Tuesday, September 27, 2005

India & China

In past couple of years, international media, especially Business Week ,has placed India's economic status at the same pedestal as China's. If you go through Business Week's recent cover story on these two emerging economies you would get the impression that India is not far behind from China. China is the new economic powerhouse of the world followed 'closely' by India goes the popular phrase from these media houses. The reason for this apparently equal treatment is that China has built its economy on non-glamorous manufacturing industries and has clearly become the factory of the world. India's reputation has been built on the more visible and glamorous high-tech(if you can call outsourcing that) industry. What is forgotten is that while China's manufacturing growth is fueled by sensible policy making by its government, India's growth in high-tech is largely the case of being at the right place at the right time and has very little to do with any sensible planning or vision from its government. This hyperbole of China and India has already led to a sense of complacency in Indian government circles witnessed by a very sluggish growth in economic reforms in past 2 years in India. If anybody thinks that India's economic status is quite close to China then he needs to do the math. Economist Shankar Acharya has provided the numbers . On every important economic parameter, India is not even close to being close to China. On same parameters, it is so shamefully far behind that the only relevant comparison could be with the most backward third world countries. True, India has made very impressive gains in past decade and a half, especially in the information technology industry. The reality, however, is that given its vast population and potential it is just not enough. India needs to do a lot lot more to get anywhere near to where China is today. It needs to build a halfway decent infrastructure, provide a quality of life fitting to humans for a vast majority of its people, remove bottlenecks for enetrpreuners, privatize the inefficient state enterprises, start a crackdown on corruption, introduce some social reforms. The to do list is long. It has those proverbial thousand miles to go before it can so much as take a nap.


Ashutosh said...

I agree! Without infrastructure development, we are going to stay where we are, or worse still, wobble down. The excuse people make of 'Indians having much better English speaking skills than the Chinese', while true, is becoming a lame one. You make a good point about being lucky at the right place at the right time. It's not going to last long unless we put some determined purpose into it, and take care of many of the problems plaguing our most basic facilities and systems.

Vivek Gupta said...

The biggest worry for me is that India may soon become a victim of its own perceived 'success'. 7% growth of past couple of years and undeserved comparisons with China has already made governments in India complacent. This can be seen in lack of any meaningful reforms since the Congress took control of power. Instead we witnessed a moratorium on privitisation program, deepened infrastructure problems even in our showcase cities(Bangalore is a case in point), wasting of money in nonsensical programs like Employment Guarantee Scheme. This article (http://www.financialexpress.com/fe_full_story.php?content_id=103870)points out the problems with our buerocratic red tape. I fear that if present state of affairs continues then it will not take long for India to go from an 'emerging' economy to a 'submerging' economy.

Amogh said...

Nicely put guys.
Btw, you should definitely read this blog
Its by Amit Verma and co. and talks about a lot of issues like the one you discussed.

Ashutosh said...

Exactly. In fact, I was thinking about this today, and the thought crossed my mind that we have an innate tendency to be self-satisfied and smug with something, and then become complacent. In fact, we have even become so smug with our past (touting 'our glorious history of vedas and the mahabharata' almost as an excuse for our present lack of progress) that I really fear that we may simply rest on our laurels and stamp out focused progress yet again. And yes, large scale privatisation seems to be the only timely solution right now for us. But these confounded politicians should let us do it, for god's sake.