India and China

A new edition of the Economist is a joy to behold – one of my first activities Friday mornings is to go check their website for the new articles to see which are good enough to link (of course, some articles are available only to subscribers), and then also wait for the hard copy of the magazine which arrives on Saturday. I first subscribed to the Economist at Columbia University (great student discount) and have maintained it since then.

So, imagine the delight when I found the latest issue with a cover story on India-China AND the Technology Quarterly. Plenty to read and think about.

First, the India-China stories [1 2]. They come on the eve of the visit of the Indian PM (Vajpayee) to China. The nutshell: “India is weaker thanks not to democracy, but to bureaucracy, intolerance and pointless rivalries” and “Indians should learn that they have less to fear from their giant neighbour than they think”.

SOME comparisons are stark enough to generate a national inferiority complex. In 1980, India had about 687m people, 300m fewer than China. Living standards, as measured by purchasing power per head, were roughly the same. Then, as China embraced modernity with a sometimes ugly but burning passion, it left India behind. In the next 21 years, India outperformed its neighbour in almost nothing but population growth.

By 2001, India had 1,033m people against China’s 1,272m. But China’s national income per head, according to the World Bank, was $890, nearly double India’s $450. Adjusted for purchasing power, the Chinese were still 70% wealthier than Indians were. In the ten years from 1992, India’s GDP per head grew at 4.3% a year, China’s twice as fast. Some 5% of Chinese now live below the national poverty line, compared with 29% of Indians.

India has only itself to blame for not being able to grow at 8-10% a year and occupy its rightplace in the world as one of the engines for growth. China’s GDP is twice that of India’s today, and growing at a much faster clip. Says the Economist: “If democracy or the lack of it is not the root cause of India’s divergence from China, what is? Mostly, as already noted, that India simply started the process of opening up later. Indians used to joke that the British raj had given way to the licence raj: even the smallest investment decision by a private firm required government approval, very often all the way from Delhi. The work of dismantling this bureaucratic behemoth started only in 1991 under a reformist finance minister, Manmohan Singhthere was no reason why it could not have started earlier, bar the absence of sufficiently intelligent or brave leadershipand pockets of resistance remain. One particular anomaly is the system that reserves extensive sectors of the economy for small businesses. China’s reforms have had 12 years longer to deal with such obstacles.”

I had visited China twice last year – both Beijing and Shanghai. Had written a Tech Talk series after my first visit (to Shanghai).

As Karthik put it at yesterday’s Book Club meeting, CK Prahalad recently said that the last time Indians had a common mission was when we wanted Independence and answered the call of “Purna Swaraj”. It is time for a similar goal now. And this should focus on economic growth – how can India grow 10-15% a year and create 10-15 million new jobs a year.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.