India needs China’s help in economic catch-up

By Li Xuanmin Source:Global Times Published: 2018/10/9 22:48:40

As foreign funds flow in, infrastructure must improve

crack hooligans europejska zadyma Workers monitor a production line at a clothing factory in Gujarat, India on August 9. Photo: VCG

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India's rapid progress in catching up with China when it comes to attracting foreign investment shows its potential to become a global economic powerhouse, but whether India will be the next China in terms of economic growth depends on many factors, and how much help and investment it gets from China may be one of the first and foremost, analysts said.

India drew $40.6 billion in foreign investment in the first nine months of 2018. Led by Walmart's $16 billion stake in e-commerce platform Flipkart, the value jumped 64 percent year-on-year, close to China's $41.6 billion worth of inbound mergers and acquisitions.

India's GDP grew 8.2 percent year-on-year in the second quarter, while China's economy grew 6.7 percent.

The figures prompted speculation that India may rival China as an alternative destination of foreign investment in Asia and become the next China in terms of economic strength.

But Long Xingchun, an associate professor of China's West Normal University, told the Global Times on Tuesday that such talk is "too early" as the two economies are at different stages of development.

"China is now transitioning to an innovation-driven economy and welcomes foreign investment that could propel technological upgrades, while its southern neighbor just wants foreign capital and has shortcomings such as an inefficient environment, an out-of-date infrastructure network and a low-end manufacturing industry," Long said.

Despite having roughly the same population, India's GDP is about $2.5 trillion, compared with China's $12.2 trillion.

Booming foreign investment partly reflects the success of Indian Prime Minister Narendra Modi's reforms, but for India to sustain robust economic growth like China, the Modi government should turn to China for help to address internal issues that hinder its economic take-off, Lou Chunhao, an expert with the China Institute of Contemporary International Relations, told the Global Times on Tuesday.

"Some problems can only be solved through cooperating with China," Lou added.

For example, India has a huge demand for infrastructure, not only highways and railways but also ports and airports, Long said, and an advanced logistics network is the foundation for long-term economic growth. The country, therefore, should look for help from Chinese companies, which have rich experience and cost-effective skills in building infrastructure.

"China could reshape India's infrastructure landscape at a relatively lower cost within a short time if India turns to China for help in technology and capital," Long noted.

India has already sought Chinese participation in a new northeast connectivity plan, the Times of India reported in September.

Besides, India, which is at an early stage of industrialization, should also seek advice from China in using its vast labor resources to advance industrialization, as China has already shifted from industrialization to informatization, experts suggested.

"If Chinese manufacturers localize production in India, they could accelerate Modi's 'Make in India' agenda and reduce its trade deficit with China," Long added.

Another area where India companies alone, without China, may not find quick success is the internet industry, Lou said.

"Both China and India have huge markets of more than 1.3 billion people. Chinese internet platforms, after working in the domestic market for several years, know well how to translate demographic dividends into consumption power that will draw in more foreign investment for India," Lou explained.

Chinese internet companies are already major investors in the Indian market.

In April, Alibaba invested $45 million in Indian e-commerce platform Paytm, Reuters reported. Online travel agency Ctrip was also in talks to invest in Indian food delivery platform Zomato, the Times of India reported.

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