In all probability, by the end of this year China's national income will overtake that of Germany' making it the third largest economy in the world, after Japan and the US. This event underlines the furious pace at which the centre of global business activity is shifting to somewhere in the middle of Asia.
Income in the BRIC countries (Brazil, Russia, India and China) is expected to overtake that of the richest nations--United States, United Kingdom, Canada, France, Germany, Japan and Italy--much earlier than investment banking major Goldman Sach's original projection of 2050. Goldman Sachs now believes that India's GDP will catch up with that of the US in 2050, by when China is projected to be a $70.71 trillion economy, a staggering 84 per cent bigger than the US.
The economic dynamics and challenges of the two fast growing economies of Asia, however, differ considerably. According to projections, growth of the working age population in China will halt at 2020 and decrease thereafter. India, on the other hand, will face the challenge of creating jobs for its growing working-age population for considerably longer.
"Overall, in comparing the two countries, one can say that China is way ahead of India when it comes to physical infrastructure and the labour market. However, in areas such as banking system, judiciary and the media, India is ahead of China," said Shahin Kamalodin of ABN Amro.
In recent times, however, Indian entrepreneurs have displayed enough gumption to take on the world and raced ahead of their counterparts across the Great Wall. According to Thomson Financial, Indian companies have acquired foreign companies worth $22 billion till October 19 this year, almost double the value of acquisitions made by Chinese companies.
India's economic success, however, will critically depend on overcoming the structural bottlenecks. "India's economic dualism is stark, with less than 3 per cent of its workforce employed in the formal private sector. India needs to rapidly absorb workers out of agriculture, into manufacturing and services," said Mark A. Dutz, senior economist with the World Bank.
At present, the European Union's size is far ahead of other countries, with a GDP of $15.6 trillion in 2006. But with an annual growth rate of 1.8 per cent over 2002-2006, productivity is stagnating, and falling in some countries.