The India Vs. China Debate: One Up For India?

A study of the Asian economy inevitably results in a comparison of the continent’s bigwigs, India and China. So far, China has always emerged the winner with its speedy government action, world-class infrastructure and high-speed growth. More recently, the Chinese government’s decisive economic policies have been credited with saving the entire Asian economy from the recession.

Now, India may have finally scored one above China. The Indian economy’s growth is slower at 6.4% compared to China’s 8.7%, but it seems to be recovering better from the downturn than China. The edge has come from the different stimulus approaches used by both countries. China implemented a massive stimulus program with tax breaks, new infrastructure, and credit. New loans now represent nearly 30% of GDP, and the plan held up growth.

India used the same fiscal stimulus tools as other countries, but on a smaller scale. Goldman Sachs (NYSE: GS) estimates put India’s stimulus at 3% of GDP this year, compared to 6% for China. In addition the Indian banking sector has also weathered the crisis well. India’s lower exposure to the international markets also cushioned it from the worst of the recession. Domestic consumer spending accounts for 57% of India’s GDP, compared to 35% for China.

India is not immune to risks and global shocks, but it can expect growth of 8% by 2011 according to the World Bank. The current recession may just help the Indian tortoise to catch up and perhaps even overtake the Chinese hare.