India’s market friendly leadership outperforms China, the world’s growth engine

India’s economic growth rate of this year is expected to outdo that of China in 16 years. The International Monetary Fund (IMF) raised India’s growth prospects from previous 6.3 percent to 7.5 percent in its latest World Economic Outlook on Tuesday. On the contrary, China’s growth forecast remains the same at 6.8 percent. Since the global financial crisis in 2008, China that had been leading the world economy despite many advanced nations’ economic downturn is now giving its position of the world’s growth engine to India.

Behind Indian economy’s sudden rise is a politician’s great leadership. It took only one great leader to change the entire nation dramatically within one year. Indian economy, which ended up with four-fold increase while China’s GDP per capita increased seventeen times between 1980 and 2014, started transforming since last May when Prime Minister Narendra Modi took office under the catch phrase of "Business Friendly Nation." Only four days after his inauguration, the prime minister announced 10 national strategies including trust building on the government and fast implementation of policies. Modi also dismantled the regulatory Central Economic Planning Commission in three months after taking office. In addition, the administration led by Modi has implemented reformative policies such as expansion of share quota for foreign investors and relaxation of regulations that protect laborers excessively. A saying that "India grows at night (when bureaucrats are sleeping)" shows how notorious India’s bureaucracy is. Therefore, Modi’s leadership to eradicate complicated regulation, corruption and inefficiency has drawn much attention.

Thanks to the prime minister’s leadership, India`s economy, which was stagnant just like its nickname of "gasping elephant," achieved growth rate of 7.2 percent last year. India’s growth prospect for the next year is 7.5 percent. When announcing the 2015 budget plan last month, Modi pledged to cut the corporate tax from current 30 percent to 25 percent in four years, continuously pursuing business-friendly policies to encourage investment. If India’s rapid economic growth continues the current trend, growing far ahead of others, the world’s 10th largest economy is expected to grow to the third largest, beating Japan, after the U.S. and China around 2030.

The Bank of Korea has recently released a report that Korea’s export is projected to decrease by 1.9 percent from the previous year due to China’s economic downturn and weak yen. Despite the government’s economic stimulation packages, the increase rate of the number of employees last month was the lowest in 22 months. The Korean government must take lessons from India’s “Modi-nomics” and push ahead with business-friendly deregulation and structural reform in the bureaucracy and labor market. In addition, Korea’s export to India, which currently accounts for only 2 percent of the entire exports, must be increased.