Shining Tiger, Leaping Dragon

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 India’s statesmen another cherished prize: bragging rights over China.

Since living standards in China overtook India’s more than a decade ago (see chart), the Chinese economy has grown roughly twice as fast as India’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 (“lies, damn lies and Chinese statistics”), anger (“it’s easy if the government’s a dictatorship”) and paranoia (“they will take all our jobs”) to a perverse sort of pride (“we may be slow and cumbersome but at least we live in a democracy”). 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 India’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 niche—such as it services—yielded for a while to the potential for co-operation. The world’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.