To meet the target set by its current five-year plan (2002-07), India would need to achieve an improbable average annual growth rate of 8%. That is the minimum required to provide jobs and the chance of prosperity to its swelling population. Such a growth rate would also give Indiaâ€™s statesmen another cherished prize: bragging rights over China.
Since living standards in China overtook Indiaâ€™s more than a decade ago (see chart), the Chinese economy has grown roughly twice as fast as Indiaâ€™s. As a destination for foreign direct investment, China has in recent years proved five times as popular as India.
Indian reactions range from denial (â€œlies, damn lies and Chinese statisticsâ€), anger (â€œitâ€™s easy if the governmentâ€™s a dictatorshipâ€) and paranoia (â€œthey will take all our jobsâ€) to a perverse sort of pride (â€œwe may be slow and cumbersome but at least we live in a democracyâ€). In some quarters, however, 2004 is billed as the year when Sino-Indian relations move beyond the mutual suspicion that has characterised them ever since they fought a border war, which China won with embarrassing ease, in 1962.
A visit to China by Indiaâ€™s prime minister, Atal Behari Vajpayee, in 2003 brought home how much the two countries have in common, both in fear of an American-dominated world order and in economic aspirations. The worry that China might one day dominate even markets where India has a seemingly secure nicheâ€”such as it servicesâ€”yielded for a while to the potential for co-operation. The worldâ€™s most successful centres of, respectively, low-cost manual labour and low-cost English-speaking services ought to have complementary strengths. The Economist World in 2004
The Economist predicts that politics will get in the way of closer economic relations. But I think it will be the other way around: closer economic ties will compel India and China to take a non-antagonistic view towards each other.