Are India and China mutually exclusive?

I have often been exposed to articles in global media which prophesize why India is going to displace China or vice versa. The latest article in this series was shared on LinkedIn by a connection. It went into great depths to predict India as the winner and surely you all must have seen the opposite in various other articles over the conceivable period of elapsed time.

To me it appears to be spin doctors on either side working over time, perhaps with a view to increase FDI in their respective countries or it could even be a ploy to potentially embarrass the other side. After all, India and China do share a chequered past!

Businesses should look at the big picture when they address investment or sourcing opportunities. The truth is that China and India coupled with USA, EU, Japan, Brazil, Russia and perhaps Kazakhstan and Africa will drive the economic growth in this millennium. Surely this is not even a comprehensive list, but to not list these other regions’ contributions to the future world economic scenario will be doing disservice to them.

These countries are hardly ever grouped together except in the UN, for some of these are classified as “Consumers” and the others as “Producers”. I see this divide as grossly illogical now and definitely more so in the future, with the consuming population growing, in both number and in purchase power terms in the producing countries.

If all goes as it is going now, and we do not see a force majeure or a world war breaking out in the next 5 decades, the following are bound to happen;

1)    With the producers’ population getting richer and having a greater expendable income in their hands, the labor cost is bound to rise and hence sourcing cheap goods from these countries will be history!

2)    Consequently, the Consumer countries will become competitive in the market place in terms of producing and hence the local production levels will go up.

3)    This will entail competition between these two, so far complementary, groups and my view is, that far from a Laissez fair economy, we could potentially be looking at innovative and perhaps region wise tariff and non-tariff barriers being invented and executed! This should give rise to new alliances and a newly polarized world order.

Coming back to India and China, I suppose they could potentially be part of a regional cooperative and promote free trade within each other’s territories, a bit like the EU of today! I do not foresee a common currency though, as countries would have definitely learnt from the vagaries of the Euro zone crisis!

Alternatively, given the connected world that we seem to have become, perhaps the alliances may not have  geographical limitations, in which case these two could end up as being competition to each other. Given the population and the consumptions that these two will control, it should be perhaps an even fight.

Whatever the scenario, India and China will play key roles in the new world order and will definitely not be mutually exclusive to each other’s existence or businesses! And all others will also co-exist and mostly peacefully and the wars if any will be fought on virtual economic battle fields between alliances. And if the alliances are loyal to each other we should not see fatalities like Greece or Iceland unless the terror groups also evolve!