T N Ninan: De-couple from China

WEEKEND RUMINATIONS

Someone thought up the word a few years ago: Chindia! It was probably the ever-inventive Jairam Ramesh (who wrote a book on the subject three years ago), or perhaps the indefatigable Tarun Das. Whoever the author, the idea was clever as a sales gimmick, to offer an alternative to the India-Pakistan mindset that prevailed internationally, and instead to club China with India in the world's thought processes, as a way of getting people to look at India differently and to take the ever-underperforming India more seriously. It also had an obvious validity: the two countries are neighbours in Asia, both are large, both were victims of 19th century imperialism, both now lead the pack of emerging markets, both have the biggest populations and then some, and both are growing rapidly and have huge long-term potential. So, the big international companies who were waking up to Asia beyond Japan and who felt they had to choose where to invest, in China or India, were told: Do both, you can't ignore either. Invest therefore in Chindia.

The time may have come, however, to rue that clever gambit, and to attempt what in contemporary phrasing is called a "de-coupling", because the sins of China are now being visited on India. China will soon be the world's largest emitter of gases that cause global warming; so when you have Chindia on your brain, you blame India as well "" though the level of emissions in the two countries is vastly different. China is by far the biggest hoarder of dollars, so the spotlight falls also on India's far more modest hoard. Chinese successes in exports take away western manufacturing jobs in great swathes, so India's relatively tiny contribution to what CNN's Lou Dobbs calls the "export of (American) jobs" faces strident and very premature criticism. As the western world struggles to cope with the Chinese phenomenon, in the largest shift of power after the rise of America more than a century ago, the United States feels encouraged to think in terms of propping up India as a foil.

That may have raised China's hackles, but it is not fooled. It knows perfectly well that the Indian economy is barely a third of China's, and it therefore worries about competition from India about as much as India worries about competition from Indonesia (whose economy is a third of India's). Still, Beijing is sufficiently provoked to up the ante whether it is the border dispute, competition for gas deals in the neighbourhood, or East Asian diplomacy. In the last of these, it has successfully killed the idea of an "Asean+4" forum and created instead an Asean+3 (excluding India while including China, South Korea and Japan). In a dozen different ways, therefore, the premature triumphalism about India has created more anti-bodies than India would like to deal with just now.

What makes the whole thing ironic is that the two countries are as unlike each other as chalk and cheese. One is a single-party dictatorship, the other a multi-party democracy; one claims to be more communist than it is in reality, the other remains surprisingly statist despite having embraced capitalism; China has succeeded in manufacturing, India in services; China's growth is export-driven, India focuses more on the domestic market (domestic consumption accounts for barely half the share of GDP in China that it does in India); China taxes international companies at a fraction of the rates it imposes on domestic firms, India if anything has done the opposite. Any international firm that tries to apply in India the rules it has learnt in China will very quickly discover its mistake. But the supreme irony is that the people who should be wondering most about why China and India are not more "coupled" in their economic performance, namely India's politicians, are the last ones to want to learn from China's successes.