An Analysis Report: The Growing Indian Economy and the Growing Gap Between the India-China Economy

The Indian Economy is one of the Fastest Growing Major Economies in the World today, which must enlighten Indians as it is undoubtedly an achievement. As per the World’s Top Economic Body – International Monetary Fund (IMF), the Indian Economy was the fastest-growing major Economy with over 9% growth rate in Financial Year (F.Y.) – 2021-22 and recorded a 6.8% growth rate in Financial Year 2022-23. More Interestingly, the Indian Economy is expected to grow at the rate of 5.9% in F.Y. 2023-24 and 6.3% in 2024-25. The IMF calculation cycle works on calendar bases from Jan to Dec, while Domestically, it is measured as per the Financial Year, which starts on 1st April and ends on 31st March. Hence, there is sometimes a slight difference between the data from India’s Finance Ministry and the IMF. Thus, the statistics presented by the IMF showed the Indian Economy grew by 6.8% in 2022, while the Finance Ministry showed a 7.2% growth rate in the F.Y. of 2022-23. So, we analyze the above statistics for India in recent times. In that case, it showcases the constant growth rate of around 6 to 7 percent, which is one of the highest growth rates if compared with all the G20 – Major Economies of the World. 

In the post-pandemic World, as per the IMF projections for 2023, Most of the World’s Nations are recovering with a 2-4% growth rate or struggling to recover with hardly 1-2%, or some are even registering a negative growth rate, i.e., The United Kingdom with -0.3%, Germany -0.1% and Sweden with -0.5%, in the same year, Indian Economy is growing at the rate of 5.9 percent is undoubtedly good news for India and a matter of appreciation. 

As per the IMF Data, the Indian Economy stood as the World’s 5th largest Economy with $3.3 Trillion GDP (Nominal) in 2022 and is projected to reach $3.7 Trillion by December 2023. Following the forecast, India would achieve over $4 Trillion Economy by 2026, surpassing Germany as the World’s 4th largest Economy. And, It would become the 3rd largest Economy by beating Japan’s $5 Trillion Economy by 2030 as Japan’s Economy is growing at a record low rate of 0.1 to 1 percent as per the IMF forecast.    

Growing China and its Deteriorating Relations with India 

In the wake of the 21st Century, the World Economy was at $34 Trillion (Nominal), and now the World Economy has tripled to $104 Trillion in 2023. The World Economy has tripled since the beginning of the Century, but the China case is special as the Chinese Economy has grown at an unprecedented pace. China as a country has performed miraculously on almost all developmental parameters. And the comparison of China’s Economy with neighbor India’s Economy is a natural phenomenon as both countries are natural competitors given the size of their same size populations and the same period of independence, and both countries started from almost the same socio-economic conditions.

From the 1962 India-China War to the Martyrdom of 20 Indian Soldiers during the India – China Army clashes on the Indo-Sino border to the recent multiple rounds of unsuccessful peace talks between both countries, the relations between the two have been deteriorating. The Indian Foreign Minister S. Jaishankar has several times reiterated the existential threat of China for India, and the present Modi Government has been taking all the measures to solidify India’s Defense, especially on the Indo-Sino border in the wake of the potential threat India sees from the neighboring China. 

Since India carries a major threat from China and building up the Defense Infrastructure along its borders to combat any war or synonymous situation, India needs Hundreds of Billions of Dollars as an additional budget to build up the defense Infra. Dr. S. Jaishankar, the Foreign Minister of India, recently said, “What Modi Government is doing now along the Indo-Sino borders to ensure the National Security should have been done 30 years before, blaming the previous Governments for the failure”. He added, “India faces a “very complicated challenge” from China, and the Narendra Modi government has taken steps to ensure no attempts are made to change the status quo in the border areas unilaterally.” 

Widening Gap Between India & China Economy 

India gained independence in 1947, whereas China in 1949. Even up to 1990, both countries were on the same levels of economic growth; after that, things got changed. In 1990, China’s per capita income was $318 annually, while India’s was higher than China’s at $368 per year. After that, the Chinese Economy went skyrocketing while Indian Economy just grew at an average pace. 

In Today’s Era, almost everything is related to the Economy and Countries’ Socio-Economic-Political; all aspects of progress are mapped on Economic Indicators. If we compare the statistics of both countries since the beginning of this Century, the Indian Economy was $468.40 Billion in 2000, while the Chinese Economy stood at $1,2 Trillion, almost 2.5 Times Bigger than India’s Economy. In the same year, India’s Per Capita Income was $443, whereas China’s was almost double at $959.

As per the latest IMF Statistics, India’s Economy was $3,312.95 Trillion in 2022, whereas China’s Economy was $18,013.40 Trillion, the Second largest globally, lagging behind only the U.S. with $25.46 trillion. 

Thus, the Chinese Economy, which was hardly 2.5 Times bigger than Indian Economy in 2000, has lagged much behind by almost 6 Times in 2022. And India’s Per Capita Income stood higher than China’s Per Capita Income in 1990. And was Nearly half the size of China in 2000 and remained at only $2,358 compared to China’s $12,763 Per Capita Income, which grew up to almost 6 times more than India by 2022. 

Furthermore, the widening gap between the China and Indian Economies is likely to widen in the years to come. As per the IMF Economic Forecasts, Indian Economy will grow at the rate of 5.9%, 6.3, and 6.2% in the upcoming years of 2023, 24, and 25, whereas the Chinese Economy will grow at 5.3%, 4.5% and 4.1% in 2023, 24 and 25. According to the forecasts IMF forecasts deemed to be the most reliable and accurate, the Indian Economy will reach 3.5 Trillion in 2023, 3.8 Trillion in 2024, and 4.1 Trillion by 2025. In the same period, the Chinese Economy would become 19.4 Trillion in 2023, 20.9 Trillion in 2024, and Would reach 22.4 by 2025. 

Similarly, India’s Per Capita would be $2,909 by 2025, and China’s Per Capita Income would be $15,855, almost 6 Times More than India’s Per Capita. Consequently, China as a Country and an average Chinese would be nearly 6 times richer than an average Indian. 

The Growing Hegemony of China as a Becoming Superpower 

Today, the World is witnessing the US-China decoupling and fastly deteriorating relations between Both countries. The World is changing at a breakneck pace in the wake of a New World Order. A New World Order where the US is no longer going to be a Superpower, and the World Order is turning to be Bipolar rather than Unipolar. Given the current Geo-Political situation Globally, on one side, the US-China have got into an Economic War. On the other side, China has not been able to maintain a good relationship with most of its neighbors. China’s relationship with India has worsened over Chinese border aggression on the Indo-China border and with neighbors Japan, South Korea, Vietnam, and many other Countries over maritime territorial issues. Still, none of it could hamper the Growing Chinese Economy and Growing Stature of China as World’s Becoming Superpower. 

If we compare the statistics of China and its Competitor – the Superpower USA, since the beginning of this Century, the Chinese Economy was only $1.2 Trillion in 2000, while the US Economy stood at $10.2, almost 8.5 Times Bigger than China’s Economy. In the same year, China’s Per Capita Income was $959 only, whereas the US Per Capita Income was $36,335, almost 38 times more than China, i.e., the US was 38 Times Richer than China in 2000. 

As per the latest IMF Statistics, China’s Economy was over $18 Trillion in 2022, whereas US Economy was over $24 Trillion. Thus, the US Economy, which was 8.5 times bigger than China’s Economy in 2000, the Chinese Economy has miraculously progressed and now become 3/4 the size of the US economy. And China’s Per Capita Income went to $12,763 compared to the US $71,896 in 2022; the US, which was almost 38 Times Richer than China in 2000, is now nearly 5.5 Times Richer than China and 31 Times Richer than India. As per the Analysts, China is likely to surpass US Economy by 2030 and replace the USA as the World’s Superpower. A Paris Based Credit insurance firm – Euler Hermes, made a similar forecast.

Like China, India has a lot of potential and can still bridge the gap to a significant level to contain the threat from China, but it has to undergo a major transformation before it is too late. And the shift can first be started by getting down India’s Trade dependence on China. India’s bilateral trade deficit with China accounts for India’s largest Trade Deficit, and it is growing speedily. In 2021-22, India’s trade deficit with China was around $73.3 billion, and it is expected to cross $100 billion in FY23-24. Given the deteriorating relationship with China, India must first start by reducing its import dependence on China as the Political and Security challenges deepen when a Country is dependent on importing products and services from an unfriendly Country. Indian Exports are growing, but such a larger trade dependence on China not only burdens India’s Economy but widens the already existing threat from China.