India & China: Taking divergent paths

India & China: Taking divergent paths

By Prasenjit Chowdhury

Deng Xiaoping acknowledged China's 'mistakes' early and changed the course dramatically.

Addressing the CEOs in 2005, prime minister Manmohan Singh had exhorted that India should try to emulate a country like China if it aimed at a greater share of the world trade. That year also happened to be first time Chinese premier Wen Jiabao visited India.

In 2010, the Chinese premier told a meeting of business leaders during his recent visit: “China and India are partners for cooperation, not rivals in competition.”

What was Manmohan Singh hinting at by saying “a country like China”? Loath to hyphenation with Pakistan, we seem to be smug about the fact that now we are being compared to China. Impressive results count in the long run so there is little point in carping about the many pitfalls of China, the foremost of which is its lack of democracy.
In China, a general liberalisation in the 1980s, of its economic policies allowed private businesses to flourish as credits flowed to peasant start-ups and rural poverty fell dramatically. It was soon to be followed by the massacre of the Tiananmen Square in 1989.

Urban-centric

Afterwards the state changed tack by chocking off credit to rural entrepreneurs, switching loan capital instead into large, rebuilt state-owned enterprises and urban infrastructures, and — not least — granting massive advantages to foreign capital drawn to big cities during which time inequality — not only between village and city-dwellers, but within the urban divide itself, was at its zenith.

As a fallout, labour’s share of the GDP fell, peasants lost land, rural health care and schooling were dismantled. Amid a ‘forest of grand theft’, officials, developers and foreign executives prospered while families struggled to get by in the “world’s most successful Potemkin metropolis”.

China practices a variety of capitalism that has been deformed by a corrupt and self-aggrandising state which denies its people liberty to manage their own economic affairs. A new working class of migrant workers from the countryside are lowly waged, toil up to 70 to 80 hours a week, without any security in atrocious working conditions.

China is now one of the most unequal and labour-repressive societies in the world. Is autocracy good? At least so it seems in case of China. The size of Chinese economy is way too larger than that of India.

Labour-intensive manufacture exports contribute almost 40 per cent to the Chinese GDP compared to only 16 per cent in India. China’s per capita GDP growth has averaged 8 per cent since 1980, which is double that of India’s per capita GDP growth rate. By 2004, India received $5.3 billion in FDI, which was less than 10 per cent of the $60.6 billion that flowed into China. According to a prediction by Goldman Sachs, India’s GDP will exceed that of Germany in 2025 and Japan in 2035, the USA in 2050, China in 2082.

Overall, when it comes to some welfare indicators, such as living standards, poverty alleviation, female literacy and life expectancy, China has raced past India by a wide margin. Since 1990, China has tripled per capita income and has eased 300 million out of poverty. China, with lesser cultivable land, produces double the foodgrains. The quantum of China’s foreign trade is huge compared to India. It has been the second largest buyer of US treasury bonds after Japan, helping to finance the huge US deficits. It is also one of the top importers of oil and raw materials.

China has a huge reservoir of domestic saving — about 40 per cent of GDP — to plough into its mammoth infrastructure. It attracts massive inflows of foreign direct investment as the means to acquire technology, managerial expertise, and factories. With close to a 24 per cent of national saving rate, only a little more than half that of China, India has far less in the way of internally-generated funds to invest into infrastructure.

A look into the trajectory of the two countries lends one to understand that at independence in 1947, two years before the Chinese Communist Party liberated China, India was ahead in many sectors. While both lost steam by adopting the planned economy, Deng Xiaoping was able to acknowledge China’s ‘mistakes’ and China’s course dramatically changed when he returned to power in 1978. India could not kickstart its engine of economy before 1991.

Long back, Professor Jagdish Bhagwati prognosticated that India may face a cruel choice between rapid expansion and democratic processes. But could we really blame our democracy for not being able to match Chinese growth? In China, capitalism has been grafted on to a state that is fascist in character.

The accumulation dynamics underlying China’s growth are already generating serious national and international imbalances. The social cost for working people in China and the rest of the world to mend them is immense. Should China ever relapse into democracy, India would get a real rival.
source;The Deccan herald