Why Does India Lag So Far Behind China?

Indian mainstream media headlines suggest that Pakistan's current troubles are becoming a cause for celebration and smugness across the border. Hindu Nationalists, in particular, are singing the praises of Indian Prime Minister Narendra Modi and some Pakistani analysts have joined this chorus. This display of triumphalism and effusive praise of India beg the following questions: Why are Indians so obsessed with Pakistan? Why do Indians choose to compare themselves with much smaller Pakistan rather than to their peer China? Why does India lag so far behind China when the two countries are equal in terms of population and number of consumers, the main draw for investors worldwide? Obviously, comparison with China does not reflect well on Hindu Nationalists because it deflates their bubble. 

Comparing China and India GDPs. Source: Statistics Times


China was poorer than India until 1990 in terms of per capita income. In 2001, both nations were included in Goldman Sachs' BRICs group of 4 nations seen as most favored destinations for foreign direct investment. Since the end of the Cold War in 1990, the western nations, including the United States and western Europe, have supported India as a counterweight to China. But a comparison of the relative size of their economies reveals that China had a nominal GDP of US$17.7 trillion in 2021, while India’s was US$3.2 trillion. India invests only 30% of its GDP, compared with 50% for China; and 14% of India's economy comes from manufacturing, as opposed to 27% of China, according to the World Bank.
 
A recent SCMP opinion piece by Sameed Basha titled "Is India ready to take China’s place in the global economy? That’s just wishful thinking" has summed it up well: 
 
"Comparing China to India is like comparing apples with oranges, with the only similarity being their billion-plus populations.......China is transforming itself into a technologically driven economy in order to exceed the potential of the US. In contrast, India is attempting to position itself as a market-driven economy utilizing its large population as a manufacturing base to compete with China........In its 2022 Investment Climate Statement on India, the US State Department called the country “a challenging place to do business” and highlighted its protectionist measures, increased tariffs and an inability to adjust from “Indian standards” to international standards". 
Over 1.5 million patent applications were filed in China in 2021, the highest number in the world. By comparison, the patent filings in India were 61,573, according to the World Intellectual Property Organization. China spends 2.4% of its GDP on research and development compared to India's 0.66%, according to the World Bank
Top Patent Filing Nations in 2021. Source: WIPO.Int

With growing Washington-Beijing tensions,  the United States is trying to decouple its economy from China's. The Wall Street Journal has reported that the Biden administration is turning to India for help as the US works to shift critical technology supply chains away from China and other countries that it says use that technology to destabilize global security.
India's Weighting in MSCI EM Index Smaller Than Taiwan's. Source: N...

The US Commerce Department is actively promoting India Inc to become an alternative to China in the West's global supply chain.  US Commerce Secretary Gina Raimondo recently told Jim Cramer on CNBC’s “Mad Money” that she will visit India in March with a handful of U.S. CEOs to discuss an alliance between the two nations on manufacturing semiconductor chips. “It’s a large population. (A) lot of workers, skilled workers, English speakers, a democratic country, rule of law,” she said.

India's unsettled land border with China will most likely continue to be a source of growing tension that could easily escalate into a broader, more intense war, as New Delhi is seen by Beijing as aligning itself with Washington

In a recent Op Ed in Global Times, considered a mouthpiece of the Beijing government, Professor Guo Bingyun  has warned New Delhi that India "will be the biggest victim" of the US proxy war against China. Below is a quote from it: 

"Inducing some countries to become US' proxies has been Washington's tactic to maintain its world hegemony since the end of WWII. It does not care about the gains and losses of these proxies. The Russia-Ukraine conflict is a proxy war instigated by the US. The US ignores Ukraine's ultimate fate, but by doing so, the US can realize the expansion of NATO, further control the EU, erode the strategic advantages of Western European countries in climate politics and safeguard the interests of US energy groups. It is killing four birds with one stone......If another armed conflict between China and India over the border issue breaks out, the US and its allies will be the biggest beneficiaries, while India will be the biggest victim. Since the Cold War, proxies have always been the biggest victims in the end". 

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Comment by Riaz Haq on May 27, 2023 at 7:51am

Why #India will continue to lag behind #China as a global #economic power. Unlike China, India had no #revolution: its old power structures & vested interests prevent change. Plus lack of investment in #education, #health, #infrastructure. #Modi #BJP
https://www.scmp.com/comment/opinion/article/3221803/why-india-will...

by David Dodwell

a further factor has been America’s remorseless efforts to slow China’s rise, and to reduce the ever-widening range of Chinese goods on which US manufacturers and consumers have come to rely. Every attempt to devise a credible decoupling, diversification or derisking strategy points Joe Biden’s team inevitably to India – the only economy with a big enough market and workforce to develop the economies of scale needed to have a hope of competing against China.
But India, for more than 40 years, has remained a miracle about to happen. Back in the 1980s, along with thousands of other Western companies, my then-employer the Financial Times was wrestling with how best to focus its Asian expansion plans: prioritise Hong Kong, focused on the China market, or in Mumbai, focused on India?

For FT bosses, the answer was obvious: India was the world’s largest English-speaking market, the world’s most populous democracy, and home to one of the world’s largest equity markets. It also had long-standing links with Britain.
Arguments that China’s leadership was far more pragmatic and seriously committed to opening up to international trade and investment, with the foundations of an urban-industrial psychology that contrasted with India’s profoundly rural-agrarian mindset, were brushed aside. To the best of my knowledge, the FT is still battling to publish in India.

My deep doubt that India can become a top-table power that might serve as a democratic counterweight to China was forged in the 1970s by social scientist Barrington Moore’s Social Origins of Dictatorship and Democracy.
In asking why India failed to succumb to a Marxist revolution after independence in 1947, while China emerged under Mao Zedong as a radically transformed Marxist power, Moore identified a wide range of powerful inertial forces in India that prevented revolution and shackled economic change – and continue to do so even today.
Perhaps most important were the rural power structures cemented around caste, which still exert more influence over social and economic development than most economists recognise.

In China, revolution swept away ancient power structures, entrenched corrupt networks and ossified vested interests. Corrupt networks could regrow but the inertial undergrowth that had for a century choked change in China had been cleared, opening the country to a potential for change.
The absence of revolution in India left in place existing power structures and long-standing vested interests, along with the corruption they nurtured, blocking the radical political or economic changes that turbocharged China’s economic growth from the late 1970s. Corruption remains a scourge in India and a nagging obstacle to growth.

Comment by Riaz Haq on May 27, 2023 at 7:52am

Why #India will continue to lag behind #China as a global #economic power.
https://www.scmp.com/comment/opinion/article/3221803/why-india-will...

by David Dodwell

There is magical thinking among forecasters who talk of an “Indian century”, with Modi’s India set to overtake China, not simply in population but as a dynamo for global growth.
Alok Sheel, a former secretary of India’s Economic Advisory Council, injected some much-needed realism: “If India were to grow at the very optimistic, and currently unlikely, rate of 9 per cent going forward, and China were to slow down to 4 per cent, the Indian economy would be 70 per cent of China’s size by mid-century.”
So many factors sit in the way of sustainable strong growth in India. Nearly 43 per cent of the population works in the farming sector, compared to 25 per cent in China. Underemployment, much of it informal and undocumented, hampers any pathway to higher productivity.

While India’s education spending is higher than in China (as a percentage of government expenditure), literacy remains at 74 per cent, compared with 97 per cent in China, with almost 27 per cent of India’s population lacking any formal education. Women account for a large share of the illiterate, contributing to the reality that just 19 per cent of women participate in the workforce, compared with 61 per cent in China.
A failure to spend adequately on education, health, social welfare and other key infrastructure also shackles progress. Just 46 per cent of Indians have access to safe sanitation (compared with 70 per cent in China), and only 43 per cent have access to the internet (70 per cent in China).
One can juggle data ad nauseam, but the reality of the past 40 years remains unchanged: Indian progress is welcome but slow, and the country will continue to lag behind China.
The rising economic heft of the Global South will give India a seat at top tables like the G20, but there is no way Biden can magically think away the reality of China as a global economic force. The 21st century may not be India’s century, but it is almost certainly Asia’s century, and Washington needs to come to terms with that.
David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades

Comment by Riaz Haq on May 27, 2023 at 7:53am

Why #India will continue to lag behind #China as a global #economic power.
https://www.scmp.com/comment/opinion/article/3221803/why-india-will...

by David Dodwell

There is magical thinking among forecasters who talk of an “Indian century”, with Modi’s India set to overtake China, not simply in population but as a dynamo for global growth.
Alok Sheel, a former secretary of India’s Economic Advisory Council, injected some much-needed realism: “If India were to grow at the very optimistic, and currently unlikely, rate of 9 per cent going forward, and China were to slow down to 4 per cent, the Indian economy would be 70 per cent of China’s size by mid-century.”
So many factors sit in the way of sustainable strong growth in India. Nearly 43 per cent of the population works in the farming sector, compared to 25 per cent in China. Underemployment, much of it informal and undocumented, hampers any pathway to higher productivity.

While India’s education spending is higher than in China (as a percentage of government expenditure), literacy remains at 74 per cent, compared with 97 per cent in China, with almost 27 per cent of India’s population lacking any formal education. Women account for a large share of the illiterate, contributing to the reality that just 19 per cent of women participate in the workforce, compared with 61 per cent in China.
A failure to spend adequately on education, health, social welfare and other key infrastructure also shackles progress. Just 46 per cent of Indians have access to safe sanitation (compared with 70 per cent in China), and only 43 per cent have access to the internet (70 per cent in China).
One can juggle data ad nauseam, but the reality of the past 40 years remains unchanged: Indian progress is welcome but slow, and the country will continue to lag behind China.
The rising economic heft of the Global South will give India a seat at top tables like the G20, but there is no way Biden can magically think away the reality of China as a global economic force. The 21st century may not be India’s century, but it is almost certainly Asia’s century, and Washington needs to come to terms with that.
David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades

Comment by Riaz Haq on May 27, 2023 at 12:35pm

Geopolitics is shrinking India’s risk premium | Reuters


https://www.reuters.com/breakingviews/geopolitics-is-shrinking-indi...

India is also benefiting from worsening relations between Washington and Beijing. Companies are looking to shift supply chains out of the People’s Republic, while money managers need a place to deploy long-term funds with fewer risks of financial sanctions.

In some cases, the pivot is stark: Apple suppliers Foxconn (2317.TW) and Pegatron (4938.TW), for example, are building factories in Karnataka and Tamil Nadu. JPMorgan analysts reckon India will make one in four iPhones within two years, even though manufacturing costs are higher than in China. Ontario Teachers’ Pension Plan, Canada’s third-largest retirement fund, closed part of its China equity investment team based in Hong Kong in April, seven months after opening an office in Mumbai.

---------

MUMBAI, May 9 (Reuters Breakingviews) - Indian tycoons and financiers are sitting back as global business comes to them for a change. Apple (AAPL.O) CEO Tim Cook, Microsoft (MSFT.O) boss Satya Nadella and Blackstone (BX.N) President Jon Gray have all visited India this year. They are lured by a country whose potential as an alternative investment destination to China increasingly outweighs the local challenges of doing business.

Visitors see many attractions. India’s $3 trillion economy is forecast to grow by 6.5% this fiscal year, continuing to outpace the rest of the world. Plentiful imports of cheap Russian oil are keeping inflation in check. Meanwhile, the workforce of the world’s most populous country offers low costs, high numbers of technology engineers, and hundreds of millions of people who speak English.


Executives and investors also see a business-friendly government that is likely to remain in power for the next half-decade. Opinion polls suggest Prime Minister Narendra Modi will win a third term next year: the biannual Mood of the Nation survey, published in January, found 72% of respondents rated Modi’s performance as good, up from 66% in August. If he wins re-election with an outright majority, businesses would not have to worry about unpredictable coalition politics.

Yet India is also benefiting from worsening relations between Washington and Beijing. Companies are looking to shift supply chains out of the People’s Republic, while money managers need a place to deploy long-term funds with fewer risks of financial sanctions.

In some cases, the pivot is stark: Apple suppliers Foxconn (2317.TW) and Pegatron (4938.TW), for example, are building factories in Karnataka and Tamil Nadu. JPMorgan analysts reckon India will make one in four iPhones within two years, even though manufacturing costs are higher than in China. Ontario Teachers’ Pension Plan, Canada’s third-largest retirement fund, closed part of its China equity investment team based in Hong Kong in April, seven months after opening an office in Mumbai.

Comment by Riaz Haq on May 27, 2023 at 12:36pm

Geopolitics is shrinking India’s risk premium | Reuters


https://www.reuters.com/breakingviews/geopolitics-is-shrinking-indi...

India is also benefiting from worsening relations between Washington and Beijing. Companies are looking to shift supply chains out of the People’s Republic, while money managers need a place to deploy long-term funds with fewer risks of financial sanctions.

In some cases, the pivot is stark: Apple suppliers Foxconn (2317.TW) and Pegatron (4938.TW), for example, are building factories in Karnataka and Tamil Nadu. JPMorgan analysts reckon India will make one in four iPhones within two years, even though manufacturing costs are higher than in China. Ontario Teachers’ Pension Plan, Canada’s third-largest retirement fund, closed part of its China equity investment team based in Hong Kong in April, seven months after opening an office in Mumbai.

---------

MUMBAI, May 9 (Reuters Breakingviews) - Indian tycoons and financiers are sitting back as global business comes to them for a change. Apple (AAPL.O) CEO Tim Cook, Microsoft (MSFT.O) boss Satya Nadella and Blackstone (BX.N) President Jon Gray have all visited India this year. They are lured by a country whose potential as an alternative investment destination to China increasingly outweighs the local challenges of doing business.

Visitors see many attractions. India’s $3 trillion economy is forecast to grow by 6.5% this fiscal year, continuing to outpace the rest of the world. Plentiful imports of cheap Russian oil are keeping inflation in check. Meanwhile, the workforce of the world’s most populous country offers low costs, high numbers of technology engineers, and hundreds of millions of people who speak English.


Executives and investors also see a business-friendly government that is likely to remain in power for the next half-decade. Opinion polls suggest Prime Minister Narendra Modi will win a third term next year: the biannual Mood of the Nation survey, published in January, found 72% of respondents rated Modi’s performance as good, up from 66% in August. If he wins re-election with an outright majority, businesses would not have to worry about unpredictable coalition politics.

Yet India is also benefiting from worsening relations between Washington and Beijing. Companies are looking to shift supply chains out of the People’s Republic, while money managers need a place to deploy long-term funds with fewer risks of financial sanctions.

In some cases, the pivot is stark: Apple suppliers Foxconn (2317.TW) and Pegatron (4938.TW), for example, are building factories in Karnataka and Tamil Nadu. JPMorgan analysts reckon India will make one in four iPhones within two years, even though manufacturing costs are higher than in China. Ontario Teachers’ Pension Plan, Canada’s third-largest retirement fund, closed part of its China equity investment team based in Hong Kong in April, seven months after opening an office in Mumbai.




India appeals as more than a manufacturing base, though. Its economy also dangles the promise of Chinese-style growth. GDP per capita was $2,379 in 2022, less than one fifth of its eastern neighbour. Over 1.2 billion people have mobile phone connections; half of which are smartphones. Morgan Stanley analysts and strategists expect India to become the world’s third-largest economy and stock market before the end of the decade.

India remains a tricky destination for international companies and investors. New Delhi has a long-standing fondness for import tariffs and is infamous for wrangling over tax with multinationals including Vodafone (VOD.L) and energy group Cairn.

Comment by Riaz Haq on May 30, 2023 at 8:26pm

India poised to deny funding for Vedanta-Foxconn chip venture - Bloomberg News | Reuters


https://www.reuters.com/world/india/india-poised-deny-funding-vedan...

May 31 (Reuters) - The Indian government is poised to deny crucial funding for Anil Agarwal's chip venture, Bloomberg News reported on Tuesday, a setback to the billionaire's ambition to build India's 'own Silicon Valley.'

The authorities are likely to inform the venture between Vedanta (VDAN.NS) and Taiwan's Foxconn (2317.TW) that it won't get incentives to make 28-nanometer chips, the report said, citing people familiar with the matter.

The venture's application seeking billions in government assistance hasn't met the criteria set by the government, the report said. The project is still in search of a technology partner and a manufacturing-grade technology license for the construction of 28nm chips, it added.

Foxconn declined to comment on the report, while India's technology ministry and Vedanta did not immediately respond to Reuters requests for comment.

The setback comes at a time when Agarwal's metals and mining conglomerate is already grappling with reducing its significant debt load.



Last year in September, Vedanta and Foxconn – formally called Hon Hai Precision Industry Co Ltd – announced they would invest $19.5 billion to set up semiconductor and display production plants in the state of Gujarat, creating more than 100,000 jobs.

"India's own Silicon Valley is a step closer now," Agarwal had said last year after the announcement.

Comment by Riaz Haq on June 2, 2023 at 4:35pm

Interview: India’s exaggerated value and the danger of S Jaishankar’s ‘new world order’ posturing


https://scroll.in/article/1049569/interview-indias-exaggerated-valu...

“the US already has other military partners like Japan and Australia, whereas India doesn’t really have anyone else that can help balance against China. Our value to the US is being partly exaggerated”


Rajesh Rajagopalan, author and professor of International Politics at JNU, says we are living in a bipolar age and it is dangerous for India to think otherwise.
Rohan Venkataramakrishnan
18 hours ago


“I think the economics of the world, the politics of the world, and the demographic of the world is making the world more multipolar.”

“The world is moving towards greater multi-polarity through steady and continuous re-balancing.”

“The Indo-Pacific is at the heart of the multipolarity and rebalancing that characterises contemporary changes.”

“The United States is moving towards greater realism both about itself and the world. It is adjusting to multipolarity and rebalancing and re-examining the balance between its domestic revival and commitments abroad.”

Those are all comments by Indian External Affairs Minister S Jaishankar over the last few years. Indeed, Jaishankar is a big votary of the concept of multipolarity – the idea that the world is not dominated by just one power (the United States), or two (the US and China, just as it was the US and the United Soviet Socialist Republic during the Cold War), but is instead now seeing a global order with a number of powers that are somewhat equally matched in terms of economic and military capacity and influence.

Jaishankar sometimes speaks of the need for establishing a multipolar world. And sometimes his comments seems to suggest the world is already multipolar or will soon be there.



Not everyone agrees. Stephen G Brooks and William C Wohlforth, in a Foreign Affairs article in April , argued that multipolarity is a “myth”.



Brooks and Wolworth argue instead for “partial unipolarity”, in part because Chinese military power remains “regional”.

Rajesh Rajagopalan, professor of International Politics at Jawaharlal Nehru University and author of Second Strike: Arguments about Nuclear War in South Asia, thinks the answer is clearer: We are living in a bipolar age. And it is dangerous for India to think otherwise.

I spoke to Rajagopalan about multipolarity vs bipolarity, why he thinks that Jaishankar describing the world as multipolar is problematic even if it is a purely rhetorical tactic, and what he made of Ashley Tellis’ much discussed piece from earlier this month – with the controversial headline, “America’s Bad Bet on India” – which argues that the US should not expect India to side with it in a military confrontation with China, unless its own security is directly threatened.



To start off, how do you read Jaishankar and India’s articulation of a multipolar world, either as an aspiration or as a reality?

I’ll start with the reality: Of course, it is not [a multipolar world].

There are different ways of defining polarity. Academics by and large look at it as either unipolar world or a transition to a bipolar word. Some argue that the world may be bipolar in the Indo-Pacific region because of China’s power there, but not bipolar in a global systemic sense. Since this is a peaceful period – not marked by war – it’s very hard to identify the boundary between unipolar and bipolar. But my sense as an analyst is that the world is already bipolar, because the way polarity is measured is purely in terms of material capacities, and on this, clearly China has the wealth and the intention.

Comment by Riaz Haq on June 2, 2023 at 9:56pm

Blinken calls China ‘most serious long-term’ threat to world order - POLITICO


https://www.politico.com/news/2022/05/26/blinken-biden-china-policy...

“China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military and technological power to do it,” Blinken said. “Beijing’s vision would move us away from the universal values that have sustained so much of the world’s progress over the past 75 years.”

Comment by Riaz Haq on June 3, 2023 at 11:04am
Deadly #TrainAccident renews questions over safety of #India’s #rail system. More than 280 people were killed and over 1,000 injured in #Odisha. Over 16,000 people were killed in #Indian #railway accidents in 2021. #Modi #BJP #Hindutva
Comment by Riaz Haq on June 5, 2023 at 7:27am

#ShangriLaDialogue: #India no threat to #China’s #military. #Indians ‘unlikely to catch up’ to #Chinese #defense industry & weapons. #NewDelhi unlikely to be ‘loyal partner’ in Washington’s strategy to counter China. #Modi #BJP | South China Morning Post

https://www.scmp.com/news/china/military/article/3222917/shangri-la...


South Asian nation ‘unlikely to catch up’ to Chinese defence industry and weapons systems, says senior colonel on sidelines of security forum
Despite clashes with Beijing over border, New Delhi unlikely to be ‘loyal partner’ in Washington’s strategy to counter China, observers say


As the world’s biggest military, the PLA aims to become a modern fighting force by 2027. Photo: via Reuters
India will not pose a security threat to China because it is still incapable of challenging Beijing in defence manufacturing and modernisation of its military, said Chinese military delegates to Asia’s premier security forum.
Speaking to media on the sidelines of the Shangri-La Dialogue in Singapore, which closed on Sunday, the People’s Liberation Army (PLA) delegates said India was still a long way from catching up to China’s military, especially in the defence industry.
“India is unlikely to catch up to China in the coming decades because of its weak industrial infrastructure, while China has built complex and systematic defence industrial platforms,” said Senior Colonel Zhao Xiaozhuo of the PLA Academy of Military Sciences.

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