Can Indian growth story replace the Chinese Armada so far as contribution to global growth is concerned?  A dispassionate answer to this frequently asked question must emphasise the complimentary rather than substitutionable characteristics of the contest by considering the speed at which it was achieved in China during the last two decades against the backdrop of sweeping economic reforms and restructuring carried out under a different political environment.

India also had enjoyed reasonably good economic growth averaging 8.8% during FY06 to FY 11 and clocked 7.3% in 2015. The recent projection by IMF has placed Chinese GDP to grow by 6.3% in 2016 and 6% in 2017 against 7.3% and 7.5% projected for India in the next two years, while global GDP is slated to go up by 3.4 and 3.6% in 2016 and 2017 respectively. The global growth in 2017 is thus a notch higher dependent on India’s growth compared to China in contrast to what has happened in all the previous years.

There remains to be an Achilles Hill that distinguishes growth stories of the two countries and this relates to the role played by fixed asset investment (FAI) in GDP. It has been empirically established that during the early phase of economic development it is the investment compared to consumption that plays a larger role to push up the growth indices. In China the share of FAI in GDP has been sustained at an average rate of 50% of GDP during 2004-2014.

The average share of investment to GDP in India has been hovering between 32 to 35% in all these years. It is not to minimise the role played by consumption (63-65% in India’s GDP) in boosting growth , but a large part of consumption (both government and household) is dependent on investment made in various sectors. Investment also contributes to net export component that adds to economic growth.

The government is making sincere endeavours to enhance investment by clearing the impediments in stalled projects, announcing Make in India programme by encouraging Indian manufacturing in hitherto import-dependent items with simplification of guidelines and procedures for FDIs in setting up manufacturing hubs in India. Schemes like Smart Cities would invite private participation in project implementation.

India is also making attempts to ease doing business in the country by eliminating a number of unproductive regulatory procedures and clearances required for setting up units and enforcing the contracts. The bankruptcy law is being restructured and PPP mode is being made investor-friendly. All these are likely to reverse the declining trend in private corporate investment that would crowd in following the lead in public investment and removal of uncertainty in business environment.

The speeding up of the growth process and sustaining its momentum would largely hinge on how fast the above reforms are materialised which China has very competently accomplished two decades earlier and completely changed the global growth scenario. It displaced both the US and EU as the major consumption points and sustained prolonged years of growth and profitability in almost the entire gamut of commodity and service sectors.

The massive capacities it created in various sectors would take years to utilise before another phase of golden periods of industry and service sectors appear on board. India’s growth story must fit into this changed dynamics of global growth. The democratic roots of policy implementation should make this growth story more sustainable and inclusive.

In this growth process being largely determined by investment, the Indian steel industry has a predominant role to play. The appreciative role played by the government in providing a level- playing field to the steel industry against the unabated flow of dumped priced imports from China, CIS as well as duty-free imports from Japan and South Korea has to be matched by corresponding efforts by the domestic industry in managing costs, enhancing share of value added products to match the imports, developing import substituting categories in new plant facilities and expanding exports.

The industry would need a commitment from the government to get it involved in all the new investment projects in matching with its capacity in volume, quality, prices and service deliveries. China in its formative years created an enabling environment for the domestic steel industry to participate in all infrastructure building projects without closing the borders for imports. Given a chance, the Indian steel industry is fully capable to squarely meet this massive challenge.

The author is DG, Institute of Steel Growth and Development. Views expressed are personal.