Dear Express Reader,

India and China are a study in contrast. For more than a decade now, the common refrain has been that while India needs to increase the investment rate in the country, China needs to rebalance its economy away from investments towards domestic consumption, with household spending accounting for a greater share.

Both these countries have, for more than a decade, been helmed by leaders who have enjoyed and exercised power in a way that not many before them have. Yet, strangely, both these leaders, who sit at the top of their party structures in two diametrically opposite political systems, have been unable or perhaps unwilling to steer their economies in the direction needed. In India, animal spirits remain caged, with a corporate sector that is reluctant to invest, while in China, consumer confidence is near historic lows.

It is not as if the ruling dispensation in India can be faulted for not taking steps to increase investments and boost manufacturing in the economy. It has, for instance, put in place the production linked incentive schemes, introduced a lower tax rate for new manufacturing facilities, while also ramping up public investments hoping to kickstart a private investment cycle. But, there are few indications of a pickup. In fact, signs point to domestic private capital flowing out of the country. Equally worrying, manufacturing and investment activity remain extremely concentrated. In 2022-23, just four states — Gujarat, Maharashtra,

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