China vs India

Comparing India and China is to embark on an old puzzle that has fascinated smart people for centuries. The newer question of economic leadership, however—"Which country will overtake the other in the foreseeable future?" —is an urgent and important one, according to a provocative article in the July-August issue of Foreign Policy magazine.
It is urgent and important because China and India are the world's next major powers, according to the writers, Yasheng Huang, formerly of Harvard Business School and now a professor at M.I.T. Sloan School of Management, and Tarun Khanna, a professor of strategy at HBS. It is also important because the two countries have embraced very different models of development.
The biggest source of worry is the state of China's banking sector, which is technically insolvent.—Yasheng Huang and Tarun Khanna
The reasons they have done so are complex but, in general, China has discouraged or actively undermined local entrepreneurship in favor of an foreign direct investment-dependent approach, they say. India, on the other hand, is building an infrastructure—however slowly—that allows entrepreneurship and free enterprise to thrive. By making fuller use of its resources, India's long-term outlook may be far stronger, they suggest. Macroeconomic statistics cited by Huang and Khanna show China clearly in the lead. "But," the authors wonder in Foreign Policy, "the real issue isn't where China and India are today, but where they will be tomorrow."
How these two models play out has great significance not just for Asia but also for other parts of the world that want to benefit from their lessons and avoid their mistakes.
Huang and Khanna recently collaborated on an e-mail interview with HBS Working Knowledge to discuss their Foreign Policy article, "Can India Overtake China?"