The economic growth race between India and China started in the late 1940s, around the time India gained independence and adopted democracy and China turned to communism. Given the sheer size of their populations, each has the potential to dominate the global economy but until recently, it's been no contest: In 2013, China's per capita gross domestic product was 4.5 times larger than India's.
The latest forecast suggests that the tide may be turning in India's favor, possibly for good. The World Bank anticipates (PDF) that, by 2017, India will be growing faster than China:
This is a short-term forecast based on some very specific circumstances. India, for example, now has a credible central banker doing sensible things like tackling inflation. The country's popular new government is finally building infrastructure and cutting the red tape that held the economy back for so many years. If India keeps it up, the World Bank expects its economy to grow 7 percent in 2017, up from 5.5 percent in 2014. Meanwhile, the forecast calls for growth in China (PDF) to slow as its government reduces spending, tightens credit, and unwinds its housing bubble. The bank expects China's growth to fall from 7.4 percent in 2o14 to a modest 6.9 percent in 2017.
Allison Schrager’s hypothesis is interesting and the outcome is likely to be important for the global economy. Potentially, we will have two Asia Pacific superpowers with huge populations. Today, only China can claim this status. Inevitably, governance will be a key factor in their continued development.
China’s governance over the last three and a half decades has clearly been much more effective since Deng Xiaoping became leader in 1978. Currently, both China and India have strong leaders in Xi Jinping and Narendra Modi. Both face serious problems of corruption, which can be the biggest impediment for GDP growth. Both are changing the course of their economies: Modi with a root and branch overhaul to increase efficiency and productivity; Xi by creating a consumer economy to reduce dependence on heavy manufacturing for export.
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