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December 02, 2010

Economist on China and India GDP growth race from 2010-2016


Although only a handful of economists think India’s growth will outpace China’s next year, a larger number believe it will do so this decade. The reasons are largely demographic. China’s economy cannot go on rapidly expanding once its labour force starts shrinking. Thanks to its one-child policy, introduced in 1978, the number of young Chinese (15-29-year-olds) will fall quite sharply after 2011, depriving the country’s factories of nomadic, nimble-fingered workers. Within a couple of years, Chinese youngsters will be outnumbered by their Indian peers, even though India’s population will not match China’s until about 2025.

India may also outpace China this decade for the simple reason that it is poorer, giving it more scope to catch up. India’s income per head would have to grow at 8% a year for 17 years to match the level China enjoys today. One year of faster growth does not, then, mean that India is somehow overtaking China. Rather, it is like a 5,000-metre runner doing a faster lap than the frontrunner, who is five laps ahead.



India is still under investing in infrastructure

Successful urbanization and development of cities is key to productivity and high GDP growth

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