KEY POINTS:
China and India and are moving towards becoming the biggest economies in the world: with 2.4 billion people, or 40 per cent of the world's population and annual GDP growth rates of between 8 per cent and 10 per cent, experts say they could one day overtake the United States.
Professor Pieter Bottelier, of the Centre for Strategic International Studies, says: "If these two countries continue to grow at the current rate, they will overtake America, although that probably won't happen for a number of decades."
The countries are different politically: India is the world's biggest democracy but China is under communist control.
Economically, China has had a head start. Bill Emmott, former editor of the Economist, says in his book, Rivals, that India's time has yet to come; to date it has been constrained by a poor infrastructure, social divisions, a caste system and poverty. But it is fast making up for lost time and, no doubt, Emmott wouldn't disagree with Steven Roach at US investment bank Morgan Stanley that "India is on the cusp of something big".
Bottelier says the challenges the countries face are quite distinct.
"China has gone much further than India in trade liberalisation and in opening to foreign investment." But things are starting to change.
"Issues facing India are much more broad-based, such as improvement in infrastructure and facilities, effective administration and labour reforms. Minus points for China include a lack of good quality software, a low proportion of English speakers and a less mature outsourcing industry," says Bottelier.
India is also hamstrung by bureaucracy and as an analyst says: "When the Chinese say they are going to do something, they get on with it and you can see the results much more quickly than in India where red tape is everywhere." On the other hand, the huge increase in trade between the two nations has fuelled talk of the "Chindia" effect.
In 2006, trade between India and China reached US$18.4 billion ($23.5 billion). However, mutual distrust remains. India is suspicious of China's relationship with arch-rival Pakistan, while China is concerned about New Delhi's growing ties with Washington, particularly on nuclear matters.
Observers expect the US to deepen its ties with India, which Washington views as a counterweight to China. The US's relations with the Chinese are more strained as a result of tension over Tibet and Taiwan, not to mention the ideological political divide. But that hasn't stopped US companies investing heavily in China, more so than British ones, who have focused on India.
But these days investors tend to get more excited about India than China. True, a superficial look would argue in China's favour: its world-class infrastructure, huge supply of cheap labour and ability to direct resources anywhere they are needed. However, a Bloomberg report says innovation is lacking in China's boom, marked by a dearth of global Chinese companies.
In contrast, India has fostered global firms and has done a better job protecting intellectual property rights. The steady increase of Indian billionaires is also a reminder that India's markets are more developed.
Indian academic Jagdish Sheth expects China to become the world's biggest economy by 2020 and India to overtake Japan to become the third biggest in two years' time. That sets the stage for the next leg of the race between China and India in what promises to be one of the most dramatic developments of the 21st century.
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