How Do India and China Stack Up Economically in 2025?
Envision two vibrant countries, both forging their ways in the global economy. With its thriving streets and rising aspirations, India is set to reach a Gross Domestic Product (GDP) of $4.3 trillion, expanding at a lively 6.5% rate as per the International Monetary Fund (IMF). That places it as the world’s fifth-largest economy, a distinction won through diligent toil. On the flip side, China, with its giant skyscrapers and manufacturing prowess, has risen to $19.5 trillion, growing at a more consistent 4.6%, according to recent estimates. It’s still number two, but the competition is intensifying, and this article explores what is fuelling these two behemoths-and what obstacles they face.
- New Delhi Skyline during dusk.
- Shanghai Skyline during dusk.
What’s Driving India’s Economic Acceleration in 2025?
India’s growth is a lively heartbeat powered by its services sector, which makes up over half of its GDP. Add to that a manufacturing push thanks to the Production Linked Incentive (PLI) scheme. The World Bank forecast a real GDP growth of 6.7% for FY 2024-25, driven by a staggering 6.12% increase in domestic air passenger traffic-imagine 161.3 million individuals flying-and an 8.2% GDP surprise in FY24. With investment commitment crossing more than
$428 billion in FY23-24, it is clear that Indian consumers and enterprises are ready to spend and build. It’s not, however, a smooth ride-a 5.3% production growth only is achieved, and a widening trade deficit due to global hiccups makes it challenging. From a GDP per capita of
$3,000 (in PPP) to $20,000 for China, India’s 1.43 billion people, especially its bulging workforce peaking by 2030, hold promise for a brighter tomorrow.
Is China’s Economic Engine Slowing Down or Adapting?
China, whose expansion is so well-rehearsed a dance, led by exports that account for 18% of global trade. The National Bureau of Statistics (NBS) brags with a 5% 2024 growth rate, albeit some analysts like Rhodium Group mutter something more subdued like 2.4-2.8% because of an ailing real estate sector-new starts declined 23%-and tapering domestic investments. China’s 14th Five-Year Plan (2021-2025) is one of grasping technology and moving towards consumer consumption, but challenges are very much on the horizon. An accelerating dependency ratio, reaching 70% by 2050 as people age, and foreign direct investment is negative of late, contrasting India’s $650 billion reserves. It is a delicate balancing act that keeps China’s leaders busy.
Who Holds the Technological and Productivity Edge—India or China?
Dig a little deeper, and we’ll see India’s Total Factor Productivity (TFP) growth outpacing China’s by 1.5% each year, thanks to a digital boom and big infrastructure bets. China, though, invests a hefty mid-30s% of its GDP compared to India’s 30%, though returns are thinning out. India’s inflation jives over 5%, encouraging the Reserve Bank to maintain a firm hold on money
as China struggles with deflation, with consumer prices falling 0.8% in 2024. India’s per-capita energy consumption is only a sixth of that of OECD levels, suggesting an insatiable future demand, in contrast with China’s more stable energy tale.
Which Country Is Better Positioned for Long-Term Economic Dominance?
As India charges ahead, its youthful energy and reforms could keep it ahead of Japan by 2026 and Germany by 2027. China’s scale and industrial heft will not be easily unseated so quickly. A marathon, not a sprint, is this battle-decades, not decades, will find the victor. With all nations playing to their strengths, the future is bright for both.
Reference –
- IMF
- World Bank
- The Economic Times
- Business Standard
- Times of India
- Money Control
