An economy awakes : Slowly but steadily, India will overtake China - New York Times
By Jonathan Power
Published: May 7, 2004
India is now in the middle of what many Chinese would give their right arm for — a general election. Yet China is the power that gets all the attention.
When President Richard Nixon first went to China it was widely assumed that he was ignoring India and courting China because China had nuclear weapons and could help balance the Soviet Union. But since 1998 India has possessed nuclear weapons and can balance China.
While Washington is slowly waking up to the fact that the tortoise soon might overtake the hare, the investors and the press continue in their old ways. Last year the inflow of foreign capital into China was two and a half times that into India. The press barely covers the Indian election while every day there is a story out of Beijing.
This skewed appreciation has been going on since the time of Mao. China basked in accolades in the 1960s and 70s, while India was mocked for its "Hindu growth rate." China's people were fed, housed, clean and tidy, while India's were ragged, hungry and sinking into a trough of despondency — "a wounded civilization," in the words of the novelist V.S. Naipaul.
With the 1981 famine we could see, to use George Watson's phrase, that "the intellectuals were duped." China had to beg around the world for grain while India had managed to survive the savage drought of 1979 without having to import a sack.
Now with Mao long dead and the capitalist reforms of Deng Xiaoping well into their stride, the story is being repeated but in a more complex way. To many, China's economic progress has been nothing less than spectacular. But inflationary pressures, bad bank loans, a rapidly increasing maldistribution of income and crime all threaten its economic stability.
India, meanwhile, has been gradually but with increasing speed loosening up its old Fabian socialist system. After a major economic crisis in 1991, Finance Minister Manmohan Singh introduced major promarket reforms and fiscal expansion and India's economy has never looked back.
India's annual growth has been averaging 5 percent — and is now 8 percent, thanks to a good monsoon. Singh, who has become Sonia Gandhi's principal economic adviser, believes that with more reforms than the present government has so far countenanced, an average annual growth rate of 6.5 percent is sustainable — which is what he privately thinks China's overhyped growth rate actually is.
India is better placed than China for future growth. Its capital markets operate with greater efficiency. They are also much more transparent. Companies can raise the money they need. India's legal system, while too slow, is much more advanced and is able to settle sophisticated and complex cases. Its banking system has relatively few nonperforming assets.
India's democracy and news media are alive and vital, which provides a safety valve for the incoherent changes that modern economic growth brings. India has religious riots, secessionist movements, urban squalor and bitter rural poverty. But the voters know they can throw the rascals out, and regularly do.
Moreover, the massive flows of foreign investment into China are a two-edged sword. It has become a substitute for domestic entrepreneurship. Few of the Chinese goods we buy are in fact made by indigenous companies. And the few that exist are besieged by regulatory constraints and find it hard to raise domestic capital. China's state-owned enterprises remain massive but bloated and possess a frightening number of nonperforming loans from China's vulnerable banking system.
India, by contrast, has created world-class companies that can compete with the best in the West, often on the cutting edge of software, pharmaceuticals and biotechnology.
India's trump cards are its use of English, its emphasis on mathematics in its schools and the talents of its diaspora. For decades China has benefited from the wealth and the investment potential of its diaspora and the economic energy of Hong Kong and Taiwan. After years of ignoring its émigrés, India is now welcoming them back — and they have much more "intellectual capital" to offer than China's, much of it coming from Silicon Valley, where the Indian contribution has shone.
Watch the tortoise continue its course as the hare starts to lose its breath.
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Jonathan Power is a commentator on foreign affairs.
Some interesting statistics.
GDP in 2004: China - 1.45 trillion, India - 0.52 trillion (China about 3 times bigger)
GDP in 2014: China - 10.3 trillion, India - 2.04 trillion (China over 5 times bigger)
Reason I have so much auto incorrect in my posts/comments.
Maybe/Seems android doesn't like China though.
