Freebies, state enterprises: Ruchir Sharma on why India can't grow like China did

Economist and fund manager Ruchir Sharma has said India will never achieve China-style double-digit growth, pointing to structural differences between the two countries and warning that freebies culture makes such growth impossible. 

When asked what challenge India would face if it aimed to grow at 10–11%, Sharm said: "India will never grow at 10–11%. Because we don't have the capacity to reform the way China did - where they didn't give people freebies and told them, ‘Go wherever you want to work', and sold off all their loss-making state enterprises. Where is all this going to happen in India? Like China in the 1990s, at least 100 million people were fired from state enterprises-they were told to go. That kind of thing is not possible here. So, how will that happen in India? It won’t."

He said India's per capita income remains at $3,000 compared with China's $10,000-plus. "Even if China’s growth rate over the next 10 years is just 2–3%, and ours is 6–7%, it will still take us at least 20 years to get ahead of China," he said during a podcast with Raj Shamani. 

Rules for national success

Sharma also laid out his top rules for how countries succeed. The first is political leadership that emerges in a time of crisis. "Maximum reforms in any country happen when a new political leader comes in and the country is facing a problem. Because at that time, people themselves also want change. Often, we say a leader brings change, but if the country is doing fine, then people say, ‘Why do we need change?’ So the biggest changes happen when a new leader comes and pushes them through," he said.

The second, he stressed, is demographics. "There is no country where the population is shrinking that can grow fast. Demographics is a necessary but not sufficient condition for high economic growth," Sharma said.

The third, he argued, is the currency. "We tend to think a strong currency is good, but actually, the cheaper the currency, the better—because it boosts exports and brings in investment. So for me, a stable and cheap currency is very important for a country to do well. A powerful currency only brings losses and disadvantages," he said.

Freebies won't deliver China-style growth

The noted economist was categorical that India's political culture makes Chinese-style rapid growth unachievable. "How can a freebie culture ever be good? It can't, right? But in India, you have to balance it, because there are a lot of poor people who do need such support. So you have to give a little. But if you look at China, which we think of as a communist country-when China was growing at 10–11%, it was giving no freebies. It was full capitalism," he said.

Sharma added that in China, workers migrated thousands of miles to coastal cities for work without state support. "If you want 10–11% growth—China-style growth—you cannot have a freebies culture. There can be no two opinions about this," he said.

Growth projections

For FY26, India is projected to grow between 6.5% and 7%, while China's growth is expected to slow to around 4.5%, according to IMF forecasts. While India may outpace China in headline GDP growth rates, the wide gap in per capita income means catching up will take decades.