Is India the next China?

Prior to the 1990s, China and India were seen as relative equals on the global stage. Both fell into the category of emerging market economies, characterised by stagnant low levels of GDP, a lack of foreign direct investment (FDI), and with minimal investment in critical infrastructure. Many issues plagued the two nations and hindered economic progress. However, in the early 1990s, China turned its focus to the manufacturing sector where it became a major centre for global manufacturing, subsequently seeing it reach heights that significantly outpaced India.

China received significant FDI after the 1990s which saw its growth opportunities outpace that of India's. Increased investment led to infrastructure spend and a noticeable uptick in the Chinese economy, one that can be replicated in India as the rest of world looks to decouple from a relatively sole reliance on China.

There is particular focus from the international community on an internalisation of critical operations and a desire to diversify risk. India could be a clear beneficiary of this trend.

With India having trailed China's growth trajectory for the past 30 years, there is disparity in the quality of life experienced between these two countries. China, having become more developed, has seen significant pressures on its wages. Minimum wages in China have risen to an equivalent US$360 per month compared to that of India which are approximately US$145 per month.

India provides significant cost savings opportunities for large manufacturing operations, and we are seeing a shift in investment flows in the near term towards such favoured jurisdictions, and beyond China. China has grown to dominate manufacturing, exports and resources markets with its aggressive expansionary policies and growth strategies over the past three decades. This has been led by its push to urbanise its population and raise the average standard of living from subsistence towards that of developed nations.