By Pratik Nandeshwar
The fastest growing economies of the world, India and China, share a perplexing political and economic relationship. While trade is prospering between two states, the old border dispute remains a major political issue. The combined population of both countries is roughly 38 percent, which hugely affects the world economy. Although China is the growth engine of the global economy, India has been catching up at a faster rate. The relationship between these two Asian giants will shape the future of world economy.
To lay down all weapons and rise
Surprisingly, both the economies are urging the states to set aside their differences and work cooperatively. Despite experiencing 10 percent economic growth for the last two decades, the Chinese economy has suddenly slowed down. On the other hand, India is facing an unemployment crisis. As the dark clouds of ‘middle-income trap’ and ‘aging population’ threaten the Chinese skies, the world has begun to anticipate India’s growth. India and China were also the few survivors of the 2008 Great Recession.
In an attempt to bounce back, China invested heavily in infrastructure, which disturbed its own economy’s structural pattern. As China transforms into a service and consumption based economy, India is becoming the manufacturing hub. This has resulted in the creation of more jobs for India. While China strives to learn from India, India aims to become the next China. Although both economies run on different models and policies, they are more closely related than expected. However, India is still far behind China in every aspect.
Emerging powers and their economic immunity
Concerns of rapid inflation hover as China steps down from being the manufacturing hub of the world economy. With a huge workforce and low wages, India is the ideal choice to fill up the space that has been left empty. The rise of protectionism is another serious threat to emerging economies. India has the potential market and a large consumer base to pose as the right destination for Chinese goods. The $150 billion outsourcing industry can find alternatives in the emerging Chinese IT companies.
India can also gain from China’s advanced technology and human resources. The nation can step in as an investment destination for Chinese companies. Unlike China, India’s public sector enterprises have failed to yield long-term profits, despite huge capital. Research & Development must be set up to improve the public sector and serve as an example for other developing economies. The instability within the EU and protectionism by the US are acting as a hurdle for many emerging economies, except for China and India. These two nations could be the saviours and restore the economy back to where it should be.
Two ‘strategic partners’ in the making?
Despite being so close to each other, China and India lack communication. While Indian students are increasingly opting for Chinese schools, the country isn’t on the list of top holiday destinations favoured by Indians. Additionally, there is a little presence of Indian expats living in China. Both states should also deepen cultural ties with each other.
Fortunately, there have been improvements. Firstly, China is quickly moving up as the source of FDI in India. Secondly, the vast Indian market has favoured Chinese goods, thus providing relief to exporters. Thirdly, New Delhi has bought large shares in the Asian Infrastructure Investment Bank in Beijing.
The constructive relations between India and China will also benefit developing and the developed economies. India must look to upgrade its IT and BPO industry and create consumer-based applications amid US slowdown. The same can be anticipated from their Chinese counterparts. Being two of the major oil importing nations in the world, their activities will also have significant impacts on oil prices.
Stepping up the game of economic success
There is a strong need for the mobilisation of resources for industrial, infrastructural and environmental development to stimulate the global economy. The sluggish Chinese economy may have devastating impacts on economies globally. India will need to maintain a minimum of 7-8 percent growth rate for over a decade to become a middle-income economy. A peaceful India-China relationship is paramount in determining where our economy will head into. The two states will have to go through inevitable hurdles but they must set aside their differences and work cooperatively in building the global economy.
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