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India
OpinionComment
David Dodwell
David Dodwell

Outside In | Why India will continue to lag behind China as a global economic power

  • Unlike China, India failed to succumb to a Marxist revolution: its old power structures and vested interests continue to shackle economic change
  • This, plus a lack of investment in education, health, social welfare and other key infrastructure, means India’s progress will be slow

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People throng a market in Mumbai, on April 24. In India, underemployment, much of it informal and undocumented, hampers any pathway to higher productivity. Photo: AP
David Dodwell

Over a 40-year career trying to understand the dynamics behind the extraordinary emergence of Asia’s economies, perhaps only one question has attracted more debate than whether or when mainland China will attack Taiwan: why has India always lagged behind China, and is that about to change?

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The issue has erupted afresh in part because the United Nations says India last month overtook China as the world’s most populous nation. It has also been driven by India’s strong recent economic growth, and Prime Minister Narendra Modi’s efforts to project India as a leader of the Global South. India’s chairmanship of the Group of 20 this year, and its hosting of the G20 summit in New Delhi in September, has also prompted chatter about India’s rise.
But a further factor has been America’s remorseless efforts to slow China’s rise, and to reduce the ever-widening range of Chinese goods on which US manufacturers and consumers have come to rely. Every attempt to devise a credible decoupling, diversification or derisking strategy points Joe Biden’s team inevitably to India – the only economy with a big enough market and workforce to develop the economies of scale needed to have a hope of competing against China.

But India, for more than 40 years, has remained a miracle about to happen. Back in the 1980s, along with thousands of other Western companies, my then-employer the Financial Times was wrestling with how best to focus its Asian expansion plans: prioritise Hong Kong, focused on the China market, or in Mumbai, focused on India?

For FT bosses, the answer was obvious: India was the world’s largest English-speaking market, the world’s most populous democracy, and home to one of the world’s largest equity markets. It also had long-standing links with Britain.

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Arguments that China’s leadership was far more pragmatic and seriously committed to opening up to international trade and investment, with the foundations of an urban-industrial psychology that contrasted with India’s profoundly rural-agrarian mindset, were brushed aside. To the best of my knowledge, the FT is still battling to publish in India.

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