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Why India lags behind China?
Mon, 24 Jun Pre-Open

The global economy has slowed down significantly in recent years. While the developed economies have been struggling with high debt and flagging economic prospects, it was hoped that the emerging economies would continue their solid growth rates and herald the global recovery. But emerging economies too have started showing signs of weakness. While China is going through a choppy transition from an investment-driven export-oriented economy to a domestic consumption-led economy, India has its own set of problems in the form of economic slowdown, persistently high inflation, depreciating rupee, lack of reforms, etc.

Until some years back India and China were the fastest growing large economies, with India closing in at number two. In fact, it was argued that India's growth rate would soon trump China. But all expectations of sustained high growth rate have come under a cloud of doubt as growth has dropped to decade-low levels in recent years.

But does India lag China only in economic growth? We came across an interesting article by Nobel laureate Dr Amartya Sen. As per Dr Sen, aiming to achieve China's growth rate should not be our top concern. In fact, there are several other more critical areas where India lags far behind China.

The most important factor where India lags significantly from China is availability of essential public services such as healthcare, education, etc. India continues to have the dual problem of high illiteracy rate as well as poor standard of schools. Moreover, the public healthcare system is in a mess. While India may pride itself in being the world's largest producer of generic drugs, most poor people in the country have to rely on low-quality medicine. The reason for this is the lack of adequate expenditure on public health. For instance, China spends 2.7% of its GDP on public healthcare. Compared to that India spends a mere 1.2% of its GDP on public healthcare.

It is important to note that failure on providing these basic public services eventually takes a toll on our growth rates. As such, competing with China purely on growth rates is a misguided endeavour. Rather India should focus on the big picture and improve in these basic yet critical areas. If this is done, we believe high economic growth rates would follow in due course.

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