27 October, 2021

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Sino-Indian Economic Competition

By Kumar David

Prof. Kumar David

China is the workshop of the world; consumer goods, appliances, devices, heavy machinery and all things China made from linen to locomotives flood global markets. It trails the best Western and Japanese top of the line technology (complex microchips, aerospace, medical). But it is closing the gap (5G, AI, robotics, vaccines) and I will have to return to this some other day. The growth engine was ignited by Deng Xiao Ping’s 1979 reforms but take-off was really after Deng’s visit to Guangzhou Province in 1992. The sleepy rice farms of Shenzhen that he turned into a new economic zone is now a more populous and prosperous city than Hong Kong. By about 2010 China had the second largest GDP in the world, and by 2030-2035 it will surpass the USA in economic output (not per capita of course).  

It is not true that India made a later start. While Mao was taking the Great Leap Forward wrecking-ball to the economy and ten-years later stirring up chaos via the Cultural Revolution, India made a well-planned start in the Nehru era. But bottle-necks, the licence Raj and the cancer of corruption (worse than modern China) were never cracked, the private sector remained moribund and lacked the effervescent energy of China’s small and medium capitalism of the Deng era. India’s state-owned industries lacked the direction and determination of China’s state-directed enterprises; gigantic infrastructure expansion unleashed an investment flurry in China that Provincial Governments (States in India) could not match. 

Nevertheless, there has always been a view, not confined to liberal economists, that at a certain stage of growth, free-markets, unfettered capitalism and do-or-die gung-ho entrepreneurship would engender innovation and rapid growth. The earth-shattering impact and energy of the bourgeoisie dominates Part I of the Communist Manifesto, and we have seen it recently in the new capitalists of post-Deng China, albeit under the watchful eye of a non-capitalist state. Many were inclined to the view that political democracy and its concomitant, market-freedom, could set off growth in India in the post-Nehru era and that India’s GDP could catch up with China in two or three decades. It is now clear that this will not be the case. There are three reasons why India overtaking China in economic power is not going to come to pass.

The primary reason is the global context. The capitalist world is already crowded with giants compared to the epoch of, say the rise of Britain and a 100 years later America, as economic empires. Germany and Japan too shot up after war devasted Europe, the Far East and China provided uncrowded space for their economies to expand. Competitive India had nowhere to explode into in this overcrowded globe unlike state-directed China (both domestic and international markets) following an entirely different post-Deng market-capitalist paradigm. From this flows my second reason about which I will have more to say next Sunday (13 December) when I discuss China’s millennial antiquity of centralised state power and natural tilt to authoritarianism. In India Social structure (ethnic diversity, linguistic fracturing and cast obsessions) militated against entrepreneurship and modernisation. Lee Kwan Yew singles this complexity for discussion in a chapter in One Man’s View of the World, Straight Times Press, Singapore (2013). India’s inefficacy is proverbial, her rich are the filthiest rich, her poor the poorest.  

The third reason is the recent rise of Modi-Amit Shah Hindutva authoritarianism and assault on democratic norms, institutions and ideology. When Modi arrived, many expected him to fire up Indian capitalism and entrepreneurial spaces and attract loads of overseas investments. None of this is happening. Hindutva extremism rings the death knell of liberal polity and economic liberalism. India’s best and brightest are migrating in hordes with no thought of returning (more than half Chines to students in the US return). Look at the cream of America’s top corporations or consider Biden’s team for pointers! For these three reasons I have adjusted my hopes of hearty capitalist growth in India rivalling China’s state-led economy and lowered my expectations for India. Prospects would be brighter if one could see the defeat of Hindutva ideology or Modi’s authoritarianism being thrown back. Unfortunately, the masses in the cow-belt, like populist lumpen all over the world, have a death wish for authoritarianism. That’s very sad.

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Latest comments

  • 3
    1

    There are things that post-Deng China built on, while jettisoning support for socialism and liberation, especially in the Third World.
    China built bridges to Africa during the anti-colonial struggles of the 1960s and 70s.
    It practiced the Five Principles of Peaceful Coexistence (Panchsheel) which it co-authored with India in 1954, far better than India did.
    The Indian elite’s obsession with being the successor to the British Raj ruined India’s status as a leader in South Asia, and led to loss of mutual trust with neighbours.
    India is increasingly seen as a bully by Nepal. Its domination over Bhutan is increasingly resented. Indian rulers have an emotional difficulty in treating Third World sovereign states as equals.
    Despite all its failings, especially since Deng, China has scored on the count of treating other states as equals, not compared with India alone but the entire West (now at a loss on how to overcome China in Africa and now Latin America– the US can only think of military expansion).
    *
    More recently, India lost its opportunity by willfully abandoning the prospect of being a key player in a grand Asian Alliance.

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    Hindutva can never be eradicated. It has damaged India, and the brainwashed will never realize that nationalism was used as a tool to “convince’ them, that their leader cares for them and the country first, while eroding their own laws, changing the Constitution, and turning them into cult followers. Add to it an element of racism, and anger against “the other”. In many ways this is what Trumpism is too. Trump has been able to convince his cult followers that nepotism, endless lies, adultery, corruption, white supremacists, breaking laws, and enriching the family from the Oval Office, is acceptable and the norm.

  • 1
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    While Hindutva in India has NOT brought economic boom in India, the Sinhala Buddhist Fundamentalism is not going to bring peace and prosperity to SL.
    It’s not too late for Rajapaksas to bring in all inclusive partnerships between different ethnic groups to turn the country around to economic prosperity. SL Tamils do not want a separate Country but they do need to have the ability to preserve their language and culture. The mindset of Rajapaksas and other groups need to change. The subjugation of SL Tamils by having unduly large Sinhala Security Forces in the North and East should be dismantled and need to get the Provincial Council with enough powers as soon as possible. The Governor to the PCs should be also elected by the people in that Province

  • 2
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    Dear Prof. David
    China’s progress, unabated is due to its ability to structure its economy without any hindrance and opposition within. The five Gorges project is a case in point, where virtually millions were displaced and not mention of the long-term environmental effects and damages, as a totalitarian regime where there is zero tolerance for any kind of opposition. China is able to bulldoze its projects unabated and unhindered
    Above all Chaina is where it is now is vastly due to the fact over the past 40 plus years the US invested in Chaina, almost 1000 times more than in India in the same period. India being secular and democratic nation, could not enforce the economic changes as well as China.
    Added to that the corruption and the red tape in the Indian administration at all levels of society is very rampant thus the progress is rather retarded. The congress party in its long reign did not contribute to any significant progress. Modi is trying his best but one is not so sure as to whether the hangers on are fully supportive of his tireless efforts
    China’s rise is also due to its ability invest in almost all third world countries, lately in developed economies and Africa in particular… The silk road policy is still very much alive.

  • 1
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    “The five Gorges project”
    Is it not Three Gorges?
    There is a difference between how it happened there and in other parts of Asia.
    The displaced people were provided for well in advance of the project.
    *
    If you ask me if it is an environmentally sound project, I have my doubts.
    Yet, the dam has given the lie to the ceaseless stream of predictions in Western media that it was due to collapse after this year’s flooding.
    *
    I admire you faith in the failing Modi.
    He has screwed up the economy and now the handling of pandemic.
    He has only a hapless opposition to save him.

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