Looking Eastward

Aah, Davos. The Alps. The crunch of snow. the setting for Thomas Mann's gigantic novel The Magic Mountain and for the World Economic Forum's equally gigantic annual gathering of 2,000-plus business leaders, politicians, academics and other influential types. The hand wringing over the world's economic, social and political problems. The search for creative solutions. The schmoozing. The parties. And, this year, the waft of curry overpowering the heavy Schweizerdeutsch fare. India everywhere, said the signs, and it was.

The Finance Minister, Palaniappan Chidambaram, and the Commerce and Industry Minister, Kamal Nath, turned up from Delhi, as did the deputy chairman of the Planning Commission and a cluster of top Indian chief executives. An organization called the India Brand Equity Foundation left pashminas in the hotel rooms of all attendees and distributed Apple iPod Shuffles with prerecorded Indian pop music to a select few. Chefs including Atul Kochhar, the first Indian to receive a Michelin star, flew in to prepare meals. The message was clear: India is in. And less explicitly: it's time for the world's decision makers to stop obsessing about China and take a closer look at the other emerging Asian economic heavyweight.

The strategy, a year in the making, worked brilliantly, although perhaps not quite as the Indians intended. The sheer ubiquity of the Indian presence didn't focus the spotlight just on the subcontinent, but on the race between India and China for growth, prosperity and investment. So the question most discussed at Davos this year soon became: Which of the two is ahead now, and which is likely to win in the longer term? The scorecard:

CHINA, reckons Jim O'Neill, the head of global economic research for Goldman Sachs. The Chinese economy is already substantially bigger than India's, and won't lose ground as both grow into world economic titans. According to his projections, China's economy will be easily the world's biggest by 2050, far ahead of the U.S., with India in third place at about half the size of its Asian rival. In the longer term, he thinks, China will also have the edge in income per head. In the short term, too, O'Neill sees the Chinese influencing Indian policy through their example of growth led by massive quantities of investment and booming low-cost exports. "The threat of China is doing some good," O'Neill said. He pointed out that India has been changing its domestic rules in a bid to attract more foreign investment, a tactic which he labels "a direct product of being envious of how much investment China is getting." The one caveat: while he expects the Chinese economy to grow by a factor of 20 between now and 2050, India will be 50 times bigger — but will still lose.