China-India - a see saw?

China's stock market recently fell by almost half, hurting many. Their economic growth rate is at a 2 decade low.

Is this India's time? 

Let us understand, it is not a zero sum game - loss of one is not others gain. Besides differing political system for governance, both nation's have different USP - India has law, China has order.

China had built its infrastructure at a time when oil was, for most part sub-$25 per barrel & with a powerful zeal of its united politburo gave it the desired the thrust. Thats a great advantage.

The other advantage it had was that its timing was perfect - at the very beginning of the globalization phase, over 25 plus years ago. It had no competition from any potential manufacturer base economy in the world & the rich western world was moving up the food chain, looking for avenues to source cheap finished low end products.

China is still in a good position - it is innovative, it has higher HDI ranking, has sound infrastructure, strong forex reserves & no demo-crazy related hurdles, if I may.

It is however severely bruised on many fronts & going forward from here may be with a limp  :

Today, there is a backlash to excessive globalization.

Jobs & protectionism is a mainstream discussion across geographic landscape, keeping politicians of every color employed with rhetoric on 'bring back employment' blah. 

To make matters worse, China made too many enemies over the last decade, which it did not have in the first 15 years of its growth. It has simply kissed every cheek that the western world has slapped - to get cheap raw materials from sanction affected nations. You can't be a leader with no followers. 

It's traditional customers in the West are also a wee bit poorer now. They are also angrier at it and so are on the natural hunt for an alternative - drifting away from it. 

It does not stop there. 

It has created a hostile neighborhood for itself by making expansionary claims on territories - India, Taiwan, Japan, Vietnam & Philippines dislike it.  Can't say same about Pakistan. Contrast that with Mexico, Canada and Puerto Rico for America.

China now has a sudden psychological uneasy to it.

Recently we saw that it still relies on devaluation of its currency for competitive-ness i.e. it has run out of super low wage & high productivity labor force.  

On the other hand, China is flexing its muscle & wants to create formidable alternative to the World Bank & have its currency at par with the American Dollar as a reserve currency for global trade. For that, it will have to make the Yuan fully convertible and tradable & thus exposing to the market vagaries, risking it's rise. A rising Yuan can be a sinking China.

It will have to begin privatization of its PSUs as they are artificially pumped up. 

Moving from conventional to high technology industries will require it to be interdependent on some of the advanced nations it annoyed & competes with. 

It has over invested in industrial towns,  some now dubbed as 'ghost towns' as further urbanization has halted. Property prices may be a bubble waiting to go bust. Construction activities have slowed & steel is already in the drain hole. 

It has polluted itself and closing some mega industries is going to hurt it so.

It will now have to transition from the government spending model to a population consuming economy and that is difficult in any place esp where there is a citizens' trust deficit with its government & no social security for the aged. The problem is further compounded as they are running out of young people & it is ageing due to years of one child only rule.

Its population was always more literate than India but is now more educated as well; recall they had closed almost all universities for a decade from 66-76 during their cultural revolution ! They are also more wealthier now ( but not rich enough ) & so not just comprising of  peasant class. An evolved population is an involved one too by default. That makes them more politically demanding, a hurdle & challenge for any government to rule over. 

Our incredible India has some of the above & much more deeper problems ( a noisy democracy being the worst ) but it is likely to pose a serious competition to China in the future esp. if a pro-business & governance efficiency seeking Modi gets both houses by 2017. Such a parliamentary control would be historic for India.

A low oil & commodity prices will be a bonus for a nation like India, which is at the cusp of building infrastructure.

Unlike China, India is a natural ally of the free world and that is its strongest intangible asset with Modi adding to the aura. 

Due to his personal stamp on foreign policy, the direct rapport with world leaders and ambition to engage nations across the spectrum, he has put India on the 'To do list' for most of the world's political & business leaders. In the very early years, he travelled to the widest variety of countries, be they big or small like... America, Bhutan, Brazil, China, Germany, Japan, Kyrgystan, Myanmar, Mongolia, Russia, Seychelles, UAE, Uzbekistan to name a few !. He enjoys an unprecedented popularity among the rich, famous & influential non resident Indians & foreign business leaders at large.

With a bit of luck, India could be that destination in few years time, that - even a blind, mute & deaf Christopher Columbus can't give a miss !

I rank the chance of both, that of stagnation of China and rise of India from here at 50:50 but with a very favorable bias towards India !

Be an optimist. Bolo Bharat Mata Ki ....Jai OK Please !