ABSTRACT
The emergence of the Asian giant economies of China and India is seen both as an opportunity and as a threat to the established global economic order. Atul Kohli has argued that developing countries, which includes China and India, are characterized by the development patterns in their distinctive regions.1 To a certain extent, the varied economic performances are due to the level of effective governance among states in the various regions. The East Asian economies are also characterized by strong states while the South Asian countries seemed to be muddling along a path of fragmented policies. The process of globalization has manifested greater cross-national economic interaction, visible by greater cross-border trade flows, finance, and the movement of people.2 Goods and services are produced based on outsourcing to the lowest cost location. In this context, China has been dubbed as the world’s factory with its ability to produce a diverse array of goods at low cost. In turn, India has been called the back office of the world with its ability to leverage on its huge pool of skilled and professional labor in information technology enabled services (ITES). However, the rise of India as a challenger to China is also being seen in the area of manufacturing but a trickling of foreign investments and the need to expand infrastructure could overheat the Indian economy because of “bottlenecks” in the economic system. The Indian Planning Commission, in its approach to the eleventh Five-Year Plan, has acknowledged the problems in infrastructure and has called for infrastructure spending to increase from 4.6 to 8 percent of Gross Domestic Product (GDP) in the period 2008 to 2012.3 Other problems could also halt India’s impressive economic growth of 8.6 percent from 2003 to 2006. These include weak regulatory framework, land acquisition problems, stretched capacities of domestic construction companies and lack of equipment availability in certain areas.4
