China and India have been Asia's growth engines for the best part of two decades. That golden period of rapid expansion now appears, at least temporarily, to be coming to an end. In its place a synchronized China-India slowdown is emerging for which neither nation is well prepared.
Of the two, India's predicament is more shocking. Third-quarter data released on November 29 showed growth sliding to 4.5%, the lowest in six years and down from around 8% in the second quarter of 2018.
Earlier declines of this magnitude could at least be blamed on external shocks, from the global financial crisis to India's 1991 balance of payments crash, triggered by oil price rises and the Iraq War.
Not so this time. Instead, festering banking sector debt problems have spread to shadow lenders, creating a liquidity crunch. Private investment is stagnant. Consumption has plunged of late too, hitting sales of everything from cars to men's underwear.
Prime Minister Narendra Modi has done little to fix these problems. Despite a thumping election victory earlier this year, he shows little willingness to spend political capital on structural reform. Modi's defenders blame global factors for India's travails. In truth India's economic mess is born almost entirely of domestic neglect and incompetence.
China's case is more complex. Its economy expanded by 6% in the most recent quarter -- a healthy clip by Indian standards but still its weakest performance in almost three decades.
Beijing's problems are at least partially the result of global forces, most obviously its trade war with the U.S. Where India has dawdled, China has also at least tried to curb the bad debts undermining its banking system.
But President Xi Jinping must take a share of blame too. A never-ending quest for regime security has seen him push his economy in evermore statist directions. The result means bank credit has been handed to state-backed businesses but denied to more productive private sector rivals, dragging down growth overall.
Economic policy elsewhere in the world is far from perfect. But it remains alarming that Asia's two largest emerging economies are pursuing policies simultaneously that leave their output below what it could be. Without a change of course, both risk entering extended periods of below-par growth that will catch their respective publics and global investors by surprise.
Put another way, the fact that demographic and economic changes would lead China to slow gradually over the coming decades is widely understood. The idea that it might slow sharply, and be joined on that journey by India at the same time, is not.
Worse, in both countries the true picture is almost certainly worse than official figures suggest. Many experts distrust China's national economic statistics, which are aggregated from regional data where growth rates are exaggerated by local Communist Party chiefs.
India's former chief economic adviser Arvind Subramanian suggested recently that his own country's GDP data were perhaps 2.5% lower than official figures suggest. If Subramanian's estimate remains right, India may now be barely growing at all.
A pronounced China-India slowdown would place pressure on both countries' political systems. Slower growth means rising unemployment and stagnant incomes, as well as likely further collapses in stressed financial institutions.
The wider effect would be felt across Asia too. China's economy is clearly the more important: at around $13.6 trillion, it is five times larger than India's, and more integrated into the global trading system as well.
But trading partners of both economies would suffer, as would international investors, many of whom have bet on India to step up as China slows for structural reasons. India's benchmark S&P BSE Sensex index is up 13% in the last year, and hit a record high last week -- an investment trend that now looks like misplaced confidence.
There are reasons to be hopeful. Many projections still suggest both economies could bounce back in a few years. The International Monetary Fund, for instance, says India will expand at 7.5% in 2021 -- although on current form such figures border on the ridiculous.
Elsewhere, an end to talk of U.S. Federal Reserve interest rate rises has perked up global sentiment over recent months. The People's Bank of China trimmed benchmark lending rates in November, with further reductions likely. The Reserve Bank of India is almost certain to cut rates again soon too.
Ultimately, however, Asia's twin emerging giants need major policy changes to restructure their respective growth models, to be become less statist in China's case and more focused on manufacturing and exports in India's.
In both countries, previous slowdowns have been the midwife of structural reforms. But so far at least their current downturns have not been dramatic enough to jolt Modi's and Xi's economic teams into serious action.
As a result, the odds of a rapid rebound also look unlikely. For the last five years China and India have vied for the title of the world's fastest growing major economy. Now their contest more resembles a race to the bottom.
James Crabtree is an associate professor in practice at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is author of "The Billionaire Raj."
