There is no denial that the Indian economy is way behind China. In fact, China is moving ahead in leaps and bounds but India is moving at the pace of a tortoise. The Chinese cities are no different from the major western cities with their high rises, wide roads and impressive structures. With the Olympics round the corner, China has built some hypermodern, state-of-the-art monstrous airports and stadiums. Unfortunately for India, the dream of catching up with China poor infrastructure is the major impediment.

What is possible or perhaps easy for an authoritarian Chinese regime is not possible for a democratic country like India, where administrative action is subject to judicial scrutiny. Whether it is about building dams, nuclear power plants, or acquiring land for building factories or highways, public interest litigations often act as bottleneck. With a population of over 1 billion, India spends approximately $35 billion a year on infrastructure. In comparison, China spends a whopping $260 billion annually on infrastructure development.

Nonetheless, the Indian government, although working rather slowly compared to China, is gradually building its infrastructure. India adds 7.5 kilometers every day to its existing highway network, which is an ambitious project to upgrade 45,000 kilometers of national highways. It is estimated that India needs over $488 billion in investment to develop its infrastructure that include roads, power, ports, airports, special economic zones and energy. To develop infrastructure, India is looking for private participation. Rising inflation that is pushing up prices of building materials like cements, iron, and steel could stifle infrastructure development.

A strong infrastructure has made China attract the bulk of global foreign direct investment. With a comparative advantage in software and service sectors, and an economy that is more reliant on domestic entrepreneurs, the slow and steady Indian tortoise could defeat the Chinese hare in the race for economic growth, perhaps in the distant future.

Source: Bloomberg
Image