By Una Galani
MUMBAI- There are some startling similarities developing between India and China. How many and how concerned investors should be will rank among the big questions in 2025.
Western policymakers, CEOs and investors have for years debated the potential of the South Asian country to follow the path of its $18 trillion neighbor in terms of GDP per capita and global manufacturing might. Such comparisons are now taking on new meaning in Mumbai financial circles and beyond.
For a start, the world’s view of China has dramatically deteriorated. Growth in the world’s second-largest economy is slowing, and Beijing’s relationship with Washington has soured. These two trends have increased India’s opportunity to shine as an investment destination on the global stage since the Covid-19 pandemic.
China’s current chapter also expands the scope of what it means for a country to emulate the People’s Republic. This now includes some less flattering aspects, and it is here where observers may conclude, rightly or wrongly, India is starting to check a few too many boxes.
The first problematic likeness is the trajectory of India’s $4 trillion economy. It is suddenly underperforming expectations: GDP growth fell to 5.4 percent in the three months to the end of September, the slowest pace in seven quarters, only 80 basis points faster than China’s print for the comparable period.
That points to a big potential weakness in the belief within Prime Minister Narendra Modi’s government that India will deliver a sustained 6 percent-8 percent annual GDP growth over the next decade. As in China, domestic problems underpinning weak private consumption – including, in India’s case, anaemic salary growth – appear deep-seated and hard to fix.
What’s more, both economies face serious external headwinds. US President-elect Donald Trump is threatening trade tariffs against the South Asian nation as large as he has threatened against the People’s Republic. Meanwhile, India’s richest man, Gautam Adani, is likely to curb his growth ambitions following his US indictment for securities fraud, which he denies.
The tycoon’s problems put a spotlight on India’s approach to courting foreign investment. Global companies are entering the country in partnership with local firms helmed by a small number of powerful Indian families. That sets up the potential for at least some of the new alliances to sour, just as several Chinese joint ventures did.
France’s TotalEnergies is grappling with that risk because of its partnership with Adani Green Energy the company at the center of the US legal case. Ultimately, while China was more forceful than India in coercing joint ventures, officials in Beijing and New Delhi want the same thing from foreign multinationals: know-how. That desire to acquire intellectual property may ultimately put India in the West’s crosshairs.
Finally, there is the issue of perceived interference. The US is trying to contain China’s rise, partly because of concerns the Asian behemoth is seeking to influence lawmakers in Washington. Politicians on both sides of the aisle also disapprove of what they view as China’s predatory business practices, cyber intrusions and territorial claims. — Reuters
