Fast Rise of India
In 2015, India overtook China in terms of GDP growth rate for the first time. Two years later in 2017 it happened again. The International Monetary Fund (IMF) predicts India’s economy to grow by 7.4 percent in 2018 and 7.8 percent in 2019, staying slightly faster than China. These numbers have solidified Indian Prime Minister Narendra Modi’s confidence for India’s future. In February 2018 at the World Economic Forum in Davos, Switzerland, Modi declared that India’s economy would reach US$5 trillion by 2025. To reach this goal, India must double its current GDP.
Does India have such a huge economic potential? Will India likely emerge as the next economic pole of global growth? Answers to such questions lie in analysis from both horizontal and vertical dimensions.
Since the end of the Cold War, the rise of India has consistently been overshadowed by the “Chinese miracle.” From the perspective of a horizontal comparison, in 1991, when India began its economic reform and opening up, its economic size ranked 16th in the world, while China ranked 9th. By the end of 2017, India’s economy amounted to US$2.4 trillion, ranking 7th globally. The figure still slightly trailed Britain and France. Considering India’s comparatively fast economic growth rate in recent years, the country is expected to soon overtake Britain and France to become the world’s fifth-largest economy. Clearly, India remains in the fast lane of development and is evolving from a regional economic power to a global power.
From a vertical comparison perspective, India has also realized remarkable achievements in reform and development. From 1950 to 1991, its annual GDP growth rate ranged from 2 to 3 percent, but rocketed to an average of 6 percent after 1991 when the country implemented its reform and opening-up policy. The figure has even increased to 8 percent since 2004. In recent years, despite the sluggish global economy, India has maintained rapid growth as a major economy. From 1992 to 2007, its annual per capita GDP growth rate reached 7.2 percent, and the figure dropped to 5.8 percent from 2008 to 2017. If India continues growing at its current rate, the per capita GDP will double every 12 years.
Modi’s Reform Pays Off
India’s economy still remains comparatively weak considering its huge population, and its potential for economic growth has yet to be fully unleashed. In 2016, India’s GDP reached US$2.256 trillion, equal to that of China in 2005. Today, China’s total GDP is five times that of India, and its per capita GDP is 4.6 times that of India. India still lags far behind the United States, China and Japan in terms of economic size. However, these figures also foreshadow the Indian economy continuing to grow rapidly as long as the country’s economic reform remains healthy.
The economic reform of the Modi government endeavors to overcome problems and capitalize on advantages to enhance the prospects for India’s long-term economic development. Of the solutions that Modi has advocated, the first was the vigorous promotion of the development of India’s manufacturing sector in a bid to transform the services-centered economic structure and create more jobs. The second was the construction of “Digital India” and the promotion of India’s economic and social transformations through plans such as “Smart Cities.” The third was to increase government revenues and integrate the domestic market by carrying out a demonetization campaign and launching the Goods and Services Tax (GST) reform.
Despite the fact that many reform policies have been controversial, the international community still speaks highly of Modi’s reform efforts. In November 2017, the international rating agency Moody’s officially upgraded India’s sovereign credit rating for the first time in 13 years. According to the report Doing Business 2018, released by the World Bank in October 2017, India jumped 30 places to 100th in the “ease of doing business” ranking. This evidences that the international community is optimistic about India’s future economic development. Reports released by multilateral institutions such as the Organization for Economic Cooperation and Development (OECD), the World Bank and the IMF all predict that India will become the world’s third-largest economy by 2030.
Profound Significance of China-India Cooperation
Just like the rise of China, India’s economic development is also globally significant. Economic collaboration between the two Asian neighbors will exert far-reaching influence worldwide.
Considering the promising outlook of the Indian economy, China is taking action to expand its economic cooperation with India. In May 2013, Chinese Premier Li Keqiang made India the first stop of his overseas visit after taking office. In a speech he delivered during the visit, Premier Li called for identifying and capitalizing on the complementary traits of the two countries’ promising markets.
“Both the Chinese and Indian markets have great potential,” he said. “If every one of our combined 2.5 billion population bought a new mobile phone at the same time, it would overwhelm every IT manufacturer in the world. Our industrial structures are highly complementary. India has a competitive edge in IT, software and biomedicine, while China is seeing rapid expansion of its heavy machinery, textiles and emerging industries. India is in a major drive to improve infrastructure, an area where China has rich experience. Our two markets, if connected, will produce more strength than the mere sum of the parts. Such a strategy will help to sustain economic growth in both countries and inject new dynamism into the global economy.”
During the visit, China and India clarified new avenues for connecting and drawing on the complementary traits of their markets. In addition to promoting trade and investment facilitation, the two sides agreed to join hands to launch major projects such as industrial parks and railways. The two countries also proposed to build the Bangladesh-China-India-Myanmar Economic Corridor and boost border trade to form a bigger market and a joint force for development.
During his first visit to India in September 2014, Chinese President Xi Jinping suggested China and India become closer partners for development, cooperative partners for growth and global partners for strategic coordination, placing the focus of their ties in economic cooperation. President Xi pointed out that known respectively as the “factory” and “office” of the world, China and India need to enhance cooperation to tap into mutually complementary advantages. Economic collaboration between the two countries would help “shape the world’s most competitive production bases, most attractive consumer markets and most powerful growth engines.”
In simple terms, China and India have already made great contributions to world economic growth and global governance through their own development. Their economic cooperation will bring prosperity and rejuvenation to Asia. As two “fast trains” of Asia, China and India will not only stimulate the development of other countries in the region and accelerate regional economic integration and infrastructure connectivity, but also contribute to the peace, stability and prosperity of the region.
From a global perspective, closer economic cooperation between China and India will exert broad political influence worldwide. “If China and India speak in one voice, the world will listen, and if the two countries join hands, the world will pay attention.” Both major developing countries, the economic rise of China and India together will provide solutions that will help all developing countries address global issues such as climate change, food security, energy security and cyber security as well as promoting the formation of a new, fair and rational international political and economic order.
The author is a researcher at the Institute of International Studies, Fudan University.