Posted by:
Sanjay Dutt
CEO-Business, India
People often compare the economies of India and China, the world’s two most populous countries and also engines of economic growth. While China may seem to have stronger growth and prospects than India, the reality is not so clear-cut.
Comparing India’s true democratic government with China’s blend of capitalism and communism is like apples and oranges in some ways. China’s unopposed government enables quick, decisive action to leverage global business opportunities and create a world-class infrastructure—areas where India’s government of checks and balances hinders global competitiveness.
However, India may emerge as a stronger long-term player than China. By 2030, India will have 800 million workers with more than 590 people located in cities and per-capita income that is expected to increase 200 percent over the next two decades.
India has world’s largest pool of educated, English-speaking workers, and attracts jobs from service-oriented companies seeking talented knowledge workers—such as the IT, IT Enabled Services, Education and Banking industries. Wages for those jobs are low by Western standards but allow a much better standard of living than the cheap-labor jobs that typically go to China.
Greater disposable income, plus a political structure that protects businesses and workers from unfair government intervention, help to raise India’s level of “domestic consumption.” That makes India attractive to global companies as a market for their products and services, whereas China is seen mainly as source of cheap labor for exports. If Chinese workers raise their level of domestic consumption, eventually they will not be the world’s cheapest labor pool, and global companies will move some manufacturing operations to other countries.
Also, India’s political system is more suited for long-term equity investments, while China attracts short-term investors. China may see stronger GDP growth in the next few years, but India’s economy is more likely to see dynamic growth sustained over the long term.
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