India needs rapid growth to catch up with China, says PIC policy paper

India can have the economic, commercial, intellectual, and cultural might to compete directly with China if it could achieve rapid growth in the next 20 years, a policy paper released on Tuesday by the Pune International Centre (PIC) said.

At present, the difference in GDP between the two countries is large, but if India grows at 8% and China grows at 4% for the next 20 years, India can narrow the gap and catch up with China, the paper said.

At this rate, the two GDP values in comparable purchasing power parity terms in 2041 would be $53 trillion for China and $40 trillion for India the paper said.

The policy paper, titled ‘Strategic Patience and Flexible Policies: How India can rise to the China Challenge’, advocates a progressive ‘less China approach’, but recommends staying away from myopic jingoism as China is a source of new technologies and capital that was necessary for growth in the short term.

India would require a 20-year high GDP growth period to match the economic, cultural, technological, and military power of China. The critical challenges to this would come from the increasing tendency towards the government micromanaging the economy, the expanding administrative state and growing erosion of the rule of law, the paper said. The PIC paper, authored by Vijay Kelkar, Ajay Shah, R Mashelkar, Ajay Shah, Ajit Ranade, Gautam Bambawale and Ganesh Natarajan, said the Indian financial system allocates capital better than the Chinese financial system, which gave India n edge.

The success of Indian vaccines and vaccination policy is an example of how India could rise to the China challenge, Kelkar, vice president of PIC, said while releasing the paper. Indian vaccines have turned out to be much better than Chinese vaccines. Instead of being worried about China, India should focus on creating acceptability for Indian goods and services, Kelkar said.

India would need to embrace international trade and finance where China is ahead of India in terms of openness to international trade and FDI, which is most visible in international finance and RMB internationalisation, the paper said. There is a need to revisit the plan of building Mumbai into an international financial centre and rupee into a global currency, which is relevant in the current context of competing with China. But for this, India would have to reverse the long-term decline of the share of India in global activity arising out of poor choices in India on financial economic policy, taxation, and capital controls.

The paper suggested that India could fare best by participating in coalitions to balance China. The three groups of countries for such coalition building are major democracies of the world, countries in the Indian region and countries that share a border with China. This would require key negotiations and partnerships with 20 countries, including Russia. China has embarked on a course of having conflicts with many countries and there is a risk of over-reach. In contrast, India is much more equanimous with good relations with many of the natural partners.