India's Growth from China's Perspective

Abstract

Bilateral India-China ties, including trade and investment, are increasing rapidly to the benefit of both countries. Looking at India's impressive economic performance of the last 10 years from the perspective of China's experience suggests that sustaining high growth will require a significant further opening of its economy—both externally and internally—a higher national investment rate and stronger labour absorption in the modern sectors. The base of India's current economic growth model—IT-related services and high-end manufacturing—is too narrow. India's poor performance in agriculture is the most important source of massive rural poverty in many parts of the country. Its greatest source of economic strength, a dynamic and relatively highly developed private corporate sector—an area where China lags—can be leveraged more effectively for national development. A partial convergence of the Indian and Chinese growth models is indicated and appears likely. The notion that India-China relations are, or are bound to become, fundamentally antagonistic—held by many in the United States—is mistaken and potentially dangerous.