The comparison between the growth models and growth rates of India and China has been almost done to death, especially since the beginning of this century. The dragon representing China and the elephant representing India have become metaphors to discuss the two Asian giants, in positive as well as negative terms. Ironically, it is the free market advocates in India who looked to the Chinese growth rates with impatience and envy, almost implying that India should follow the Chinese path of centralised and authoritarian political system and a State-driven capitalist boom anchored by the Communist Party of China (CPC). In contrast, it is the Indian Communists who have been quite uncomfortable with China’s market economy achievements. In the last six months, the Chinese example has become more of an attraction for the BJP-led NDA government of Prime Minister Narendra Modi. There is a keen desire to follow the Chinese way and overtake China. There was an obvious sense of thrill when in the last quarter of 2014, the Indian economy, outpaced the Chinese one. 

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It is for this reason that the speech of Chinese Prime Minister Li Keqiang to the National People’s Congress, on March 5, referred to the problems the Chinese economy was facing. In his speech, he pegged the growth rate for 2015 at 7%, which is lower than the rate for India which is projected to grow between 8 and 8.5% in 2015-16. China grew at 7.4% in 2014 as against India’s 6.9%. It apparently looks that in terms of annual growth rate, India will overtake China. But that is a misleading statistic because China is a much larger economy than India, and a lesser growth rate in the medium term still keeps it ahead of India in terms of sheer size and capacity. 

It could be the case that the Chinese economy is slowing down because of the lingering global recession. But Li has described the relatively low growth rate as “the new normal” and made Chinese economy watchers across the world sit up and take note of it. The Chinese Prime Minister has talked of the importance of “development” and the need for “appropriate growth rate” to achieve developmental goals. After nearly a quarter-century of double digit growth, which is what India wants to achieve in the next few years, China feels the need to deliberately slow down in order to consolidate the achievements of growth for developmental purposes. Enumerating the statistical highs that the Chinese economy touched in the past year, Li summed up the problems neatly: “China’s economic growth model remains inefficient; our capacity for innovation is insufficient; overcapacity is a pronounced problem, and the foundation of agriculture is weak.”

China’s decision to go slow on growth should be of interest to those debating the issue of growth and development in India. The economic reformists and free-market supporters have always argued that higher growth rates would ensure better developmental outcomes. The critics of market economy have been of the view that development is more important that growth — and that there cannot be a trade-off between the two. Growth is essential for development. The Chinese experiment offers the option that after crossing the critical peak, it will be necessary to scale the growth rate down and focus on development. The growth vs development debate thus has appeared to return in a new form.