China and India - Will they Drive the Global Economy?

In this paper on India and China, an attempt is being made to assess the long term outlook for the two economies during a period of rapid globalization. Focus is on how the rise of India and China is a significant economic force in the world economy and hoiv their growing presence will continue to change the rules governing the structure of global manufacturing and services output. The challenges the two economies now face to maintain their groioth trajectories beyond the current boom are also discussed. The huge surplus in India's and China's working-age populations has forced the world to recognize their roles in the global business. Both markets are increasingly integral to the business strategies of multinational companies and are viewed as drivers for productivity. The two economies will be the dominant growth stories for the next 30 years. In the short to medium term, however, there will be challenges for both economies. India and China are at a critical juncture where they need to reassess their growth models and initiate difficult policy reforms for the current strong growth trend to be sustained. India requires an aggressive investment and export thrust while cooling consumption; China needs to slow its investment and export drive in favor of consumption. Both the economies need to reduce unemployment, poverty, and inequality and to improve education. In addition, each country has a unique set of challenges: India has to strengthen its infrastructure, improve public finances; reform its labor laws and augment its resources through higher FDI infloios and privatization. China needs to revamp its financial system, move to a flexible currency regime, and reform its institutional framework. Both countries will require political reform to lift them to the next level of economic development.