Do not wait for ideal circumstances nor for the best opportunities; they will never come.
Anonymous
India overtaking China: Possible or Pipe dream
India has had many aspirations to overtake China, and it might be able to do so in terms of economic growth rate, but never in size. It is miles behind China’s GDP; it has the world’s 7th largest economy, for crying out loud. If it were 3rd or 4th, we could understand the big hoopla this question is creating, but it’s not, so the answer is simple: India will never overtake China, at least not in this century.
Source of image: knoema.com
India’s level of corruption surpasses that of China, making China’s corruption seem negligible in comparison. When you factor in the traffic jams, odours, and filth prevalent in parts of Mumbai and Delhi, the attractiveness of investing in India diminishes rapidly. This is a key reason why India continues to experience a significant brain drain. Intelligent Indians recognize that their best course of action is to seek better opportunities elsewhere. Despite having the strongest mandate of any government, Modi’s administration, like its predecessors, appears to be all talk and little to no action. It has failed to implement any substantial changes.
The initial step should have been to streamline the investment process and make it exceptionally easy for foreigners to invest. Foreign investment brings along a plethora of job opportunities. However, Modi continues to chant the same old tune of change while adhering to the status quo. India is unlikely to catch up with China, at least not in this century.
This century undoubtedly belongs to China, and this fact is acknowledged worldwide. When Indian markets experience declines, hardly anyone flinches. However, when Chinese markets face adversity or negative news emerges from China, global financial markets react strongly. This mass psychology indicates that financial markets recognize China as the de facto leader, while India, if fortunate, may manage to hold some position in the top five. For investors, the prospect of India surpassing China is a distant one. Nonetheless, certain Indian companies remain worth considering for investment, and it’s advisable to wait for significant pullbacks before allocating funds to these stocks.
To underscore this sentiment, we’ll share a few recent quotes from Jim Rogers, who appears to share a similar viewpoint:
“You can’t base your investments solely on hope. Even if reforms start to materialize, it may not be enough to drive the markets higher, as the markets have already factored it in. Substantial reforms, if enacted, could lead to market gains. However, there’s no indication of that happening.”
“If Modi were to make the currency convertible and open the markets to outsiders, then I would consider returning to India. So far, Modi has taken positive steps in addressing some social issues, which is commendable and beneficial for many people. However, India needs more.”
“By limiting foreigners to owning no more than five hectares of land, you have protected your farmers. But how can an Indian farmer compete with an Australian farmer who has 50,000 hectares? Historically, India has been one of the world’s great agricultural nations, with abundant land, a large population, and favourable weather. However, Delhi’s actions have hindered its potential.”
Conclusion
While the Indian economy has grown nicely over the years, we think the tiger will have difficulty dethroning the Golden Dragon. India has a GDP of roughly $2.1 trillion, and that, sadly is a long way off from China’s current GDP of $11.3 trillion.
At this stage, it’s not even a close race. In fact, the odds are higher that China will displace the US as the top dog than India overtaking China. While there are some great companies in India, from a long-term perspective, China makes for a better investment as the market is extremely oversold; great companies are selling for a fraction of their former prices. For example, CHH, CHL TCEHY, BABA, are good
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