Wednesday, May 13, 2009

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The Future Belongs To India, Not China

what is the difference between China growing at a rate of 10% and India at 8%? 
The difference was, indeed, very significant. If we were to grow at 10% we could save twenty years. This is almost a generation. We could lift a whole generation into the middle class twenty years sooner. 

"We have waited 3,000 years for this moment. Why don't we wait another twenty and do it the Indian way?"
The cost of democracy is the price the poor pay in the delay of their entry into the middle class. The 'Indian way'  includes taking a holiday on half a dozen New Year's Days! It is easy to get mesmerized by China's amazing progress and feel frustrated by India's chaotic democracy, but Indians will not trade off democracy for two per cent higher growth. 

In referring to the 'Indian way', a nation must be true to itself. Democracy comes easily to us because India has historically 'accumulated' its diverse groups who retain their distinctiveness while identifying themselves as Indian. China has 'assimilated' its people into a common, homogeneous Confucian society. China is a melting pot in which differences disappear while India is a salad bowl in which the constituents retain their identity. Hence, China has always been governed by a hierarchical, centralized state - a tradition that has carried into the present era of reform communism. China resembles a business corporation today. Each mayor and party secretary has objectives relating to investment, output and growth, which are aligned to national goals. Those who exceed their goals rise quickly. The main problem in running a country as a business is that many people get left out.

India, on the other hand, can only manage itself by accommodating vocal and varied interest groups in its salad bowl. This leads to a million negotiations daily and we call this system 'democracy'. It slows us down - we take five years to build a highway versus one in China. Those who are disgruntled go to court. But our politicians are forced to worry about abuses of human rights, whereas my search on Google on 'human rights abuses in China' yielded 47.8 million entries in 13 seconds! Democracies have a safety valve - it allows the disgruntled to let off steam before slowly co-opting them.

Both India and China have accepted the capitalist road to prosperity. But capitalism is more comfortable in a democracy, which fosters entrepreneurs naturally. A state enterprise can never be as innovative or nimble and this is why the Chinese envy some of our private companies. Democracy respects property rights. As both nations urbanize, peasants in India are able to sell or borrow against their land, but the Chinese peasants are at the mercy of local party bosses. Because India has the rule of law, entrepreneurs can enforce contracts. If someone takes away your property in China, you have no recourse. Hence, it is the party bosses who are accumulating wealth in China. The rule of law slows us down but it also protects us (and our environment, as the NGOs have discovered).

We take freedom for granted in India but it was not always so. When General Reginald Dyer opened fire in 1919 in Jallianwala Bagh, killing 379 people, Indians realised they could only have dignity when they were free from British rule. The massacre at Tiananmen Square in 1989, where 300 students were killed, was China's Jallianwala Bagh. China today may have become richer than India but the poorest Chinese yearns for the same freedom.

Because the Indian state is inefficient, millions of entrepreneurs have stepped into the vacuum. When government schools fail, people start private schools in the slums, and the result is millions of 'slumdog millionaires'. You cannot do this in China. Our free society forces us to solve our own problems, making us self-reliant. Hence, the Indian way is likely to be more enduring because the people have scripted India's success while China's state has crafted its success. This worries China's leaders who ask, if India can become the world's second fastest economy despite the state, what will happen when the Indian state begins to perform? India's path may be slower but it is surer, and the Indian way of life is also more likely to survive. This is why when I am reborn I would prefer it to be in India, again.

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Haja Peer Mohamed H, Software Engineer by profession, Author, Founder and CEO of "bench3" you can connect with me on Twitter , Facebook and also onGoogle+

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Anonymous
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May 29, 2009 at 10:56 AM delete

Dear Sir,

I am Chinese and a much deserved Indo-phile as well. To us Chinese, India is already the world's No.1 Superpower. No dispute here, and much admired. In PPP terms, India is already the world's No1 economy; not even the US comes close. India has a super high-tech economy with your old dig and InfoSys, Wipro, and much more that the average Chinese never even heard about. Not to mention Gandhi, Nehru, and Singh super human politicians. India has a huge population dividend, and as time grows the advantage will become much more pronounced. In the next 100 years, India with her super effective democracy will prevail; as we just pray that India will be also kind enough to leave a bit of room for us Chinese to earn a modest living on our corner of the planet. India just needs to sleep walk through the next 30 years, or just sit down and talk, whereas us Chinese will have to continue to slave under the Sun, rain, and snow just to keep us fed and our kids in school. With this economy crisis, our economy is shrinking by 8% each year, please be merciful to us. Cheers to India.

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May 29, 2009 at 6:43 PM delete

We should not lose our sense of proportion in thinking about the rise of China and India.
There are many severe pitfalls and roadblocks which we have to overcome in the near future, before we can become significant players in the international economic scene on a sustained basis.


Every day, countless commentators prophesize the ascendance of the world's next superpowers, China and India, the two "Asian giants" shaking off their ancient slumber and rising to the call of the 21st century.

According to current situation, India is as yet a minor player in world trade, contributing less than one percent of world exports. (China's share is about 6 percent.)

China is a manufacturing center of the world and India is a service-providing center of the world. They both have a large workforce. They both have a young median age. They both have a huge military. They both have a fast growth rate.

According to popular punditry, their place in the firmament of globalization's success stories is already guaranteed. Yet economist Pranab Bardhan argues that a much more complicated picture belies the rosy visions of optimists. In China, rural and urban inequality grows at alarming rates, stirring unrest amongst those hundreds of millions who remain impoverished. In fact, China, responsible for only 6 percent of world trade, has actually lost manufacturing jobs in the past ten years. Meanwhile, India's much-vaunted hi-tech sector accounts for less than one quarter of one percent of the country's labor force. The nation still boasts the world's highest illiteracy rate, while poverty reduction continues to slow.
While there is no doubt about the great potential of these two economies in the rest of this century, severe structural and institutional problems will hobble them for years to come. At this point, the hype about the Indian economy seems patently premature, and the risks on the horizon for the Chinese polity – and hence for economic stability – highly underestimated.

Both China and India are still developing. Of the total of 2.3 billion people in these two countries, nearly 1.5 billion earn less than US$2 a day, according to World Bank calculations. Of course, the lifting of hundreds of millions of people above poverty in China has been historic!

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