India & China ~ Paths to Future Development...

Several interesting pieces recently about India and China's economic development. $123T -- that's the GDP in PPP of China in 2040 according to U Chicago Nobelist Robert Fogel in Foreign Policy...

"In 2040, the Chinese economy will reach $123 trillion, or nearly three times the economic output of the entire globe in 2000. China's per capita income will hit $85,000, more than double the forecast for the European Union, and also much higher than that of India and Japan. In other words, the average Chinese megacity dweller will be living twice as well as the average Frenchman when China goes from a poor country in 2000 to a superrich country in 2040. Although it will not have overtaken the United States in per capita wealth, according to my forecasts, China's share of global GDP -- 40 percent -- will dwarf that of the United States (14 percent) and the European Union (5 percent) 30 years from now. This is what economic hegemony will look like. [...] What, precisely, does China have going so right for it? The first essential factor that is often overlooked: the enormous investment China is making in education..."

Along these lines, MIT Sloan's Yasheng Huang writes Human capital development: The reason behind China's growth in India's Sunday Economic Times...

"...explaining the growth differences between China and India by pointing to this difference in infrastructures and FDI [commits a] classic analytic error known as reverse causality, i.e., [thinking] that it is infrastructures or FDI that caused the Chinese growth when in reality it is the growth that caused China to have infrastructures and FDI. [...] For India to achieve the kind of growth that China has achieved, it has to invest more in its human capital base, especially basic education in the rural areas and especially basic education for girls. For India, this is easier said than done. [...] It is education that will pay in the long run and once India has the growth then infrastructure will be self-financed by the growth itself. India faces a tougher challenge to improve its basic education because it has historically so under-invested in it. It is also more expensive for the country because it has a larger rural population."

In the FT, we have Joe Leahy writing about India: A nation develops...

"Why India? It’s very straightforward," [says GE's Guillermo Wille] "there are few other countries where you can hire such large numbers of engineers so quickly. China is comparable but after that, nothing comes close." [...] "We are at the cusp of a new paradigm in which innovation will happen in India and China first and then it’ll go to the rich countries," says Prof Govindarajan. [...] This trend of moving up the value chain is just beginning and there is still much to do in terms of overcoming India’s chronic infrastructure problems and improving its education system."

Fascinating and compelling! This is why my colleagues and I at the MIT Media Lab have our India Initiatives and have been incubating similar China Initiatives -- to contribute our bit to this epic development!