CLASH OF THE “SLEEPING GIANTS"

CLASH OF THE “SLEEPING GIANTS"

Is there a faster growth in China over India or the prediction of India overtaking China is inevitable?

Independence has given India a defining feature “Democracy” as was “Communism” to China. Now, these giants woke up from their cat nap. The clear advantage of China over India is from the mode and pace at which China can accumulate capital which has been the reason for the swell in the investment rate, whereas in India the main source is by public tax. The policies mainly focused on the counter-productive framework that created a void in producing investments at a satisfactory rate. Equity investments were at a halt and the trade was in sense of autarky. The growth of the public sector was swift beyond the need. The communist government of China also had seen the same result due to the role of state in the economy.

These issues led the giants to make some “liberal reforms” to their ineffectual policies and began to pace out. The heat was on. The bet was on China which strides at a good pace when compared to the slow democracy of India. The policy reforms are done as fast as possible for a quick growth due to which China was reaping fruits.  But for how long would this tyrannical trump-card prove to have an edge? The volatility in heavy-top systems is high and unpredictable.

That being so, China finally started focusing on external markets but in a world of democracy this has come across hurdles which were expected for these exports. For many years China has enjoyed the growth without any constraint of labor, hence there has been no slowdown in the accumulation of capital. But now the sparse labor and the rise in the wages in the growing areas with respect to infrastructure has been a result of the policy “One Child”. However, the “One Child” policy has been eased after almost three decades but even then this has been a vogue and according to surveys people of China are willing to have only one child due to the rise in expenses.

The labor curve of China has been flat for many decades but now is sloping upwards, which means there has been an increase in demand for labors. As this was the case the capital accumulation has also been slowing down along with increase in the demand for hike in wages.

India on the other hand has still got an abundant labor supply and the investment rate has been increasing drastically due to the demographic profile favoring these investments. India thus has a chance of giving heat to China.

Barring, the quick economic reforms which India lacks, India has got a long way to go. Increasing the reach of the retail to more regions, reforms in the market of labor and most importantly privatization would further foster the growth of India.

The world’s economic shift from west to east is inevitable but taking these factors into account and the required economic reforms which will be taken up by these giants in next decade would decide the next “Economic Super-Power”.