India should not copy China's model

[illusion8]

As the article says, In India most vibrant economic sectors are dominated by domestic private firms that can compete with the best in the world on equal terms. There private firms have flourished in spite of the government. Just imagine how many manufacturing companies India would have created if we had the same govt backing as Chinese companies have. Here we need to take a cue from S Korea. In S Korea, govt subsidies helped create giants like Samsung, LG, Hyundai etc.

The initial starting stage is problematic but once it's achieved even here its easy to grow and such companies enjoy all the support they need.

 

[vk17]

Hope Congress do something like Modi ji,

We don't have problem if u guys steal our tax money,

but please do something that our country get back on the growth track!!

 

[IndoCarib]

And talking about the "Private Sector"...

BBC News - Lenovo ousts HP as world's top PC maker

Lenovo is not a state-owned company, yet it is now the number 1 PC maker in the world.

In fact, the Private Sector contributes to most of our GDP growth. While our State-owned companies are large but not fast-growing.

One of the stake holders of Lenovo is Chinese academy of sciences, which is govt controlled. Majority of the stake is held by the general public

 

[Chinese-Dragon]

In 2006, Indian Prime Minister Manmohan Singh heaped considerable praise on the so-called Beijing Consensus approach to economic development, arguing India could learn much from China in terms of reinventing, rebuilding and rediscovering itself.

India is in a weaker structural position now than it was several years ago. An entrenched socialism, combined with widespread admiration for the Chinese approach, has meant the re-emergence of Indian economic statism, the conviction that the government needs to take the lead in steering economic development into the future.

Who asked Manmohan Singh to do this? Certainly not us.

 

[illusion8]

Who asked Manmohan Singh to do this? Certainly not us.

Who's blaming you in the first place, why so defensive?

 

[Chinese-Dragon]

Who's blaming you in the first place, why so defensive?

The article is saying that India's attempt to follow the Chinese economic model is leading to stagnation:

An entrenched socialism, combined with widespread admiration for the Chinese approach, has meant the re-emergence of Indian economic statism, the conviction that the government needs to take the lead in steering economic development into the future.

But it's not actually the economic model itself that has the problem. The problem is Manmohan Singh's half-hearted attempt to implement some of the aspects, while merging the rest with some kind of Indian socialism.

And in any case, China's economic model was specially developed for China, and China alone.

 

[illusion8]

The article is saying that India's attempt to follow the Chinese economic model is leading to stagnation:

How does that mean that it's your fault, or that we are blaming China?

 

[Chinese-Dragon]

How does that mean that it's your fault, or that we are blaming China?

They are blaming the Chinese economic model.

The thing is, no one asked India to try (& fail) to emulate it.

If India had successfully emulated the model and adapted it to fit India, then they should have seen the same results that we did, i.e. 3 decades of sustained double-digit growth.

 

[illusion8]

IN 2006, Indian Prime Minister Manmohan Singh heaped considerable praise on the so-called Beijing Consensus approach to economic development, arguing India could learn much from China in terms of reinventing, rebuilding and rediscovering itself.

With the Chinese economy now stumbling, Julia Gillard is desperately hoping India can take up some of the slack, declaring that her goal is to double bilateral trade between Australia and India to $40 billion by 2015. For that to occur, India needs to reject the Chinese approach and look instead to its vibrant private sector to lead the country into the future.

Like China, India has an economy that is too big to ignore. With two-thirds of the population still in rural areas, it has a faster rate of urbanisation than China at 2.5 per cent a year. With a population that is set to exceed China's within the next two decades, and an age demographic that means it will remain a young country well into the middle of this century, it has an economy that has been expanding at about 7 per cent a year since the early 1990s.

This means a rapidly growing India will need even more of our coal. It will need huge quantities of food for its growing population. As a consumption-driven economy with a more sophisticated services sector than China, English-speaking India should welcome Australian services expertise. And to top it off, it is surrounded by weak or small states, meaning India will need to look further afield for meaningful economic partners during the next few decades.

In theory, this all bodes well for an advanced, resource-rich and agriculturally strong economy such as Australia. But there is no such thing as inevitability when it comes to continued economic growth and reform. A telling signal of how a country is really faring is what private entrepreneurs are doing with their capital. In the latest figures available (2010-11), outward investment from India more than doubled, while inward investment plunged. If India is well on its way to becoming an Asian economic superpower, the $US20 billion net outflow from an economy that desperately needs investment does not make sense.

A closer reading of why Indian and foreign entrepreneurs are investing abroad rather than in Asia's second fastest growing economy is troubling. India is in a weaker structural position now than it was several years ago. An entrenched socialism, combined with widespread admiration for the Chinese approach, has meant the re-emergence of Indian economic statism, the conviction that the government needs to take the lead in steering economic development into the future.

Take the present Indian five-year plan (2007-12). In line with the Chinese approach and as Derek Scissors from the Heritage Foundation puts it, "state-led infrastructure is the centrepiece of economic policy and growth strategy". Of the $US500 billion spent on infrastructure development across this period, only 17 per cent came from the private sector and almost all of that came from telecommunications firms.

For the next five year plan (2012-17), the government has set the target of $US1 trillion in infrastructure spending, with half to come from the private sector. No one in the Indian private sector believes this is an achievable goal.

Why are domestic and international private investors so reluctant to commit? One problem is that regulatory conditions and tendering processes are biased against private firms, while cheap loans generally are offered only to state-owned firms. In proposed public-private partnerships, the government's attitude is skewed towards socialising profits and privatising losses. Partly from a legacy emphasising the co-operative and collective ownership and exploitation of land, little progress has been made on an effective land title registration system. This means it is unclear who owns various pieces of land and investors cannot be sure that their infrastructure projects will be granted legal sanction.

Moreover, because the state still dominates - or else limits foreign firms from participating in key industries such as banking, insurance, agriculture, mining and minerals, energy, retail and transport - extremely inefficient and protected state-owned firms allocate and receive far too much capital while delivering far too few products and services at too great a cost. The impact on the agricultural sector is particularly troubling since some indicators suggest productivity in this sector has declined, a worrying trend for a country with a large and growing population to feed.

This means that the economic model, like China's, grows increasingly addicted to throwing more and more money at poorly performing state-owned firms to guarantee growth.

One consequence of heavy reliance on cheap money (in addition to subsidies, tax breaks and protective tariffs) offered to undeserving firms to drive growth is a government debt-to-gross domestic product ratio of 50 per cent - large for a developing country with a small tax base, and one that spends little on welfare - meaning interest payments absorb more than one-fifth of the annual budget. Another is that the money supply is growing three times faster than GDP, contributing significantly to 7 per cent to 8 per cent annual inflation in the past few years. As in China, the state-led mobilisation of resources is preferred over an emphasis on efficiency and productivity.

India's problem is not its democratic past but its socialist legacy. Across the past two decades, India can boast the rise of world-class private sector firms in areas such as telecommunications, pharmaceuticals, vertically integrated manufacturing and bio-technology, which occurred despite government policy.

The most vibrant economic sectors are dominated by domestic private firms that can compete with the best in the world on equal terms. If Australia is hoping an Indian economic miracle can match or surpass the Chinese one, then New Delhi needs to move on from its history and look beyond Beijing for inspiration.

John Lee is Michael Hintze fellow and adjunct associate professor at the Centre for International Security Studies, University of Sydney, and a non-resident senior scholar at the Hudson Institute, Washington, DC.

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Thanks for the post, it makes lot of sense.

 

[WS-10 Engine]

China is growing not because of government, but because of our private sector.
We would grow even faster if our government stopped interfering in the market and let the state-owned enterprises go bankrupt.
SOE's are using up far too much of our resources to produce jack.

We would be far advanced if we had a strong capital market where small & medium companies can get access to capital to grow their business.
Right now our useless state-owned banks lend to our even more useless state-owned enterprises.
The small and & medium companies get nothing.
When they do get a loan, it's with short term loans and charge a much higher interest rates.

Our economy is distorted because of government intervention.
Only way to solve this is to liberalise interest rates and reforming the exchange rate.

Private capital should be allowed to enter all sectors on a fair basis.

We have totally underdeveloped financial markets, major financial reform is needed.

We need to allow local governments to issue municipal bonds to raise revenue so that they don't steal land from people and sell them to raise revenue to carry out infrastructure projects, welfare programs, etc.

We need more market forces to allocate resources efficiently, not some guy in the government thinking he knows exactly what the economy needs.
The market will figure that out.

Without major reforms soon, our economy is in big trouble. Our economy is very big now and it's more complex, the government training wheels should be removed and let the economy run on its own wheels.

 

[KRAIT]

They are blaming the Chinese economic model.

The thing is, no one asked India to try (& fail) to emulate it.

If India had successfully emulated the model and adapted it to fit India, then they should have seen the same results that we did, i.e. 3 decades of sustained double-digit growth.

Chinese model can't be used for India. Only thing we can do is inculcate few aspects of Chinese model into our existing system and optimize it according to our way of governance, policy making and execution of plan.

The adaptation and selective induction in existing plan which essentially means an evolutionary economic model is what India needs according to its present goals and future aims. India is not in state of changing entire system or gradually shift to Chinese model entirely. The economic and social conditions are way different in both the countries and this makes the major difference and reason against using Chinese model.

 

[karan21]

China is growing not because of government, but because of our private sector.
We would grow even faster if our government stopped interfering in the market and let the state-owned enterprises go bankrupt.
SOE's are using up far too much of our resources to produce jack.

We would be far advanced if we had a strong capital market where small & medium companies can get access to capital to grow their business.
Right now our useless state-owned banks lend to our even more useless state-owned enterprises.
The small and & medium companies get nothing.
When they do get a loan, it's with short term loans and charge a much higher interest rates.

Our economy is distorted because of government intervention.
Only way to solve this is to liberalise interest rates and reforming the exchange rate.

Private capital should be allowed to enter all sectors on a fair basis.

We have totally underdeveloped financial markets, major financial reform is needed.

We need to allow local governments to issue municipal bonds to raise revenue so that they don't steal land from people and sell them to raise revenue to carry out infrastructure projects, welfare programs, etc.

We need more market forces to allocate resources efficiently, not some guy in the government thinking he knows exactly what the economy needs.
The market will figure that out.

Without major reforms soon, our economy is in big trouble. Our economy is very big now and it's more complex, the government training wheels should be removed and let the economy run on its own wheels.

I thought your posts were only limited to Indian inferiority, poverty and failed defence projects. Seems like yo are a different guy now.

 

[KRAIT]

I thought your posts were only limited to Indian inferiority, poverty and failed defence projects. Seems like yo are a different guy now.

Believe me or not, most of these posters like to have good discussion but the problem is few posters from both sides ruining each thread. Indians use slangs and Chinese as to reply back and at the same time, few Chinese posters talking about India related banned topic and Indians have to reply in same fashion.

Only good thing we can do is support any member who is rational and report the trouble making one. You will soon make good Chinese friends .

 

[karan21]

Believe me or not, most of these posters like to have good discussion but the problem is few posters from both sides ruining each thread. Indians use slangs and Chinese as to reply back and at the same time, few Chinese posters talking about India related banned topic and Indians have to reply in same fashion.

Only good thing we can do is support any member who is rational and report the trouble making one. You will soon make good Chinese friends .

I have many many in real life. 50% of my engineering class is Chinese. They are good people. Most of them don't care about poverty, df-41 and Indian white colour obsession etc etc. Forums don't represent reality.

 

[Kloitra]

They are blaming the Chinese economic model.

The thing is, no one asked India to try (& fail) to emulate it.

If India had successfully emulated the model and adapted it to fit India, then they should have seen the same results that we did, i.e. 3 decades of sustained double-digit growth.

They are blaming India's attempt at emulation of Chinese model. Chinese model itself is successful so no point in commenting on it. If it was not good, India would not have tried to copy it. The blame is on India's attempt and not on Chinese policy.