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Can India Outshine China In Industrial And Economic Growth?

The ground reality is that China is a communist country only in name and is virtually adopting the policies and methods of capitalist economy.

6 mins read
Chinese President Xi Jinping and Indian Prime Minister Narendra Modi attend a group photo session during the BRICS Summit in Xiamen, China, on Sept. 4, 2017. [ Photo © Kenzaburo Fukuhara/AFP via Getty Images]

In recent time, there have been several reports by international agencies including International Monetary Fund, stating that  economic growth in India is showing  impressive trend  and is the highest  amongst  several  countries in the world. While developed countries like USA, UK and China are facing recessionary trends and inflationary pressure, it is said that India’s economic growth profile is intact and is improving steadily.  These observations from credible global agencies have  created a feeling of euphoria in India , as if Indian economy is now at the top of the world.

Of course, India is the fourth largest economy in the world and is well placed to achieve spectacular growth of it’s economy in the coming years ,

Probably, the best way of assessingIndia’s  economic and industrial  growth profile and measuring it’s performance and future prospects would be to compare India with China, since the economic status of India and China around a  few  decades back were almost at the same level and both are highly populated countries with high population density  and reasonable level of  natural and mineral resources.

Of course, India is heavily dependent on import of crude oil and natural gas,which are essential input  to sustain industrial and economic growth, for it’s requirements and so is China.

For further analysing India’s growth profile  and track record  vis a vis China, the following indicative figuresare of interest.

Comparative figures :

                  DescriptionIndiaChina
  Land area3.287 million  Sq.Km9.597 million Sq.Km
Population in Yr.2021140.76 Crore1`41.24 Crore
Population density431.11per sq.km153 per sq.km
Size of economy$3.469 trillion$ 18.321 trillion
Foreign direct investment in 2021-22 84,835 million USD 180.96 billion USD
Likely GDP growth in 23-246.4%5%
Dependence on import of crude oil per annum Around 212 million tonne Around 508 million tonne
Production of coal per annumAround 892 million tonneAround 4500 million tonne
Wind power capacity41.9 GW328.48 GW (China was responsible for almost 70% of wind generation growth in 2021)
Solar power capacity64 GW392.61 GW
  Production  of wafers for solar panels  NegligibleWafers are ultra-thin silicon squares that are pieced together into solar panels, and China accounts for 97 per cent of global output.
 Lithium ion battery capacity Lithium ion battery cell not produced and entirely importedNearly 750 gigawatt-hours
Graphene production in 2022 (A product withemerging importance)NilAround 630,000 tonne of the graphene every year
Capacity in 2022Silicon metal,NilAround 5.17 million tonne
Annual capacity  for Polycrystalline silicaNilRound2 million per annum
Annual capacity for Titanium sponge500  tonne per annumAround 1,80,000 tonne per annum

The above figures which are a few illustrative  comparative examples ,  obviously indicate that   as on date, the status of India’s economy and industrial profile are  much lower compared to that of China, though the economy of both India and China were at the same level  in 1980s.

Factors influencing  China’s spectacular progress in the last three decades

While pretending  to be a communist country, the fact is that China  has a totalitarian regime with media being heavily censored , personal freedom of people severely curtailed  and rule of law by force rather than by consent.

The ground reality is that China is a communist country only in name and is virtually adopting the policies and methods of capitalist economy.

Foreign direct investment (FDI) has been an important part of the Chinese economy since  1980s.   To accelerate the process of opening to foreign capital and technology, the Chinese government has been providing forward treatment to foreign direct investment. That include tax incentives and loosening of administration restrictions.

From 1980s , China  liberalised it’s economy to the extent of  any other capitalist economy and threw open it’s market and investment  potential to international and  multinational companies. As multinational companies are all the time looking for market openings, invitation from Chinese government became irresistible attraction for them. Several of them came to China with huge investments and updated technologies, which immensely benefited China. What was another attraction for multinational companies is that China strictly maintained it’s promises  to them and ensured  well structured and  orderly political and economic climate , so that multinational companies can comfortably work and stay in China.

Even as multinational companies came in a big way to China, China also  encouraged and facilitated the growth of domestic companies to such an extent , that many of the domestic companies  could acquire the capability to compete with the multinational companies in China itself in the course of time. At the same time , China continued to invest in public sector organisations and encouraged infrastructure between domestic companies and overseas companies.

Under such  conditions,.today China’s industrial   and economic structure is an elegant mix of private owned domestic companies government owned public sector companies and multinational companies as well as joint venture.  The fact is that all these four entities are complimenting each other and there  appears to be no conflict of interests between them.

Today, the confidence level  of the multinational companies  and overseas organisations  in the stable policy of Chinese government is so high, that these companies from abroad are contributing to further growth of Chinese economy in a significant way.

All said and done, the underlying reason for spectacular economic and industrial growth of China is that China has thoughtfully created a situation which is  winwin situation for both Chin and multinational companies and overseas organisations.

View of global credit rating agencies on India’s economy :

According to World Bank , in general,  the economic situation In India is better than n any of the other countries in South Asia.

The services sector and the infrastructure sector are the fastest  growing sectors in India.There is still a huge structural agenda in India to make growth more inclusive . Private investment  from abroad is needed to be increased. Government has done a lot to improve the social protection but that by itself not enough.

According to Asian Development Bank between 2015 and 2019,India’s contribution to GDP growth in developing Asia was 22%, while China’s contribution was 53%.

The rapid growth  in India reflects healthy domestic consumption which will be further boosted by tax cuts.  India will be less affected by the slow down in the advanced countries, since exports have limited role in the Indian economy.

India – A few pointers

n the last nine years  after Prime Minister Modi has taken over, several reform measures have been introduced and number of infrastructure projects have been launched , apart from social welfare measures to lift the countrymen from poverty level. 

Defence shipments has risen by more than ten times since  2016.  In 2016-17, defence exports stood at Rs.1521 crore and reaching Rs.15920 crore in 2022-23.

India’s cumulative solar module manufacturing nameplate capacity has more than doubled to 38 GW in March,2023 from  18 GW in March,2022

Now, India is the largest provider of generic drugs globally with global markets reducing their dependence on China for drugs. 

On May,8, 2020,  Indian Council of Medical Research launchedMade in India COVID vaccine campaign and Indian pharma companies produced massive quantity  of COVID  vaccine in  very short period , not only for India’s needs but for  several countries in the world.  The world was pleasantly surprised to see  India’s  such achievement

Government of India has sanctioned Rs 40,900 crore to over 80630 accounts for the start up India scheme in the last seven years which are yielding results  now.

While India is a net importer of petrochemicals and intermediates, India now has become a net exporter of diverse range of speciality chemicals.

There are so many other pointers such as in space research and so on.

Can India match China ?

India is endowed with large   land area and coastal belt , different climatic and soil conditions ,  mineral resources , well established  agricultural base and “army” of  scientists, engineers and technologists  and certainly India has the potential to match China in economic and industrial growth.

What is required to achieve big leap forward  in India is that India should exhibit , future   governance capability ,  ensure growth oriented political structure , promote  innovation and R & D capability    as  well as commitment of the countrymen  to attain growth  by hard efforts, similar to what China has exhibited in the last few decades.

An issue in India which China does not have is the democratic structure in the India and the freedom of speech and action enjoyed by the citizens. As a result, every step of the government in India become a matter of debate and counter view and in recent years , several massive projects have been stopped or prevented from operating in India due to agitations and protests. It appears that the country is losing industrial and economic opportunities due to such permissive conditions and many wonder whether India is paying a by price due to it’s democracy.

In such conditions, the multinational companies  and investors from abroad cannot get the needed level  of confidence to operate in India, similar to what they enjoy in China.

With frequent elections and multiple political parties and number of political parties being family controlled development vested interests in India democracy have become a hurdle for India’s progress.

In this context , one cannot but point out that in China , apart from the proactive policies of government of China, people in China responded to the opportunities by exploiting the developing favourable conditions.  The question here is whether Indians can emulate Chinese citizens in such greed for results and achievements.

India has the potentials in multiple ways to achieve the type of progress that China made but it appears that it’s progress would be much lees than the potential level, as the present political structure, attitudinal issues of people and their mind set for exercise freedom at the cost of economic growth are unlikely to see a big change.

N.S.Venkataraman

N. S. Venkataraman is a trustee with the "Nandini Voice for the Deprived," a not-for-profit organization that aims to highlight the problems of downtrodden and deprived people and support their cause and to promote probity and ethical values in private and public life and to deliberate on socio-economic issues in a dispassionate and objective manner.

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