How will india surpass china growth rates

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why and how will India start to outpace China.

One is demography. China’s workforce will shortly start ageing; in a
few years’ time, it will start shrinking that’s because of its one-
child policy.
India is now blessed with a young and growing workforce. Its
dependency ratio—the proportion of children and old people to working-
age adults—is one of the best in the world and will remain so for a
generation. India’s economy will benefit from this “demographic
dividend”, which has powered many of Asia’s economic miracles. The
proportion of Indians aged under 15 or over 64 has declined from 69%
in 1995 to 56% this year, says the UN. India’s working-age population
will increase by 136m by 2020; China’s will grow by a mere 23m, says
Morgan Stanley


The second reason for optimism is India’s much-derided democracy. The
notion that democracy retards development in poor countries has gained
currency in recent years. Certainly, it has its disadvantages. Elected
governments bow to the demands of selfish factions and interest
groups. Even the most urgent decisions are endlessly debated and
delayed.

China does not have this problem. When its technocrats decide to dam a
river, build a road or move a village, the dam goes up, the road goes
down and the village disappears. The displaced villagers may be
compensated, but they are not allowed to stand in the way of progress.
China’s leaders make rational decisions that balance the needs of all
citizens over the long term. This has led to rapid, sustained growth
that has lifted hundreds of millions of people out of poverty. Small
wonder that authoritarians everywhere cite China as their best excuse
not to allow democracy just yet.

Since the early 1990s, when India dismantled the “licence raj” and
opened up to foreign trade, Indian business has boomed. The country
now boasts legions of thriving small businesses and a fair number of
world-class ones whose English-speaking bosses network confidently
with the global elite. They are less dependent on state patronage than
Chinese firms, and often more innovative: they have pioneered the
$2,000 car, the ultra-cheap heart operation and some novel ways to
make management more responsive to customers. Ideas flow easily around
India, since it lacks China’s culture of secrecy and censorship. That,
plus China’s rampant piracy, is why knowledge-based industries such as
software love India but shun the Middle Kingdom.

India’s individualistic brand of capitalism may also be more robust
than China’s state-directed sort. Chinese firms prosper under wise
government, but bad rulers can cause far more damage in China than in
India, because their powers are so much greater. If, God forbid,
another Mao were to seize the reins, there would be no mechanism for
getting rid of him.
That is a problem for the future. For now, India’s problems are
painfully visible. The roads are atrocious. Public transport is a
disgrace. Many of the country’s dynamic entrepreneurs waste hours each
day stuck in traffic. Their firms are hobbled by the costs of building
their own infrastructure: backup generators, water-treatment plants
and fleets of buses to ferry staff to work. And India’s demographic
dividend will not count for much if those new workers are
unemployable. India’s literacy rate is rising, thanks in part to a
surge in cheap private schools for the poor, but it is still far
behind China’s.
Advantage India
The Indian government recognises the need to tackle the infrastructure
crisis, and is getting better at persuading private firms to stump up
the capital. But the process is slow and infected with corruption. It
is hard to measure these things, but many observers think China has
done a better job than India of curbing corruption, with its usual
brutal methods.

Given the choice between doing business in China or India, most
foreign investors would probably pick China. The market is bigger, the
government easier to deal with, and if your supply chain for
manufactured goods does not pass through China your shareholders will
demand to know why. But as the global economy becomes more knowledge-
intensive, India’s advantage will grow.