Yasheng Huang - Associate Professor of International Management, MIT Sloan School of Management
Two years ago the view that India might have a more competitive economy than China was met with incredulity. Now a comparison of the two countries offers valuable insights for anyone studying economic growth. A fundamental distinction is that China’s growth stems from resource accumulation while India’s is rooted in increasing efficiency. Those who warned that India attracted too little foreign direct investment undervalued its business environment, characterized by entrepreneurship, healthy competition, and minimal political intervention. Another myth is that China’s rise was due to major investment in infrastructure, when economic liberalization and institutional reforms deserve more credit. Indeed, Yasheng Huang of MIT notes that single-minded development of infrastructure has its drawbacks, and China pursued this goal while giving less priority to education. India’s educational system, on the other hand, has steadily improved, especially in rural areas. For these and other reasons, he postulates, India could outperform China over the next 20 years - unless that is, the Chinese learn from their neighbor and rival. For more information visit Yale Global Online.