Friday, 17 May, 2024
By: Anshul Vipat
China's nominal gross domestic product (GDP) reached $17.7 trillion in 2021, which is about 5.7 times that of India's $3.1 trillion. Image source: IANS
The two Asian giants started from scratch after being battered by wars and colonization. In 1947, India became an independent nation from the British Empire, while two years later in 1949, the People’s Republic of China was founded. But the later years made the difference
Sixty-years ago, Chinese troops entered the Indian Territory to make a point. The simple point that Mao Zedong tried to make at the time to Jawaharlal Nehru was that China did not regard India an equal. As it turned out, the Indian leadership went into a panic mode when the Chinese troops attacked the Indian outposts on October 20. The Chinese penetrated deep into India's territory and it seemed as if New Delhi would lose its grip over north east. But a month later, on November 20, China declared a ceasefire and commenced its withdrawal from the areas it had occupied, having staked its territorial claim in Ladakh and given unambiguous notice of its politico-military intent.
Today, sixty years later, China has been trying to make the same point with its border skirmishes. They do, however, have a valid point.
The economic journey of two neighbours
The two Asian giants started from scratch after being battered by wars and colonization. In 1947, India became an independent nation from the British Empire, while two years later in 1949, the People’s Republic of China was founded. But the later years made the difference. While the Chinese and Indian economies were almost equal as recently as 1990, China's nominal gross domestic product (GDP) reached $17.7 trillion in 2021, which is about 5.7 times that of India's $3.1 trillion.
Since 2000, China's total GDP successively exceeded those of Italy, France and the UK, and surpassed industrial behemoth Germany to become the world's third-largest in 2007. Despite severe global recessions since 2007, the Chinese economic engine maintained rapid growth, eventually overtaking Japan as the world's second-largest economy by nominal GDP in 2010. But how did such a gap between the two most populous economies grow?
When India missed its chance
The historically significant reform and opening-up policy began in China in 1978, whereas India began to make revolutionary changes to its economic policy in 1991, to open the economy to trade and foreign investment. This enabled Beijing to embark as a manufacturing and export super power has transformed the economic condition of its citizens.
Despite rising population (at least till recently), China has a seen a dizzying rise in per capita incomes of citizens. In 1991, the per capita income of China was $317 a year, almost exactly the same as the per capita income of India. By 2000, the per capita income had grown to $959, more than double the per capita income of India. The gap has been widening since then. In 2021, China’s per capita income was $12,000.
Purchasing Power Parity (PPP) is another economic indicator to determine country's economic progress. PPP is the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country. It’s a popular metric rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country. Here too, both the countries were almost equal till late 1980s, but followed next is what economic pundits call it, "Chinese economic miracle".
China has also managed its unemployment rate better than India. While both the countries saw an increase in their unemployment rates in the past three decades, India's unemployment rate has remained consistently above its eastern neighbour.
The road ahead
This catalogue blends the good with missed opportunities. In essence, China’s reforms have been more strategic and inter-locking, involving not just the visible actions, but also accompanied by pervasive supplementary initiatives across multiple sectors, producing a multiplier, national effect. Indian reforms—often described as ‘stealthy’—involve unending compromises amidst competing demands. As former foreign secretary Shyam Saran says: India is receding in China’s rear-view mirror.
The Sino-Indian War of 1962 is not a happy memory. It is remembered for the humiliation of India’s total defeat, the betrayal of Hindi-Chini-Bhai-Bhai. The clashes between the two countries in past few years brought back the bitter memories. This peak border tensions, makes India’s growth as an economic superpower more crucial. No matter how strong military firepower is, it cannot sustain without a strong domestic industrial base. We may have missed the bus in the last century, but we cannot afford to miss it now. Hence, when China aspires to become a great power in coming decades, India’s national aim should be to become the principal challenger.
