****India 13 years behind***

The stories of Mumbai and Shanghai stand as a potent example of the
marked differences between Asia's tiger powerhouses as the two embrace
very different models in their race to become global superpowers.

Across the nation as a whole, India's economic development is 13 years
behind China, according to a report written by Morgan Stanley in 2004,
and if they both keep growing at the same rate, India may never surpass
its Asian rival.

"I see difficulties in India overtaking China. It's difficult to see what
time it will overtake China," says Chetan Ahya, India economist for Morgan

"The gap has only widened in the immediate years. In 1980, China and India
were comparable on data."

In 1982, China's GDP per person was $275, marginally lower than India's $280,
according to the Morgan Stanley report. But by 2003, China had jumped
to $1,086, twice that of India.

And "the Chinese will grow rich more quickly than the people of India,
" according to a paper released by Deutsche Bank this year.

"Per-capita income will reach $11,000. Even more than today, China will
be the world's manufacturing workshop," the Deutsche Bank report said.

China's share in global trade is 5.2 percent -- nearly six times that
of India's 0.9 percent.

China spends more than eight times what India does on infrastructure,
while the cost of infrastructure in India is 50 percent to 100 percent
higher, the Morgan Stanley report said.

As much as 60 percent of electricity generated in India gets no revenue
, while China's highway network is seven times larger than India's, most
of it funded from road maintenance fees, vehicle purchase fees and other
government revenue sources.

Indian ports are still inefficient, with the cost of moving cargo
significantly higher than the global average, because of low productivity,
insufficient infrastructure and customs delays, economists say.

It takes two to three weeks to ship to the United States from China,
compared to six to 12 weeks from India.

###Indian forte###

True, India has some advantages -- it has a strong technology and service
industry, a relatively efficient capital market with a long history of
banks, a strong private sector and legal framework, a younger workforce,
a growing population, and a great university system.

India's capital market and strong entrepreneurial culture mean that
companies tend to have a higher return on equity than China, the ultimate
driver of profitability, and so attract higher prices, experts in the
field say.

But red tape, corruption, tough labor laws and bureaucracy all deter
investment, leaving a woeful infrastructure and a lackluster primary
education system.

And India's coalition government, with its Communist allies, has stopped
the privatization of key industries.

"China is trying to get as many people on board, moving up on their own
feet; we are not able to do that," Ahya said.

"We are creating an exclusive growth environment that benefits some people
but not the poor. While there is some multiplier effect, the pace is still

$$$'Chindia' a force$$$

China, through its hybrid communist-capitalist model, has been able to
legislate development, becoming a manufacturing giant with solid primary
schools and infrastructure that lures foreign investment, economists say.
Still it struggles with a weak financial system and inefficient capital

The country's one-child policy could be China's greatest problem, according
to the Deutsche Bank report, as it slows population growth and leads to
a shortage of women.

But in the short term, economists say it is best not to look at these two
nations as rivals. Together, they are the most important economic force in
the world, so much so that some analysts say they complement each other,
and could be called "Chindia."

For two decades their economies have been growing twice as fast as the
rest of the world, and they now account for 40 percent of the world's
working age population and 18 percent of the global economy, on the basis
of purchasing power parity.

Morgan Stanley says that on this basis, a decade from now China's consumers
will have more buying power than their American counterparts, and Indians
will have more than the Japanese.

International companies will be able to get their hardware made in
China and power it with software and circuitry designed in India.

There's no doubt that the two will become the biggest consumer markets,
with a vast number of investors, producers and users of energy and other

"The case for taking a view on India or China may arise in five to 10 years
but, in the meantime, we believe that today it is India and China," the
Morgan Stanley report concludes.

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