India’s Measures Targeting China: A Rising Economic Power
In a surprising turn of events, India’s economy has been accelerating while China’s economy disappoints. This shift in fortunes can be attributed to India’s adoption of policies that were once successful for China but now seem to be failing. As China struggles to meet its reduced 5 percent real growth target for 2024, India’s economy has surpassed expectations, leaving Beijing concerned about its own performance.
Major international institutions such as the International Monetary Fund (IMF) and the World Bank, along with strategy makers at large banks and financial firms, have expressed skepticism about China’s ability to achieve its growth target. On the other hand, India’s recent statistics are truly impressive. The country has experienced a real economic growth of 8.4 percent over the four quarters of 2023, surpassing the 8.1 percent recorded in the previous year’s third quarter. While India still has a long way to catch up to China’s overall economic size, the significant difference in growth rates must be disconcerting for Beijing.
Notably, India’s economic indicators paint an even more impressive picture. Auto sales, for instance, were 37.3 percent higher than the previous year in January, according to the Society of Indian Automobile Manufacturers. The IMF has raised its real growth projection for India in 2024 to a conservative 6.5 percent, while the Indian government projects a plausible growth rate of 7.6 percent. Although inflation remains a concern at 5 percent, it has started to moderate. In contrast, China grapples with deflation, which hampers growth by discouraging spending and investment.
What may be particularly frustrating for Beijing is that India’s growth is largely driven by infrastructure spending, a strategy that was once successful for China but seems to have lost its effectiveness. India’s relatively underdeveloped state makes it clear what it needs, such as improved roads, housing, and expanded ports. Investing in these areas, as China did in the past, yields substantial economic returns and improves living standards. India’s government has budgeted $134 billion for infrastructure, an 11 percent increase from last year, which is expected to continue driving growth. In contrast, China’s advanced development stage makes it less obvious where investments are needed and the returns are less dramatic.
As India progresses and becomes more developed, the economic impact of infrastructure efforts will decrease, similar to China’s recent experience. However, this development will also lead to a closing of the economic gap between the two countries. Consequently, Beijing will have to reevaluate its economic, political, diplomatic, and even military calculations. India will become a more prominent presence in the region, forcing Beijing to pay closer attention to its actions, especially as it looks towards the Pacific and navigates its relationship with the United States.
As India’s economy continues to rise, it is clear that the country is becoming a force to be reckoned with on the global stage. While China faces challenges and struggles to maintain its growth trajectory, India’s success serves as a reminder that policies and investments in infrastructure can yield significant economic benefits. As the gap between these two Asian giants narrows, it will be interesting to see how the balance of power and influence shifts in the region, ultimately shaping the future of global economics and diplomacy.
