The economic growth race between India and China started in the late 1940s, around the time India gained independence and adopted democracy and China turned to communism. Given the sheer size of their populations, each has the potential to dominate the global economy but until recently, it's been no contest: In 2013, China's per capita gross domestic product was 4.5 times larger than India's.

The latest forecast suggests that the tide may be turning in India's favor, possibly for good. The World Bank anticipates (PDF) that, by 2017, India will be growing faster than China:

This is a short-term forecast based on some very specific circumstances. India, for example, now has a credible central banker doing sensible things like tackling inflation. The country's popular new government is finally building infrastructure and cutting the red tape that held the economy back for so many years. If India keeps it up, the World Bank expects its economy to grow 7 percent in 2017, up from 5.5 percent in 2014. Meanwhile, the forecast calls for growth in China (PDF) to slow as its government reduces spending, tightens credit, and unwinds its housing bubble. The bank expects China's growth to fall from 7.4 percent in 2o14 to a modest 6.9 percent in 2017.

David Fuller's view

Allison Schrager’s hypothesis is interesting and the outcome is likely to be important for the global economy.  Potentially, we will have two Asia Pacific superpowers with huge populations.  Today, only China can claim this status.  Inevitably, governance will be a key factor in their continued development. 

China’s governance over the last three and a half decades has clearly been much more effective since Deng Xiaoping became leader in 1978.  Currently, both China and India have strong leaders in Xi Jinping and Narendra Modi.  Both face serious problems of corruption, which can be the biggest impediment for GDP growth.  Both are changing the course of their economies: Modi with a root and branch overhaul to increase efficiency and productivity; Xi by creating a consumer economy to reduce dependence on heavy manufacturing for export.

China has approximately a two decade lead over India in terms of infrastructure development.  However, India matches and may even lead China in first world corporations, including within the crucial field of technology.  Arguably, India’s chaotic democracy is nevertheless more innovative than China’s command economy.  Additionally, China’s authoritative capitalism appears to be less inventive, although it is very good at copying.

Interestingly, the Modi factor has transformed global impressions of India from dysfunctional and impoverished, to an up and coming peaceful democracy of 1.2bn people, and rising.  He has a proven economic track record, and charisma.  People in power want to be seen with Modi.  More importantly, they are increasingly likely to help in India’s development. 

This new love affair, Pakistan excepted, is not entirely about India and Modi.  The darker side is that most other countries, from Asia to North America, fear or are at least apprehensive about China.  This is not entirely based on what China is doing, although it has not been shy about flexing its new military power and ignoring maritime boundaries in the South China Sea.  China is a former world power and understandably sees that as its future destiny.  However, China is currently a communist power, although its economic model is now based on command capitalism. 

In terms of potential, I remain a long-term bull of both China and India.  China’s stock market is currently cheaper but India’s GDP growth rate is more likely to catch up and exceed China over the next few years, not least because it is rising from a less developed stage.