India has averaged respectable productivity growth of 2.5% a year over the past two decades. But that can grow sharply, thanks to liberalization of many industries, a literacy rate that has risen from 18% in 1951 to 65% now, and India's rising openness to foreign trade, which has jumped from 15% of GDP in 1991 to 26% now.

Manufacturing Surge China dwarfs India as a manufacturing power, especially for export.

And it will be a long time before India, with its inadequate infrastructure and components supply base, will be a serious export rival. But in recent years, India's domestic manufacturing industry has been growing strongly.

What's more, a number of Indian companies are especially strong in high-end manufacturing, such as auto parts, power generators, and medical equipment, that requires a lot of engineering.

In terms of quality and efficiency, several Indian auto parts companies are on par with the US.

"If you look at engineering work across the board, in industries from pharmaceuticals to telecom, what India is doing is an order of magnitude beyond what China is doing," says Keystone's Ghosh.

Anyone who visits both countries today may find it hard to imagine India overtaking China in economic performance.

But when you look at the fundamental drivers—growth in the workforce, fixed investment, and productivity -- over the long run the prospect looks a lot more plausible.

Excerpted from: Chindia-How China and India are Revolutionizing Global Business by Pete Engardio. Reproduced with permission from Tata McGraw-Hill Publishing Company Limited. Price: Rs 395. Copyright 2008.

Image: A ticker on the facade of the Bombay Stock Exchange shows India's benchmark 30-share index Sensex in Mumbai. | Photograph: Indranil Mukherjee/AFP/Getty Images