China and India have long been in a race of economic growth since the late 1940s when India

gained
independence, adopted democracy and China became a Communist state. But until 2013, it was no
longer a competition when China’s GDP was 4.5 times larger than that of India. Or so we thought.

In January 2016, India took China’s crown as the world’s fastest-growing economy when the World Bank
released the economic growth forecasts for India and China. India’s number is 7.8%, and China’s is 6.7%.
However, the question remains. Can India really outgrow China?

China’s GDP in 2015 was $10.42 trillion, and India’s was $2.18 trillion, according to the Global Times.
Since India was a decade behind China in development, the matter lies in how fast it could grow to
shorten the gap. India’s government has launched many initiatives such as Make in India project to
support the economy, which boosted the FDI in India to $3 billion in January 2016.

India also has a strong labor force forecasted to grow to 900 million in 2020 while China’s labor is
shrinking. Since economic growth depends on capital goods and labor, India will have an edge over China
if it equips the labor force with necessary skills.

On the other hand, India is still facing many challenges that can break the country’s goal to surpass
China. India government still needs to build more infrastructure, boost education quality to increase
labor skills training and find solutions to its water security problem. The ongoing droughts are big
obstacles on Prime Minister Narenda Modi’s path to meet the inflation target because of the
compensation for farmers and failing crops. Meanwhile, China’s CPI in March remained unchanged at
2.3%, so the China’s central bank does not have to worry about inflation signals yet.

The latest challenge to India’s growth is the weakest deposit growth rate since 1963. It conflicts with the
government’s plan to bring down the borrowing cost to boost investment and reduce bad debts. The
reasons for this slowdown were the decrease in job creation, alternative investment options and the
“black money” tax evading authorities.

China began opening its economy inviting foreign investment particularly in coastal areas making export-
import easy.

The communist China regime started freeing agriculture from state control - a big-ticket reform in the
country. It enforced one-child policy in order to defuse the population bomb and so that the
demographic dividend could be utilized.

In contrast, India, whose traditional rule of law provided for the open market - that was chained in by the
British colonial rulers to maximize their own industrial progress - under Pandit Nehru adopted a socialist
economic model where wealth creation and big private enterprise were not encouraged.

Indian economy grew at around 3.5 per cent rate through the 1960s and 1970s while population grew in
excess of 2.5 per cent. The population growth rate was a curious case as India was among the first few
nations in the post-World War II phase to roll out population control policy.

However, the family planning centres in India practically functioned as a family expansion facility due to
the very low penetration of medical facilities in remote areas and lack of awareness.