Avinash Persaud, chairman of Intelligence Capital, which specialises in financial market liquidity, believes India is better placed for the next phase of development.
“The Chinese model was the right model for taking China out of poverty and much more successful than the Indian model, but we have entered a different phase of economic development where that model is not going to function so well,” he says. “A country that saves about 40% of GDP and is only generating 10% of growth [like China] is actually not succeeding. The next phase of economic development is about those micro-economic decisions made by profit-driven private corporations and China is not as well set up [as India] for that.”
But Mr Persaud has his opponents. At an economists’ roundtable, held as part of The Banker’s 80th anniversary celebrations, Gene Frieda, head of emerging markets research at the Royal Bank of Scotland, took a different line. He felt that China’s private sector is much less shackled than India’s and its economy deregulating much faster.
China is no longer controlled by the Communist Party at the centre, said Mr Frieda, but at the local level and in a more diffuse way, with 60% of exports being produced by foreign investors.
Other views included that of Gerard Lyons, chief economist at Standard Chartered, who said that both China and India faced the problem of managing success and addressing the plight of the rural poor. They needed to turn high savings rates into consumption, which would also bring about greater balance in the world economy.
Krishna Guha, editorial leader writer for the Financial Times newspaper, disputed the idea that India’s strong service sector could deliver broad-based growth. He argued that China’s strength was its labour-intensive manufacturing, which created many jobs.
