Are China and India converging?

Who will grow faster?

With the right policies, India can grow as fast as China, if not faster. There is as much scope for catching up through productivity growth in services as there is in manufacturing. Globalisation of services is the tip of the iceberg (Blinder 2006).
But India can ill afford to be a single trick pony. Services are more skill intensive compared to manufacturing, and so it creates fewer jobs. India now needs to develop its manufacturing sector to create jobs for the millions of additional workers who will join the labour force every year for the next two decades.
China, on the other hand, needs to develop services and go up the value chain, from less skill-intensive to more skill-intensive activities. Developing services will enable China to avoid the inevitable middle-income trap, which is more difficult to avoid if it just relies on manufacturing as a source of growth.
There is enough room for India to use manufacturing as a growth escalator, and for China to tap into services as a growth escalator.

voxeu