But in what economic areas could India catch up China in the next few years? The following chart breaks it down. As it currently stands, India is already a superpower when it comes to internal demand. According to the Global Competitiveness Report, India has the third largest market size—behind China and the US, but ahead of other regional economic powers such as Germany, Japan and Brazil.
But India does have some catching up to do if it wants to surpass China and the US. Both countries have a GDP, measured according to purchasing power parity, of about $18 trillion. India's, at $7.4 trillion, is still much smaller. That said, India's growth rates will almost certainly surpass China's this year. "With an expected growth of 7.5 percent this year, India is, for the first time, leading the World Bank's growth chart of major economies," Kaushik Basu, World Bank Chief Economist, recently said.
India and China are also close contenders when it comes to their financial market development, coming in at 51st and 54th place respectively in the Global Competitiveness Report rankings.
Both countries have been making great progress in recent years in the availability of venture capital. For example, both China and India have doubled their share in global venture capital in recent years: China jumped from an average of none percent before 2014, to 18 percent in 2014; India progressed from three percent to six percent in the same period of time.
Both India and China have also seen their stock market capitalization increase dramatically in the last decade (source: World Bank). India's stock market tripled in size from 2002 to 2012, China's almost quintupled, and has more than doubled in the last three years.
In June, total Chinese stock market capitalization stood at some $10 trillion, making the Chinese stock markets the second largest in the world, behind only the US. And it overtook India, historically one of the hottest stock markets in the emerging world, with its market cap to GDP ratio.
But as recent news reports have shown, there's been volatility in the Chinese stock market, with the SSE Composite Index in Shanghai losing almost 40 percent since June. Meanwhile, India's star index in Mumbai, on the other hand, has been more stable in recent times.
In other key competitiveness rankings, such as health, education and the labour market, India falls far behind China. In fact, in many areas, it even falls near the bottom of global rankings.
In health and primary education, for example, India comes in at 98th of 144 economies, whereas China sits in 46th place. In higher education, India stands at 93rd, with China ahead in 65th. And in terms of labour market efficiency, India does not even make it into the top 100: it stands at 112th out of 144 measured economies; China finishes 37th.
This performance shows that merely surpassing China in economic growth won't make India a superpower; it must also ensure its growth is inclusive. These findings were confirmed in the Inclusive Growth Report 2015.
As the Wall Street Journal wrote, "while income distribution and GDP growth indicators in India and China are neck and neck, most of the other numbers thrown up by the Forum's survey suggest China is doing a much better job of taking care of its population of more than 1 billion people. More of China's populace is getting educated, more Chinese citizens are covered by healthcare and that country has a much larger middle class." In other words, if India in the future surpasses China's economic growth, it should not forget the importance of doing so in an inclusive way.
Locked between two neighbors
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