India Is Some 13 Years Behind China

The Chinese Ambassador to India has pointed out, that India is about 13 years behind China in economic development. The reason given is also true--India started to liberalise the economy around and about 13 years later than China did. Now that India is indeed following in those liberalising economic paths we can expect the next 13 years to follow that of China. Not exactly and precisely of course, Marx was wrong, history does not repeat itself. But in general we can expect something like the same path to be followed. India should, as long as no one does anything silly, follow China's path of economic development. Move from being a poor country to being most definitely middle income at the least.

As to the equivalence and the times, that's around and about right. There are large problems in determining the actual output of something as complex as an economy. Most especially when so much is, as in India, in the informal sector. But the usual recorded GDP (at market exchange rates) for India in 2015 is around and about $2 trillion. The same number in China for 2004 is the same sort of number, around and about $2 trillion. Given the roughly equivalent populations, that gives per capita GDP (again, at market rates, PPP or living standards are quite, quite different) either side of $1,500 for the two countries on the two dates.

The Licence Raj held back economic development as government tried to do too much. Manmohan Singh and Narasimha Rao changed that in 1991, beginning the process of dismantling that Raj. And that's when the economic growth really started. And for the same reason. Government now left room for market processes to work, the room necessary for economic development to take place.

India is 13 years behind China and it is because the economic liberalisation process started 13 years later. This is good news though--we don't think that India is going to follow exactly the same growth path, a 5 times rise in GDP in only 13 years. But at growth rates of 7 and 8%, instead of China's 10%, a 3 times growth over that period, possibly a 4 times, isn't out of reach. And the good news is that China, as South Korea, Japan, Singapore and so on before, show that it is possible. India started later than China but there's really no reason at all why it shouldn't get to the same place, even if a little later....

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