Keun Lee
At a time of growing doubts about China’s economic prospects, India’s rise has been attracting increasing attention, with some predicting that the country will become the developing world’s next economic superstar. Whether you believe India can be the “next China,” however, may depend on whether you subscribe more to “young” or “old” Schumpeterian logic.
The twentieth-century economist Joseph Schumpeter is best known for the concept of “creative destruction,” which describes how new innovations transform the economy partly by making older technologies obsolete. But Schumpeter’s ideas about economic dynamism and development were not static: whereas he initially emphasized the role of entrepreneurship above all, he later recognized the importance of big businesses.
So, in assessing India’s prospects, the “old” Schumpeter might look at the number of big businesses the country has produced (Table 1). India lags well behind China on this front, with just eight Fortune Global 500 companies, compared to its neighbor’s 135. (To put this in perspective, the United States has 136 Fortune Global 500 companies, and South Korea has 18, despite having a much smaller population.) China has achieved this lead over India in just a few decades: in the early 1990s, China had three Fortune Global 500 companies, and India had one.
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