India or China — who will rule the future?
It's the talk of the town — who's going to win this race of the 21st century? And beyond that who's going to be the hare and who will be the tortoise — India or China?

Let's take India's case: India's first and foremost advantage is its democratic form of government. Moreover, the nation is a production power-house and it also reaps benefits from an excellent educational system. Its native enterprises are self-sufficient and are growth engines.

Yes, India has its own share of issues. The government doesn't invest enough in vital infrastructure while it spends too much money subsidizing agriculture. China has invested more in infrastructure than India has, which is in a big catch-up situation. Three other things that hold India back are draconian labour laws, corruption, and indirect tax structure. We need to work on these areas.

Against these, China's economy has grown more than 7 percent annually for the last couple of decades. China has emerged as a manufacturer of high-tech goods and is backed by a hoard of companies featuring the likes of Lenovo, Baidu.com and Huawei Technologies. The right prescription to be a winner!

On the flip side, China's aggressive growth has disguised several increasingly pronounced dark patches. Statistics tell me, though China's labour productivity is at a reasonable level, its capital productivity is low. This means that the wealth creation process has been the work of foreign investors and multinational companies rather than native enterprises. China's economic growth is smooth on the surface, but turbulent on the inside.

I'm sure everyone will agree with me that the Chinese government has made a virtual agreement with the rising entrepreneurial class by saying "okay you do business, but leave the politics to us!" The business class has no say in the affairs of the state. There is a fear that the better-off sections will press for freedom to use their economic clout and may lead to an incompatibility between China's political and economic system in the near future. And when this happens, the MNCs will leave the country in droves.

My views are not about supporting India's case or trying to check the Chinese threat, but to ensure that consumers and investors do not put all their eggs in one basket.

In China, you can be rich, but you keep your opinions to yourself. Any Indian can also dream about making a fortune, but they can apply those lessons to build a better society. India's human touch even in its economic growth is its greatest asset and this will perhaps be the dominating factor that'll take it to the finishing line, FIRST!

To rule is one thing, how you rule is another! So what do you think?

Monthly Economic & Commercial Report on South Korea for June 2007 giving latest updates on developments directly affecting India's foreign trade and investment. Read More...