India’s economy is leaving China behind

In the first quarter of 2018, India has beaten China in economic expansion, reports Forbes. This economic competition between the two key players in Asia can impact the whole region. India’s economy experienced an expansion rate of 7.7% in Q1 of 2018 which is a jump from 5.6% in 2017. China, however, remained at 6.8 percent just as last year.

The two countries are in entirely different stages of economic growth. While China’s economy is operating close to full capacity, India’s economy is still in an early growth stage. Therefore, India has plenty of excess resources. With better utilization of these resources and integration of technology, Indian economy can pace its growth. In comparison, China now needs to innovate more in its economic sectors which are majorly controlled by the government.

Not just economic expansion rate, India is also beating China in terms of economic competitiveness. According to World Economic Forum’s Global Competitiveness Ranking, India has gained 20 points just in the last four years, moving from 60th to 40th while China remains almost unchanged, jumping just two spots from 29th to 27th.

While China’s financial reserves are a surplus of 1.30 percent of GDP, India is still struggling to come out of its account deficit that remained at 0.70 percent of GDP in the fiscal year of 2016-17. Since US interest rates are rising, this can bring trouble for India’s currency and financial market, as capital is majorly seen to flow back from emerging markets to the US. The international financial market has also observed that Indian exchange-traded fund dominated by dollar, is underperforming as compared to that of China.

Technology companies are contributing vehemently to the economic growth of their respective countries. Four Chinese technology companies have made it to the top 10 most valuable companies in the world. Similarly, in India, key international players are now investing in technology startups and local companies to establish their foothold in the country that has a potential market of 1.3 billion population.

This healthy economic competition projects economic growth for the Asian region overall. Pakistan now has to cope up by introducing government incentives and economic policy to further empower local industries and drive international investments. With the State Bank of Pakistan depreciating the currency value against the dollar, Pakistan’s economy is facing serious threats.