Is India Catching Up with China?

Filed in archive News on December 26, 2009

India is not catching up with China. At least if you mean that soon the Indian economy and the Chinese economy will be level with each other, then it isn't.

If you think you heard me say something like that India's economy wasn't really that important, or wasn't prepared to compete with China's economy, you weren't listening. When I say that India isn't "catching up," that doesn't mean it's not keeping up. And it doesn't mean that the Indian economy isn't growing in importance.

BusinessWeek took a close look at the Indian economy this week. The general public seems the view India as being decades behind China, economically.

In 2008, China's GDP was just a bit more than three times that of India. If India's GDP grows at 8% to 9% a year over the next decade-a reasonable prediction based on analyses by Goldman Sachs (GS), the U.S. National Intelligence Council, and other analysts-India's GDP in 2020 will be almost the same as China's in 2008. Of course, China would have powered ahead by then, but the fact remains that India's economy is about 12 to 14 years, not decades, behind China's. This is exactly the difference from 1978, when Deng Xiaoping launched China's reforms, to 1991, when India jumped onto a similar train.

In other words, India is going to gain more and more attention iin the coming years as a factory for the world - just like China did in the late 90's. After all, manufacturing (not technology) is the single largest component of India's already-huge economy.

China has spent the last decade trying to cut into India's outsourcing market. Shortly, India will begin trying to cut into China's export market. India is a steady 12 or so years behind China, economically. It is not catching up yet. But if the Chinese economy stalls for any reason, the story changes.


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