A V Rajwade: India and China: a comparison

WORLD MONEY/ There's only one field where we have a chance of beating China ? population

The gap between the performance of the world's two largest nations, China and India, keeps growing. Two instances from entirely different fields should give us an idea.

The world's first commercial maglev (magnetic levitation) train is operating between the Pudong International Airport and downtown Shanghai.

It takes just seven minutes to cross the 30-kilometre distance "" which is about the same distance between Mumbai's international airport and Nariman Point, which takes anywhere from 75 minutes to a couple of hours, to cover.

In a different field, China won 63 medals in the last Olympics; India just one. The growing gap in economic performance, too, evidences few signs of narrowing.

Historically, there are a number of similarities between the two: ancient civilisations, the world's leading and richest at one time; going down the league table in the second-half of the second millennium; and starting their progress to modernity in the middle of the last century.

In the 1950s and 1960s there was considerable media debate on which system, authoritarian communism in China or parliamentary democracy in India, will deliver better.

There was not much difference in the economic performance roughly until 1980, when the per capita incomes were also similar. Over the last quarter century, both instituted economic reforms and growth accelerated.

China embraced globalisation and trade enthusiastically, welcoming foreign direct investment (FDI) with no inhibitions, and gradually gaining control of world markets for low-tech labour-intensive manufactures.

While reforms in India are supposed to have been initiated in 1991, the doctrinaire socialist policy had begun to be diluted in the second innings of Indira Gandhi.

The process of liberalisation continued under her son Rajiv Gandhi, and more dramatically after 1991. The growth rate doubled from the previous Hindu rate, but still lagged that of China.

The result has been that starting with more or less the same per capita incomes 25 years back, Chinese incomes today are double that of India's "" a result not only of faster GDP growth, but also of a lower population increase, thanks to the one-child policy.

Both face growing economic inequality.

Today, apart from higher incomes and lower poverty, the areas in which China is far ahead of us are literacy, FDI, labour rationalisation in the public sector and infrastructure investments.

Many international observers are astounded at the sheer speed with which infrastructure projects get implemented. As the Financial Times commented (January 21, 2004) "if thousands of villagers have to be moved to make way for roads or power stations, so be it: investment in infrastructure underpins China's success."

Barun Roy's comparison of Pudong with Rajarhat, near Kolkata (Asia File Business Standard August 6), is striking.

While the Deng revolution completely discarded Mao's economic model, the Chinese haven't forgotten one of the Great Helmsman's thoughts: respect your enemy (that is, any problem) strategically, and despise him tactically.

The blitzkrieg-like implementation of projects is an illustration of the latter tenet.

Contrast the way the giant Three Gorges Dam has come up in China, with the fate of the Sardar Sarovar Project in Gujarat.

Agitation, endless court cases, environmentalists, and other manifestations of a democratic, rule-of-law society have not only delayed implementation perhaps by a decade, but also added enormously to the costs.

And the direct cost escalation is perhaps only a small part of the total cost to the economy.

One can only imagine the output lost because of the delays in the starting of the project.

Take another instance where China is ahead of us, namely, labour-intensive manufacture.

Our labour laws, which protect existing employment, but at the cost of creating new jobs, have created a bias in favour of capital-intensive investments.

An Ambani prefers a refinery, in which the only comparative advantage comes out of the duty structure, to manufacturing, say, toys in billions and exporting them to the world.

China does not seem to be treating PSUs as holy cows either "" millions of jobs in state-owned enterprises have been lost in preparation for world competition.

But new ones keep getting created in larger numbers. In contrast, we not only condone over-manning, but also keep thousands employed in factories that haven't produced anything for decades.

No wonder resources are short for the much-needed investments. Organised private industry, afraid of labour laws, has produced few new ones in recent years.

There is a positive side to our system as well: we avoided the millions of starvation deaths that were a corollary to Mao's "Great Leap Forward" in augmenting steel output, and the social chaos of his Cultural Revolution.

Only an authoritarian system would permit such excesses. But the fact remains that fast growth in Asia has invariably come under authoritarian governments.

The correlation is strong, but as political correctness will argue, correlation is not necessarily cause and effect. Again, is quarter of a century too short a period to compare the efficacy of enlightened, reformist, authoritarian regimes and political democracies?

To be sure, there is one field where we have a good, if frightening, chance of beating China "" population. In most other areas, it is more comfortable to stop making comparisons.

Email: avrco@vsnl.com