Sunday, 18 December 2016

Is India's Growth Story that different from China's?

India and China – two largest nations on the Earth in population terms; chose different ways towards their right to self-determination. While India, based on the earlier established limited democratic framework under the British and the GoI Act 1935 decided for a democratically elected bicameral legislature with President as the head of the state; China went for a unicameral legislature with Communism as the core doctrine – what Chinese call as ‘Socialism with Chinese Characteristics’.

Despite China and India moving on different political trajectories post 1940 – both of them have remarkable similarities.  Both the countries gained total control to decide their future roughly around the same time – 1947 for India and 1949 for China. It is notable that both the countries had similar share of world GDP in 1950 [4.2% & 4.5% for India and China respectively] and were agrarian in nature, both had to fight illiteracy, poor health care and corruption; But China today is on much better footing than India, even HDI says so.

The start for either of these countries was marked with challenges – primarily being how to increase the pie to be effectively shared amongst the population?

India followed the Nehru-Mahalonobis model of development favouring heavy industries over agriculture and China followed a similar path – both relying on USSR initially to expand the industrial technology. Both the countries were averse to the idea of ‘West’ helping them, leaning towards self-sufficiency. Then came the famines – Earlier in China as a result of Mao’s ill-conceived Great Leap forward [1958-1961] and in India as a result of poor monsoon [1966-1969]. For India, it was a positive outcome resulting in ‘Green Revolution’. On the other-hand in China, it resulted in heavy censure of Mao. Mao had to launch the ‘Cultural Revolution’ unleashing his ‘Red Guards’ over his perceived enemies consolidating this power from 1966 till 1978. This put Chinese development on a stand-still till Mao’s death in 1978. India faced a similar situation much later in 1975-1977 when Emergency was declared and India witnessed a pseudo-dictatorial regime within a democratic framework. So for both India and China – the periods from 1947-1980 and from 1949-1978 respectively were the age of self-learning through mistakes.

China rebounded harder under the leadership of her visionary leader Deng Xiaoping who is credited with Chinese reform. One of the first things that Deng did was to make China more receptive of growth of its Asian neighbours [Singapore, Taiwan and South Korea] and learn from their experience and implement them under Chinese context. Introduction of Family Responsibility System, allowing foreign capital and opening up SEZs were great steps under communist regime. India partially opened up in 1980’s but the shock of 1991 was the actual turning point when the doors were finally opened to foreign competition ushering in LPG reforms. But, it was easier to introduce reforms in China than in India – due to the political culture in place. Chinese leader had the final say on all major reforms while Indian PM often had to appease a larger audience in the political spectrum to remain in power given the coalition politics.

The key takeaway is Chinese rise as compared to other communist countries seems an anomaly, primarily due to the fact that China has been able to segregate its Political ideology of Leninist State from its economic prerogatives and decisions [allowing limited capitalism within communist ideology]. In India’s case, economic socialism is inbuilt in Indian democracy as enshrined in the Indian Constitution, but still has a long way to go. India’s case seems to be driven primarily by private sector entrepreneurial spirit that is best served by limited government intervention unlike China. License Raj was a glorious failure. In today’s interconnected world, closed economy is a guaranteed failure. A lesson learnt by both the countries.

In conclusion, China will have to eventually address the questions of political ideology when dissent happens – but so long, the economic prosperity ensues, such questions can be kept in check. India on the otherhand may remain a soft-state as compared to China, and little chance that it can ever catch up with China in the next few decades economically, but nevertheless, free speech and actions will ensure that poverty is eventually a bygone word in Indian context.

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