posted April 12, 2008 05:39 AM
JAMES SCHLESINGER Former Secretary, U.S. Defense and Energy Departments, and former Director, Central Intelligence Agency
History is not predetermined. In a world of uncertainty and unpredictable change, almost anything can happen. Chinese growth could be stalled by internal unrest, or stopped by war or even loss of unfettered access to the American market. Such things are possible, but unlikely.
India has the advantages cited. Yet it had a later start than China, particularly in manufacturing. Its demographic burden is excessive population growth. As a democracy, it is obliged to yield in turn to various interest groups. Tensions with Pakistan--or even with its internal Muslim population--could readily grow. No more than with China can one be assured of smooth sailing.
India likely will do quite well. Yes, bedazzled by China, the commentators have to some extent given India short shrift. Nonetheless, it is most unlikely that India will steal China's thunder. However, it will emulate China and share some of its thunder.
India will steal the spotlight
STEVE FORBES
President and Chief Executive Officer of Forbes and Editor-in-Chief of Forbes magazine
Yes, India will steal China's thunder, though it is not inevitable. India does indeed have advantages, such as an English-based legal system and a large English-speaking middle-class population. India is also not plagued by a problem with which China is about to suffer: a huge shortage of brides. China's one-child policy led to a widespread infanticide of female babies.
But India must deal with its own internal problems more aggressively than it has to date. Bureaucracies on both the national and state levels make the United States look swift and streamlined. Infrastructure in India is abysmally poor, as is the education system. While the country is creating an impressive pool of entrepreneurial, scientific, and mathematical talent, India still doesn't teach the basics of reading to hundreds of millions of young people. Actual illiteracy stands at more than 40 percent. Regulations in India still make it extremely difficult to set up a legal business, and its labor laws are rigid, in the style of Western Europe.
But what leaves one feeling optimistic is the fact that India is a democracy and that as its middle class grows so will pressures for pro-growth reform.
GEORGE HOGUET
Global Investment Strategist, State Street Global Advisors
India will not steal China's thunder. Twenty years from now both China and India will have made substantial progress in reducing poverty, but it is unlikely that India will catch up with China, given China's head start and private sector dynamism.
China's per-capita income on a purchasing power parity basis is already twice India's, and the math of compound growth rates is inescapable. The Chinese economy has a savings and investment rate roughly double India's, attracts annually more than ten times the foreign direct investment, and is twice as open as India's. China has made greater progress in human development, its fiscal situation is superior, and it is better positioned to withstand global shocks. India suffers from the legacy of inward-looking policies.
An orderly transition to more representative government in China is not certain, but China has generally viewed itself as a nation with a central authority, whereas historically India was a collection of princely states. Both countries provide attractive investment opportunities. Given differences in corporate governance, institutional development and capital efficiency, the Indian stock market may generate better long term returns. But China will remain the more dominant economy.
GARY CLYDE HUFBAUER
Reginald Jones Senior Fellow, Institute for International Economics
India has become the fashion of the day: a great prime minister, consistent GDP growth of 7 percent plus, a world-beating information technology sector, a booming stock market--all crowned by U.S. acceptance of India in the nuclear weapons club. Meanwhile China continues to resist RMB appreciation, doesn't rein in North Korea, punches well below its weight in the WTO Doha Round, and runs its stock exchanges like shady casinos.
But competition between India and China over the next thirty years will largely be decided by which country can urbanize the fastest and the best. China is now 39 percent urbanized, India only 28 percent. Twenty years ago the urbanization figures were China 22 percent, India 25 percent. (By comparison, the United States and Japan are both about 80 percent urban today.) Indian cities are strangled by a ponderous legal system that practically guarantees dreadful infrastructure and sprawling slums. Every year China builds multiple new cities that accommodate a million or more rural migrants. Moreover, while India offers charming urban living for the rich, Chinese cities are far more livable for the middle and lower classes. My guess is that China will have an easier time learning democracy and English than India will have learning how to build cities.