictions against companies controlled by the Chinese state from having a controlling stake in a hotlist of sensitive infrastructure assets" like ports and airports though not highways.
“There is a need to avoid locking into Chinese-controlled technological standards and instead work with global standards processes. In particular, India must go on a path for mobile telephony, on questions such as 5G, with global standards and avoid Chinese controlled standards," it says.
And thirdly, “India must police against and block Chinese state surveillance of Indian persons, which appears to often be done through backdoors in network equipment," it says.
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