Very interest observations made in this article:

India’s best is not good enough to beat China, figures show.

Everyone will have a different view about why India's growth lags China's, but in my opinion the primary flaw lies in the Indian mentality.

The Indian government and bureaucrats talk more and does less.

India (as a nation) is more interested in talking about its bright future than actually working towards it.

When was the last time that Chinese politicians bragged about their economic superpower status in the media?

India isn't even an economic superpower, but Indian politicians still brag about it every other day and use terms like "Shining India", "Rising India", "Emerging India" to brainwash the people.

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Obviously it doesn't include Indian politician's reserve in Swiss bank . If it includes then the ratio would be other way around.

I am very pessimistic about the long-term prospects of India.

At the "high value" end, I don't see new technology being developed here, not even innovations in existing technologies.

At the "low value" end, China kicks our "behinds" in plain and simple manufacturing. Soon Indonesia, Vietnam and the likes will join China in this regard.

Even the hype about our IT prowess is greatly exaggerated. For all these years of IT "growth", I feel this industry is stuck in low value outsourcing. Other than I-flex "Flex cube" product, I don't see any significant product developed here.

A small portion of money flowing in to India is actually long term FDI. Most of it is "hot money" invested in capital markets that can flow out at a moment's notice.

If we are good at something, it is in scams. But that doesn't help progress.

There is no doubt that China is outperforming India in every sense and I completely agree with that. Let’s see the key difference between two countries for economic development.


First China
China uses top down growth approach just like a private company.

China mostly depends on its exports and became world’s factory in last few decades. Going forward China would need vast reserves of resources for its energy and manufacturing needs. It is paying relatively high premium to secure its energy and raw material requirements around the world which has started creating imbalance in the commodity prices. Hu Jintao is an aggressive dictator forcing China towards communist capitalism. Every economic policy is driven by Hu Jintao and there is a good chance he would be allowed to serve China for another term (there is no one as strong as Hu Jintao in communist party of China). So one strong politician is driving the entire country and if Hu Jintao collapses then it would definitely stall Chinese growth. Rising wages, rising inflation, high cost of housing in Eastern China cities and an aging population are all growing concerns for Chinese growth.

Now India
India follows decentralised bottom up approach for its growth.

The country’s constitution establishes a federalist system, so state governments can set their own course. Changes at lower levels of the political system are leading to a healthy competition for business and investment. As the states try to outdo each other, India’s investment climate improves. This now-intense state rivalry could even end up moving New Delhi in the right direction. And now, it looks like the Indians, mostly through good fortune, have ended up with a decentralized model of local competition that can continue growth over time, even if paralysis in New Delhi continues. India has a very young population compared to China which will benefit India in next few decades where China would struggle for young workforce and its healthcare costs would become burden for Chinese system. The Chinese top-down management of the economy—especially with Hu Jintao’s emphasis on renationalization—is a distant second choice for national development. The vitality of competition will soon become evident as growth stalls in China and soars in India. Tensions between US and China will increase as China come close to US GDP, this will again provide India with an opportunity to grow without much interference from the world.

If you are interested in knowing more about inter state economic freedom in India then check out this 87 page long "Economic freedom of the states of India report". This decentralised model would help India beat China in the future, I am optimistic, are you?

Economic Freedom of the States of India: 2011 | Swaminathan S. Anklesaria Aiyar, Bibek Debroy, and Laveesh Bhandari | Cato Institute

An interesting article that highlights the India investment conundrum. Money is flowing in to capital markets but investments in the "real" economy are drying up.

No wonder China is racing ahead on India.

People who compare India with China have never visited China for sure. Guys, believe me all it takes is just half a day in China to know that there is no comparison.

The scale of the things (whatever they do) and speed if implementation (of any policy) is something India can only dream of at this stage. China is way ahead and the comparison is just a denial of reality.

Fully agree. I don't see India catching with China in the next 20 years. Not even coming close.

20% of the world's manufacturing in China. 20% is done in the USA. I am not sure about India's exact figure but I think it's somewhere around 6%. Brazil is also around the same, I think.