Which is the cheetah?

Source: The post is based on an article “Which is the cheetah?” published in Business Standard on 4^th March 2023.

Syllabus: GS 3 – Indian Economy

Relevance: India’s economic growth and associated concerns

News: The article compares the economy of India and China and it also provides highlights towards India’s projected economy.

How has the Indian economy performed compared to China in the past years?

India’s economy has grown faster than China’s in the year 2021 and 2022.

For example, India’s economy grew at 7% compared to China’s which was at 3% for the year 2022. Similarly, in 2021, India’s economy grew at 9.1% while China’s was at 8.1%.

For the years 2014-2018, India outpaced China for the first time with an average 7.4 percent growth, while China managed 7 percent. This gave India the image of the world’s fastest-growing large economy.

However, things changed during the Covid period. For the years 2019 and 2020, China managed to do better than India. China grew by 6 percent in 2019 compared to India’s 3.9 percent for 2019-20.

Therefore, there was a large gap between the economies of the two nations for the Covid period. This benefited China to outpace India in average economic growth.

What are the different projections of China’s and India’s economic growth?

Economic forecasters have held that India would do significantly better than China in 2023-24. For example, the International Monetary Fund postulated China’s growth at 4.4 percent against 6.1 percent for India.

However, the projections changed after China gave up its zero-tolerance policy on Covid.

This led forecasters to project higher economic growth for China in 2023. Most have moved up their China forecast to 5.5 percent.

However, when compared to the growth projection given by this year’s Economic Survey (2022-23), the projection for China is below that of India’s.

The Economic Survey has kept India’s economic growth between 6.0-6.8 percent for the year 2023-24.

However, there is a doubt over the economic forecast projected by the Economic Survey after looking at India’s GDP growth for the quarter October-December.

What are the concerns with India’s economic growth?

The GDP growth for October-December was only at 4.4 percent.

Further, there is no sign of the economic growth that would take India from a 5 percent growth to 6 percent and more as stated by the Survey.

India also has serious trade and fiscal imbalances and excessive dependence on capital expenditure by the government.