Handicapping the China versus India Race

As Europe and America struggle with their economies, economic growth is humming along in the East. Which one will be the next superpower? The current bets would have China as the favorite with India as the dark horse but some of the current trends indicate that India could make a race.

Here are a few of the areas which could determine which country takes its place as the next superpower:

China is has been growing fast for the last two decades but its dependence on foreign investment and exports could hurt if other economies slow down. India is less beholden to foreign economies but is currently dealing with rampant corruption and rising inflation

Chinas housing prices are in bubble territory with forecasts for a drop of 20% by the end of 2011. Prices have doubled in major cities like Mumbai and Delhi but Indian banks aren’t priming the pump to keep a bubble at bay.

China, with 1.3 billion people is larger than India but the positions are forecast to switch circa 2028 due to China’s one child rule. The one child rule will start to decrease the working age population beginning in 2020. Without education and health reform, India's masses could prove to be a burden instead of a resource.

China loosened its position on foreign investment over three decades ago. India is still considered to be foreign investor ambivalent.

China has relied on the growth of credit to boost its economy with a stimulus package valued at $585 billion. It targeted infrastructure and at this time 11% of GDP is spent there. India used a $36 billion stimulus, which amounted to only 3% of its GDP, putting the country's credit growth at a fraction of China's. India cut interest rates, offered tax breaks and increased fiscal spending but on a much smaller scale than China.

In China, The Shenzhen is down 3% for 2011 but has returned an average of 9% since 1993. India’s main index, The Sense has seen +12% returns since 1993. The index has pulled back due to worrying inflation numbers that have pushed over $200 billion out of the market this year alone.

While China appears to be the current juggernaut, India’s self reliance and insulation from other economies could be a benefit. India’ struggles with corruption, inflation, and poverty levels could prove to counterbalance its self reliance, however.