China and India: different routes, same destination By Randeep

India and China: comparing the incomparable by Vishnu Saraf

Macmillan India. Pages: xxiii+157. Price: Rs. 385/-.

For the past about two decades India and China, (often described as unidentical twins), have been coming under the scanners of a growing number of analysts. And for good reason too. There has been a remarkable transformation in their respective economic profiles. From being pathetic laggards they have turned into two of the fastest growing economies in the world. What is interesting is that each has adopted a different growth model – top-down by China and bottom-up by India. And, at least for now, both are working. Saraf’s comparative study takes a close look at the achievements, failures, strengths, weaknesses and pitfalls in the growth-routes chosen by two economies.

China scores over India in almost all macro-economic indicators. Its GDP is nearly thrice and per capita income more than twice of India’s. It attracts vastly more foreign direct investments (FDIs) – until 2006 $700 billion were invested in China compared to $68 billion in India. India’s exports are only a fraction of China’s. The Dragon is years ahead in development of hard infrastructure like buildings, highways, ports, power plants etc. In manufacturing capacity and output India is nowhere near China. The latter’s spanking new cities are world class with nary a hint of slums. Contrast this with the overwhelmingly filthy shanty towns in Mumbai, Kolkata, Delhi and elsewhere in India.

For all this there are justifications too. China began experimenting with liberal economic regime in 1978 while India started the process of integration with global economy only in 1991. China, being a totalitarian state, has the advantage of taking quick decisions and implementing them without fear of adverse public reaction or legal intervention. India, on the other hand, has to use slow democratic processes to arrive at decisions and, while implementing them has to contend with various interest groups and lobbies, not to mention a pro-active judiciary and a rather shrill press.

But this tome is not a litany of excuses for India’s relatively modest showing. On the one hand it enumerates India’s strengths – successes in the fields of software and service industries, a comparatively better skilled pool of engineers and workers, a sophisticated and efficient banking system, a vibrant well-entrenched private sector and a well developed ‘soft hardware’ like our judiciary, capital markets, free press, democratic institutions etc. Another long term advantage for India is its younger population and better tertiary education – although its primary education scenario is worrisome.

China’s overdependence on state owned enterprises, over-investment in the manufacturing sector, a profligate and inefficient banking system and the official tendency to fudge facts and figures may cost it dearly in the long term.

Among the common drawbacks for both countries corruption ranks rather high, although China is relatively free of red tape. But, it is the challenge to sustain high growth rates in the foreseeable future that appears to be rather daunting. Pointedly making a distinction between growth and development the author rightly avers that a growing GDP becomes meaningless if the distribution of benefits is skewed. However, India’s healthier micro-economic fundamentals – its institutions, innovative acumen, market efficiency etc – promise rich rewards in the long term.

This extremely readable, well researched and cogently argued dissertation is certainly a valuable addition to one’s bookshelf. However, its scope has been limited to only certain aspects of the comparative study. Saraf has ignored certain significant aspects of the Sino-Indian rivalry (although he eschews this term and prefers China and India to China versus India). With the strengthening of their respective economic sinews both the Asian giants are bound to seek more prominent roles in international affairs. What effect would it have on the global geo-strategic scenario? Already Chinese military is making its presence felt in our backyard. Attempts are also being made to browbeat India. Moreover, since China, in its quest for rapid industrialization and low costs of production, has blatantly ignored environment related issues, how would it be made to fall in line? China’s aggressive acquisition of various sources of energy and raw materials in different parts of the world – ranging from Australia to Africa, Latin America and Central Asia – is bound to have repercussions on the efforts of other developing nations to achieve economic security. A brief analysis of these issues would have placed the phenomenon of resurgent Asian economies in perspective. After all you cannot separate economics from geo-politics.