#writing The realization of China's decline is best seen in the emergence of India. The parallels between the US in the 1800s and India today are stark. Both nations possess strong borders and rich natural resources. Both are also predisposed to be inwardly looking due to their endowments. India today is forming its national identity much like the US was during the 1800s. However, India is often thought of in comparison to China due to their proximity and membership in the BRICS grouping of major emerging economies. It is a critical mistake to lump India in with China as the two nations are different in everything except for their location and size. Instead of thinking of India as emerging like China did, think of India as emerging as the US has. Things to keep track of is India's ability to build domestic energy production, value-add manufacturing, and capital goods production. These will allow India to maintain a reduced reliance on external markets for its economy. --- **December 1, 2025** Last week a reader asked about the emergence of India as a global power. Earlier in our research we had realized that we were overlooking the fifth largest economy in the world in our discussion of the multi-polar world, but why? The modern idea of India as single, unified nation is a 19th and 20th century development resulting from its time as a British colony; prior to that there was no India as we know it today. During imperial rule, India was considered the crown jewel of the British empire due to its economic benefits including a large population, strategic position in the Indian Ocean, and key raw materials. Modern-day India maintains those endowments but is a young nation after having only recently gained independence from Britain in 1947. To understand any nation, one must understand the fundamental drivers and constraints of that nation which are highly impacted by geography and culture. Today, the Indian national identity is still emerging from its imperial legacy and dense patchwork of regional identities. “It is an ancient culture trying to find its footing as a unified nation” with many parallels to the early days of America. India has strong borders which allows it to focus internally without many existential imperatives forced upon it by outside powers. It's time under British rule left it with a strong education system which produces its highly skilled and low-cost workforce. Its highly accomplished diaspora and domestic professional services outsourcing industry create healthy capital flows that finance energy and capital goods imports. India has a large military, strong defense industry, and they are starting to build out domestic, high-value manufacturing capabilities.  Geopolitically India dominates the Indian ocean and has strong natural borders consisting of the Himalayas, Indus River, the Hindu Kush, and the rainforests of Southeast Asia. Its border with Pakistan is the only exposed border however India enjoys greater strategic depth since Pakistan sits on a narrow strip of open land between the Indus River, Hindu Kush and India. India's primary regional rival is China which rivals India in size of economy, population, and military. We have touched on China in all of our recent letters but have never focused solely on China. It is a result of the complexity of China and its position on the global stage that they are omnipresent in any geopolitical or economic discussion, and while we should write several letters on China alone, we don’t have to because [Alex Campbell has already done that](https://open.substack.com/pub/campbellramble/p/china-cant-win) for us. We will merely connect to and expand on the work he has already laid out.  The overarching conclusion about China is that it is a declining power after having tried to catapult itself into a geopolitical and economic superpower. China embraced low-cost exports as the path to power, but they have not been able to reach the escape velocity required to break free from the dependence on foreign markets implicit in that strategy. Any discussion of India must include a discussion of China and the two provide an illustrative comparison of the different paths each has taken. Both China and India started the post-WWII period with similar per-capita GDP, but China has experienced rapid growth since the 1980s which has afforded it more attention from the West. Both have large populations, and the low levels of per-capita GDP meant those populations could produce goods and services at a fraction of the cost in the developed world. China used this to build a large, low-cost manufacturing industry whereas India's highly skilled workforce has been more focused on exporting professional services such as accounting, financial reporting, and customer service functions. China was able to grow more quickly than India, but that growth also came with a growing dependence on foreign markets. Exports made up as much as 36% of Chinese GDP in the early 2000s compared to only 20% for India which has resulted in a large balance of payments surplus for China and a small deficit for India. While Chinese growth has outpaced India, both are still low relative to the other major global powers. According to the World Bank, in 2024 India’s per-capita GDP was a mere $2,697 compared with China’s $13,303, Russia’s $14,889, Japan’s $32,476, the US’s $85,810, $46k to $56k for France, Germany, and the UK. ![[20251201_china_india.png]] This creates a vastly different set of geopolitical imperatives for China and India, relative to their peers, as the low standard of living creates domestic political pressure which constrains each from projecting power outward. China's large population is split between the rich coastal regions and poor interior which has presented China with an existential problem throughout its long history. China must grow fast enough to raise the standard of living for the interior or risk revolution as inequality threatens domestic stability. To manage this tension the Communist Party of China has implemented policies such as the One-Child Policy to curb population growth and relieve pressure from inequality. While India faces the same imperative to raise its standard of living, it does not have the same level of inequality that China faces. This combined with the legacy of imperial rule has left India with a democratic political system and the ability to pursue a more stable growth trajectory than China felt compelled to take. India's strong borders have created a culture that thrives on being self-sufficient and its distance from the Atlantic and Pacific trade routes have necessitated a different growth path than China. However, the key difference between India and China can be seen in their demographic profiles. India has a young and growing population while China's population is aging and shrinking. India is in the early innings of its growth phase and has many more choices than China has due to its political and education systems. India can patiently build value-add manufacturing capabilities with its highly skilled and young workforce instead of rushing to create low-cost manufacturing capacity like China did. ![[Pasted image 20251201100550.png]] Both China and India have large populations, militaries, and economies; but that is where the similarities end. China is a nation in decline as the gamble to raise its standard of living through cheap exports has failed and it now has large debt burdens, a housing crisis, and growing inequality. Whereas India is a young nation, with a young and growing population, that is not dependent on foreign markets for its economic growth. Consumer spending in India ranges from 60-65% versus the 40% seen in China and demonstrates that India has already achieved what China was never able to. This may be a surprise since media coverage of China always seems to paint China as a large military and economic power, but that will not always be the case. India is the nation on an upward trajectory while China is managing its decline. India is working from a position of power while China is working from a position of weakness. This makes China dangerous due to its desperation instead of its ambitions. However, India is not ready to project power and step into the role of a global power **_yet_**. India still has capital controls which restricts Indian citizens from moving money outside of the country, but the implementation of free economic zones such as [Gift City](https://giftgujarat.in/) is a sign that India realizes the need to open up its markets to achieve its long-range goals. The Indian national identity is still emerging and its cultural proclivity to stay inwardly focused will always make India a reluctant global power; much like the US. India has many similarities with the US in the 1800s and it would be a mistake to ignore India's emerging role in the global economy. As the US cyclically pulls back from an overextended global position it creates strategic room for India to accelerate its emergence onto the global stage.