India has rocketed ahead of China as a leading world economic powerhouse amid a steep slowdown in the global economy and despite an atmosphere of increasingly looming challenges for most emerging markets. According to recent statistics, the world’s largest democracy recorded an economic growth of 7.5 percent in the concluding quarter of 2015, surpassing China’s 6.8 percent.
While China continues to strive for more economic acceleration, its westerly neighbor has been undergoing phenomenal economic expansion. According to International Monetary Fund data, while per capita income in India is only $1,688, compared with China’s $8,280, the former’s reliance on its vividly thriving services sector, as well a large and emerging younger population, provide for compellingly optimistic growth projections for the South Asian powerhouse. This growth is most likely to proceed from the merits associated with low manufacturing costs and largely inexpensive labor.
According to recently available statistics, with population figures exceeding the 1.3 billion mark, India is projected to outdistance China and become the most populous country on the planet by the year 2020. There is obviously scope for a fair bit of optimism in these projections considering that 65 percent of its population is under the age of 35, outlining the enormous significance of a promisingly young labor force.
Nearly half of India’s share constituting its GDP is contributed from the services sector alone, outperforming manufacturing and agriculture sectors as the country’s most rapidly expanding sector. Figures over the last quarter of the concluding year show the services sector has expanded by nearly 10 percent, indicative of a flourishing segment poised for better growth prospects in the coming years.
According to Amitabh Kant, secretary for industrial policy and promotion, this growth rate can only be sustained by employing consistently productive measures from a long term perspective.
“The challenge before India is to sustain a 9-10 per cent growth rate for the next three decades. This can be achieved only if India continues to offer an easy ecosystem for businesses to flourish and a robust manufacturing sector growth.”
China, on the other hand, has already begun to contemplate measures to undertake wholesale structural transformations that would dramatically alter the country’s economic paradigm towards a more innovation-driven, high-added value production framework in concert with the rest of the world. Such initiatives would mean a radical departure from the historically low-cost manufacturing and labor-intensive economic model.
Experts believe that China’s escalating debt, its exorbitant labor-cuts in manufacturing, and drastically depleting reserves have compelled its scientists and entrepreneurs to aim for extraordinary measures to secure monetary sustainability and industrial hegemony.
Just recently, China’s Premier Li Keqiang pledged to keep GDP growth above 6.5 percent for the next five years, and between 6.5 percent and 7 percent in the next year, despite acknowledging the obvious.
“Growth in investment is sluggish, overcapacity is a serious problem in certain industries, some enterprises are facing difficulties in production … and there are latent risks in the financial and other sectors,”
Meanwhile, India’s new government under incumbent Prime Minister Narendra Modi is endeavoring to revolutionize the manufacturing industry and has undertaken an investment program aiming to alter India’s fortunes by transforming it into the world’s leading manufacturing giant. These milestones appear far from unrealistic, owing to India’s impressively low manufacturing costs, as well as a highly propitious industrial climate most conducive to long-term foreign investment.
While India has successfully managed a growth rate higher than that of China, it needs to nonetheless address the complexities and potentially stifling impediments to the progress of its manufacturing sector. These may include a possible lack of harnessing commercial initiatives to the fuller extent, as well as an inadvertent misreading of the prospects associated with a promisingly lucrative sector. However, on account of its present leap toward a more progressive transition, there is no reason to suggest why India shouldn’t emerge as the next economic powerhouse of Asia.
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