While doubts about Chinese growth remain widespread, India’s economy has charged ahead. Just about every major institution in the international realm has signaled that China may well fall short of its growth target — from the International Monetary Fund (IMF) to the World Bank to the spokes people of world’s largest financial firms, HSBC, for instance, Nomura, and JP Morgan Chase. A very different and more positive story has emerged where India is concerned.
Measures of India’s most recent economic performance are truly impressive. They show real economic growth of 8.4% over the four quarters of 2023, an acceleration from the 8.1% recorded over the four quarters ended with last year’s third quarter. India clearly has a long way to go to catch up to the overall size of China’s economy, but the differential growth pictures surely must disconcert the people in Beijing’s Forbidden City. Consider that Mumbai is delivering on its implicit promise to bring its people prosperity, but Beijing is falling short of that same implicit promise it has made to its people.
Other economic indicators suggest an even more impressive Indian performance. According to the Society of Indian Automobile Manufacturers, auto sales in January stood some 37.3% above year-ago levels. The IMF has raised its real growth projection for 2024 to an admittedly conservative 6.5%, while India’s Ministry of Commerce and Industry has offered the entirely plausible projection of 7.6%. Inflation remains a problem at 5%, a year, but it has begun to moderate. In any case, too much inflation, though it carries economic ills, is preferable to China’s deflation problem. Inflation is at least a growth spur but deflation retards growth by inducing people and businesses to delay spending and investment in the hopes of getting lower prices in the future.
It must chagrin Beijing especially that India’s growth has come from the kind of infrastructure spending that once worked so well in China but seems not to work so well now. Much of the difference reflects different states of development between the two countries. As was once true in China, India’s relatively underdeveloped state makes obvious what it needs – paved roads, for instance, better housing, expanded ports, and the like. Spending on these, as China found out years ago and India enjoys now, offers huge economic returns in growth and living standards. It also suggests that India’s budgeted $134 billion for infrastructure, up 11% from last year, will continue to have a powerful effect. China’s now developed state precludes this kind of success. Relatively advanced development makes less obvious what needs to be done, and because so much has already been developed, the return is less dramatic even when the planners have a good idea of what can help.
As Indian development proceeds, such infrastructure efforts will have a less dramatic economic payoff, as China has discovered recently. In the meantime, however, the economic gap between the two countries will close, and as it does, Beijing’s calculations will have to change on just about every front, economic, diplomatic, even military. India will become more of a presence and will make Beijing look back over its shoulder more than it does now, especially as China looks out into the Pacific and plots its economic, diplomatic, and military positioning against the United States.
