The two most populous countries in the world, India and China, were long considered the engines of the Asian century. They began their modern economic journey from roughly the same income level, but their trajectories subsequently diverged. Currently, India's economic growth rate appears higher than China's. It is projected that India's GDP growth will be 7.7% in the 2025-26 fiscal year, while for China, this figure is estimated at around 5%. Moreover, this divergence is not limited to one year; constant changes in the growth rate of both countries have been observed since 2015, and since 2021, India has surpassed China in annual economic growth.
In 1980, China's GDP growth rate was about 7.9%, while India grew at a rate of 6.7%. Following this, during the 1980s, 1990s, and 2000s, China demonstrated significantly faster economic growth than India. Nevertheless, in the 2010s, the gap in growth between the two countries began to narrow. According to World Bank data for 2025, India's growth was 7.6%, and China's was about 5%. Furthermore, in the International Monetary Fund's (IMF) update for July 2026, it is forecast that India's economic growth rate in the 2026-27 fiscal year will be 6.7%.
The economic paths of both countries did not start completely differently. In 1987, the nominal GDP of India and China was almost identical. Even by Purchasing Power Parity (PPP) in 1990, China was not far behind India. At that time, India led in per capita income. However, after this, China began to rapidly accelerate its economic growth. From 1961 to 2024, China achieved more than 22 years of annual GDP growth exceeding 10%, whereas India never reached an annual growth rate of 10% during this period.
Despite higher growth rates, a significant difference in scale remains between the economies of India and China. In 2025, China's nominal GDP was estimated at approximately $19.5 trillion, while India's GDP was about $3.96 trillion. By PPP, China's economy was valued at approximately $41 trillion, and India's at $17.7 trillion. A substantial gap is also observed in GDP per capita: nominally, China's GDP per capita was about $13,806, while in India, it was about $2,818.
China developed its economy over decades, relying on industry, exports, and large-scale investments. On the other hand, India's economic growth is largely driven by domestic demand, the service sector, and private consumption. In 2024, domestic consumption in India accounted for about 61% of GDP. Overall, about 70% of the Indian economy is linked to consumption. The share of domestic consumption in China's GDP was about 40%.
China's current stagnation cannot be viewed merely as a weak year. The crisis in the real estate sector, debt pressure on developers, falling asset prices, declining consumer confidence, and demographic challenges are affecting economic demand. Among these challenges, China is focusing on sectors such as electric vehicles (EVs), batteries, solar installations, and advanced electronics. However, concerns about excess production capacity have also grown due to increasing manufacturing capabilities in these areas. This could increase the risk of China's dependence on external markets and trade barriers.
Changes in global supply chains in the post-COVID period have opened up significant opportunities for India. Many multinational corporations view India not only as a manufacturing base but also as a major consumer market. However, there is also a serious problem. If high-tech manufacturing remains in countries like China, Vietnam, and South Korea, and India becomes predominantly a large market for finished products from other countries, its benefits may be limited. Existing economic indicators for India are optimistic: its consumer engine is strong, the service sector remains resilient, and its population size and market provide opportunities available to very few large economies.
The main challenge is transforming growth into employment and income. While India's faster growth compared to China is an obvious positive sign, the GDP growth rate alone does not tell the whole story. China still significantly surpasses India in economic size, per capita income, and industrial potential. The real test for India is whether it can transform rapid economic growth into more jobs, higher incomes, strengthened production, and improved living standards. IMF and World Bank forecasts show that India's growth rates are better than China's. But now the most important question is not whether India can grow faster than China, but whether it can sustain this advantage long enough to close the enormous economic gap that has emerged between these two Asian giants.