China-India – are all growth stories built on infrastructure?

Our China-India comparison series continues as we delve into the potential lessons from China’s decades-long infrastructure investment-driven growth model and the implications for India’s own investment push.

What you will learn:

• Our own analysis using more recent investment data across Asia shows that booms in public investment – which has one of the highest fiscal multipliers – crowd-in private investment spending noticeably. Meanwhile, public debt tends to remain under control during the initial years of a state-led investment boom, though it rises substantially later.
• India has clear infrastructure needs alongside continued economic slack. And with increasing returns to investment and improving debt servicing costs, a sustained state-driven investment push is a compelling thesis.
• The China investment-driven growth experience offers a cautionary tale. While no doubt a key reason behind decades of fast growth, China’s experience shows the importance of the deployment of public spending in targeting key at-need sectors of the economy, policy coordination and the alignment of incentives across central and local governments, and the need for a fiscally-sound exit strategy from boom periods.