India's economic growth and market potential: benchmarked against China

Abstract

PurposeIn the context of India's growth and development benchmarked against China, this paper aims to address two important research questions: How do the growth models and market potential of China and India compare? What are some policy lessons to be learned?Design/methodology/approachThis paper presents a critical analysis and review of the empirical results.FindingsWhile India has adopted policies that have stimulated consumer demand and fostered entrepreneurship, China has adopted policies that have encouraged resource‐mobilization. China's physical infrastructure, while impressive, may have come at the cost of social investments (e.g. primary and secondary education). Empirical result shows that social investments are important for an economy's sustained growth, more than incentives to attract foreign direct investments. While the structure of the economy appears to be more promising for India, there is one enigmatic issue yet to be understood: China's path of economic development (agriculture to industry to services) has been demonstrated to be viable but India's path of development (almost directly agrarian to services‐based) may or may not be viable (the jury is still out). Finally, data from China and India are not yet discriminating enough to answer the question: is growth driven by greater export‐import trade recommended for long‐term and stable growth?Originality/valueThis study shows that while China and India have adopted two different models of growth, India's model is likely to be more sustainable.