The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Una Galani

MUMBAI, Dec 19 (Reuters Breakingviews) - There are some startling similarities developing between India and China. How many and how concerned investors should be will rank among the big questions in 2025.

Western policymakers, CEOs and investors have for years debated the potential of the South Asian country to follow the path of its $18 trillion neighbour in terms of GDP per capita and global manufacturing might. Such comparisons are now taking on new meaning in Mumbai financial circles and beyond.

For a start, the world’s view of China has dramatically deteriorated. Growth in the world’s second-largest economy is slowing, and Beijing’s relationship with Washington has soured. These two trends have increased India’s opportunity to shine as an investment destination on the global stage since the Covid-19 pandemic.

China’s current chapter also expands the scope of what it means for a country to emulate the People’s Republic. This now includes some less flattering aspects, and it is here where observers may conclude, rightly or wrongly, India is starting to check a few too many boxes.

The first problematic likeness is the trajectory of India’s $4 trillion economy. It is suddenly underperforming expectations: GDP growth fell to 5.4% in the three months to the end of September, the slowest pace in seven quarters, only 80 basis points faster than China’s print for the comparable period.

That points to a big potential weakness in the belief within Prime Minister Narendra Modi’s government that India will deliver a sustained 6%-8% annual GDP growth over the next decade. As in China, domestic problems underpinning weak private consumption – including, in India’s case, anaemic salary growth – appear deep-seated and hard to fix.

What’s more, both economies face serious external headwinds. U.S. President-elect Donald Trump is threatening trade tariffs against the South Asian nation as large as he has threatened against the People’s Republic. Meanwhile, India’s richest man, Gautam Adani, is likely to curb his growth ambitions following his U.S. indictment for securities fraud, which he denies.

The tycoon’s problems put a spotlight on India’s approach to courting foreign investment. Global companies are entering the country in partnership with local firms helmed by a small number of powerful Indian families. That sets up the potential for at least some of the new alliances to sour, just as several Chinese joint ventures did.

France’s TotalEnergies TTEF.PA is grappling with that risk because of its partnership with Adani Green Energy ADNA.NS, the company at the centre of the U.S. legal case. Ultimately, while China was more forceful than India in coercing joint ventures, officials in Beijing and New Delhi want the same thing from foreign multinationals: know-how. That desire to acquire intellectual property may ultimately put India in the West’s crosshairs.

Finally, there is the issue of perceived interference. The U.S. is trying to contain China’s rise, partly because of concerns the Asian behemoth is seeking to influence lawmakers in Washington. Politicians on both sides of the aisle also disapprove of what they view as China’s predatory business practices, cyber intrusions and territorial claims.

Unhelpfully, a somewhat similar label of meddling is starting to stick to India. Canada, a member of the Group of Seven rich countries, slapped a “foreign interference” tag on India in June, unseating Russia as the North American country’s biggest threat after China per its assessment in 2019.

Tensions between Canada and India escalated after Ottawa said Indian diplomats were linked to plots to target Sikh separatists in Canada. India denies the claims, and even if these were true, it would hardly be the first country to seek to assassinate its enemies on foreign soil. The diplomatic brouhaha does not, though, help a capital-hungry country attract investment. Many ordinary Indians view their country as a victim of Canada’s domestic politics in this saga.

Nearer to home, too, there’s a debate about whether India is emerging as a bully to its smaller neighbours including Bangladesh, the Maldives and Nepal; the billions of dollars of aid New Delhi provides these countries in times of crisis does provide leverage, though Modi prefers to describe India as a friend of the world.

Whatever the nuances, global decision-makers are paying attention because disruptions between rich and developing countries can be costly. The deterioration of Sino-American ties has led to a conscious decoupling, accelerating both a crash in Chinese stocks and re-routing of supply chains by U.S. firms beyond the People’s Republic. How India reacts to some of its emerging challenges will set the tone. Burnt by one large emerging market, global investors may prove far less willing to give another the benefit of the doubt.

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This is a Reuters Breakingviews prediction for 2025. To read more of our predictions, click here.

(Editing by Antony Currie and Oliver Taslic)

((For previous columns by the author, Reuters customers can click on GALANI/
una.galani@thomsonreuters.com))