Wei Shangjin's Column: Is the Indian Economy Overrated?(AI Translation)

【周刊提前读】魏尚进专栏：印度经济被高估了吗？

The 2023 Indian general election began on April 19, highlighting the contrasting economic trajectories of China and India. According to a Standard & Poor's report titled "China Slows, India Grows," India is experiencing robust economic growth while China faces a slowdown. The National Stock Exchange of India has seen a significant increase in accounts, rising from 41 million in 2019 to 140 million in 2023. This growth is partly due to multinational corporations shifting their factories from China to India, driven by various factors including tariffs imposed on Chinese goods by the US and EU, rising labor costs, and environmental pressures in China [para. 1].

India's economy benefits from several demographic advantages. It recently became the world's most populous country, surpassing China with a younger population where 43.3% are under the age of 25. These demographics could potentially provide a substantial workforce for its developing economy [para. 2]. Furthermore, India's government under Prime Minister Narendra Modi has implemented numerous economic reforms such as "Make in India" and "Digital India," aimed at improving the investment climate and promoting self-reliance [para. 3].

Despite these positive indicators, there are reasons to believe that the potential of India's economy might be overstated. The fertility rate in India is below replacement level at two children per woman, and female labor participation is significantly lower than in China (32.7% compared to 60.5%). Additionally, while wage levels in India are lower than in China and the US, this advantage is diminished by the relatively lower education and skill levels of its workforce [para. 4].

Moreover, despite lower production costs due to cheaper labor, other factors like less developed infrastructure make exporting goods from India more expensive than from China [para. 5]. Protectionist policies further complicate matters; according to WTO data, India has higher trade barriers compared to many countries which could deter foreign direct investment [para. 6].

Corruption also poses a significant challenge for business operations within India. It ranks worse than China on Transparency International’s Corruption Perceptions Index for 2023 and reports indicate high rates of bribery and use of personal connections for obtaining public services [para. 7]. To address these issues effectively and enhance its attractiveness as an investment destination, comprehensive anti-corruption reforms along with investments in infrastructure improvement and educational enhancement are necessary [para. 8].

In conclusion, while there are optimistic views about India becoming an economic superpower by leveraging its demographic advantages and reformative policies under current governance, it must overcome substantial challenges related to workforce quality, infrastructure deficiencies, protectionist policies, and corruption before it can realize this potential fully [para. 2][para. 4][para. 6][para. 7][para. 8].