Why India's path forward is likely to be different from China's

Big electronics cos like Foxconn and Pegatron have poured hundreds of millions of dollars into the country

- Megha Mandavia & Nathaniel Taplin

China’s economy is struggling, but another Asian giant, neighboring India, is suddenly squarely on investors’ and manufacturers’ radar. The first two decades of the 21st century were largely the story of China’s rise. Will the next two be the story of India’s?

There are plenty of reasons for optimism. The country’s population surpassed China’s last year. More than half of Indians are under 25. And at current growth rates, it could become the world’s third-largest economy in less than a decade, having recently overtaken the U.K., its old colonial ruler, for the no. 5 spot. India’s equity market has now seen eight straight years of gains. Worsening trade relations between the West and China only helps its case.

But India's path forward is likely to look very different and more challenging than China's.

While its labor resources are, in theory, plentiful, a host of barriers still make it difficult to connect workers with employers. That makes it hard for households and companies alike to build up the savings needed for the kind of investment booms that transformed East Asian tigers like Taiwan and South Korea and lifted them out of poverty. Still-high barriers to trade are another problem, especially if India wants to become a gadget assembly hub like China.

That isn't to say that recent progress hasn't been impressive, or that it won't continue. Big electronics assemblers like Foxconn and Pegatron have poured hundreds of millions of dollars into the country, and its share of global exports has risen.