China and India

I heard a fascinating talk by Prof. Leslie Young of the Chinese University in Hong Kong, organised by Prof. Young talked about how a mix of history, geopolitics, spiritual framework, institutional structure, impact of neighbouring states and overseas (non-resident) Chinese have made China the economic powerhouse that it is today. He also compared China to India using the same parameters. My question to him was that given these factors, is it possible for India to catch-up with China? His short answer: No. [The transcript should be put up online sometime soon.]

Listening to him what became very clear is that a lot of thought seemed to have gone into the way Chinese built out their structures and policies, in a very practical way. Indians on the other hand have been focused more on theory. This is what can be seen today. “India has an intellectual advantage, but a practical disadvantage”, he said. That helps us in software but hinders us elsewhere.

A few of his recommendations for India from the Chinese experiences:
– Attract NRI investment in zones cleared of bureaucracy
– Offer bureaucracy high rewards for improvements in efficiency and productivity.
– Convert state agencies into profit centres and then spin them off into companies
– Keep capital account closed but make foreign investment attractive and simple. [The reason for this is interesting: preventing capital outflow, as China has done, ensures that the money siphoned away does not make its way out of the country – as is what happened in Russia – but gets reinvested within the country.]

The underlying message: it is possible to transform a country. China’s homogenity made it easier and India cannot replicate the same ideas because of its diversity. But it should be possible. I think the Indian government should get him to advise us on what we need to do.

On a separate note, there is an article in the recent Economist on China’s economy.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.