Following recent declines in GDP growth in China and India, many are asking important questions: Have the two countries lost their way? Is China a bubble about to burst? Are India’s bureaucracy, corruption, and infrastructure issues insurmountable? Will income disparity create civil unrest comparable to an Arab Spring? Are political dysfunction and crony capitalism preventing reform? Will the next generation of leadership in the two countries change the dynamics in ways that are sufficient to provide enough jobs for their entry-level workers?
We believe that the answer to these questions is simple: China and India are in the midst of a revolution in growth. Risk and volatility are part of the bargain. We remain convinced that by the end of this decade, there will be 1 billion middle-class consumers in China and India—and both countries will have delivered long-term annual growth averaging 8 percent.
As we explain in our new book, The $10 Trillion Prize: Captivating the Newly Affluent in China and India, this growth will not occur along a straight line, and both countries will have to overcome corruption, imprudent investments, social disharmony, pollution, natural disasters, and political conflict. History is a good teacher. In the past, emerging-market countries have often experienced significant instability, with wide swings in yearly growth rates. The immaturity of their economies increases both risk and return.