World Economic Forum at Davos - Who is ahead - India or China?

Based on 'Looking Eastward' from Time Magazine, February 2006

A hot topic of discussion during the World Economic Forum at Davos was the race between India and China for growth, prosperity and investment. The question to be answered: Which of the two is ahead now, and which is likely to win in the longer term?

China
The head of global economic research for Goldman Sachs, Jim O’Neill reckons China as its economy is already substantially bigger than India’s. According to his predictions, China will be the largest by 2050, with India in third place below the US. In the long term, China will have a greater income per head and in the short term, China is influencing India’s policies. India has been changing its domestic rules in a bid to attract more investment. He predicts that China’s economy will expand by a factor of 20 and India’s by 50 between now and 2050 but India will still be behind.

China (just)
According to Augusto Lopez-Claros, who heads the World Economic Forum’s competitiveness program, China is ahead but India is catching up their Asian rivals fast. He believes that the momentum is with India in terms of national competitiveness using dozens of various criteria.

India
Michael E. Porter, a Harvard Business School professor says that China is exporting masses, but “it’s still adding relatively little value”. Additionally, China’s companies and not very profitable compared to India’s and there seems to be a dearth of Chinese brands. India has a crop of companies – Infosys, Jet Airways and Mittal Steel. While Davos was in full swing, Mittal Steel was making a hostile €18.6 billion bid for Europe’s steel champion, Arcelor.

However, all these predictions depend on many assumptions. Both nations could be destabilized by geopolitical instability of Western protectionism. Both need to overcome the divide between rich and poor. But some experts say that this competition misses the point: the world economy is not a zero-sum game – both China and India can be winners.