Will India become a hyperpower, i.e. a country as strong or stronger than the US?, page 3

Although the potential for either India or China to rise as a super power certainly exists there are several major impediments that may derail them in simply economic terms.

India: Although India doesn't have the same geopolitical tensions with the US that China does they do have a significant portion of the population that is xenophobic. Not just of americans but all foreigners. They are highly critical of increased foreign presence in their markets and are notoriously conservative when it comes to loosening regulations. This is a big issue for India because they have one of the most inefficient beaurocracies in the world coupled with arcane regulations on their economy & foreign investment. This has kept India's economy from experiencing the red hot growth that China experiences; despite the fact that US investors see it as a more 'secure' destination for their capital. As such India's economy would take decades, if not longer, to catch up to the US economy. Without economic growth there is no way that the Indian government could build either the hard power ( Military ) or soft power ( Diplomatic / Economic ) to be a major player outside their own region.

Other issues include massive stratification between urban centers and rural areas with most of the wealth centered in large cities. This magnifies tension between conservative rural populations ( Anti-foreign interference / free trade ) and urban populations who tend to be more progressive.

This is not to say that India could never become a superpower just that it would require great political and economic reform that will be difficult for an entrenched beaurocracy.

China: No one can disagree that China's economic growth over the last twenty has been anything but incredible. With 8-10% GDP growth per year that's one hell of a trend. What some people don't realize however is that growth of this type is not always sustainable and not always healthy in the long term for an economy.

First of all ( As mentioned earlier ) 60% of China's GDP does consist of it's exports and Foreign Direct Investment. This has contributed significantly to the US current account deficit as Americans hungrilly consume cheap Chinese manufactured goods and invest in their red hot economy. Because of this low end manufacturing has shifted in droves to China contributing to the rustbelting of the US. As such American companies now produce higher end goods for which there is currently no great market in China. This is because although Chinas GDP is rather large so is it's population so most people cannot yet afford higher priced American luxury consumer goods. The resulting imbalance is not sustainable.

Now normally as China's economy grew a domestic market and a middle class would rise to start buying American products and over time redress the balance. And, certainly, that is starting to happen as companies like Wal Mart and Microsoft develop 'China' strategies. The problem here is that, unlike in America where there was a period of 'Fordism' during which unions were created and social programs put in place that basically created the American consumer, China does not have that. Americans spend something like 100.6% of their income each year the chinese spend 40%. Unless the Chinese government puts these sort of programs in place and convinces it's people to spend no domestic consumer will ever arise.

Another problem created by the lack of a domestic consumer is that of over production. Most of the investment in China is going towards expanding manufacturing capacity. The problem is that the markets for cheap manufactured goods are already saturated. Surplus production drives prices for manufactured goods down whilst driving raw material prices up; shrinking profit margins. Unless new markets are found for these goods (domestic markets) the economy will be forced to contract.

There are other issues but i've run out of characters.