For many years, the world economy operated under the unspoken premise that China would continue to expand regardless of what happened. Container ships would continue to depart Shanghai, Guangdong factories would continue to operate, and more than a billion consumers would continue to move up into the middle class. Now, that assumption is shaky. Instead, a new question is emerging in boardrooms from Singapore to San Francisco: can India, which has been the most populous nation in the world since last year, truly bear the burden?
It’s a fair question, but it’s not simple. Experienced investors have learned to roll their eyes at the term “next big thing” because it has been used so frequently. The nation has previously dabbled in greatness before failing due to political distraction, bureaucracy, or inadequate infrastructure. However, there’s a feeling that something is different this time, whether you’re strolling through Mumbai’s financial districts or observing the cranes that line Hyderabad’s skyline. Not changed. Simply different.
The Indian delegation in Davos was so noticeable earlier this year that one investor allegedly referred to the main street as “Little India.” A few months later, the Indian spacecraft Chandrayaan-3 gently landed on the lunar south pole, the Sensex reached all-time highs, and Prime Minister Narendra Modi hosted the G20 leaders’ summit in New Delhi. Yes, symbolism, but symbolism that takes a different turn when things are stacked this way. The nation is now discussing more than just ambition. It’s taking pictures of it.
China, meanwhile, is acting in the opposite way. Due to a 35-year-old one-child policy that was loosened too late to be significant, the population has started to decline for the first time in 60 years. Due to unfinished towers and unpaid debts, the country’s real estate industry is collapsing. Western capital, which was once eager, is now hedging, youth unemployment is uncomfortable, and consumer spending is muted. With a median age of 38.4, China is ten years older than India. Demographers will tell you that you can’t close that gap in a single generation.
Nevertheless, the math is harsh. The current value of India’s economy is approximately $3.5 trillion. Nearly $18 trillion is China’s. India would need to maintain an 8 percent annual growth rate, which it hasn’t consistently achieved, in order to surpass China as the world’s largest growth contributor in five years. Although impressive by any standard, the IMF’s 6.3 percent forecast for this year falls short of what is needed to actually close the gap. India does not always benefit from China’s slowdown.
The foreign investment is still coming in. In Tamil Nadu, Apple is producing more iPhones. Foxconn is starting construction on new facilities. Western capitals, growing more cautious of Beijing, perceive New Delhi as a business-friendly democracy that is flawed, occasionally annoying, but not hostile. The reforms India has implemented over the past few years are finally paying off, according to Cornell trade economist Eswar Prasad, and foreign investor interest is based on something more substantial than hype.
However, it’s difficult to ignore how much still relies on execution. India’s power grid, ports, and roads have all improved, albeit unevenly. The most difficult issue of all is still creating jobs for its massive young workforce. Making iPhones is one thing, but creating the kind of widespread jobs that helped hundreds of millions of Chinese escape poverty is quite another.
You get the impression that India is not attempting to become China as you watch this develop. It’s attempting to become something China never quite was: a boisterous, pluralistic, democratic behemoth whose expansion is messier but possibly more resilient. The question that no one has yet addressed is whether the world is patient enough to wait for that story to be fully realized.
