Discussion in 'Foreign Relations' started by Vinod2070, Apr 19, 2009.
Guys, if you notice the media over the last few months, the difference between China and India is glaringly apparent. China has leaped ahead from an already substantial lead. It seems to work to a purpose compared to the chaos that India seems to represent. It knows how to use and project its national power while India fails on both counts.
Our inept handling of the terror attacks and failure to take the lead on matters that are important to India is ensuring that the window that opened for us to go up a league may close and we may again lose the focus of the world.
I feel pained when India and Pakistan are mentioned in the same sentence. We are again in the danger of getting hyphenated because of Islamic terror and our inability to offer a strong resistance to it.
Also the divided polity perhaps makes it impossible to form any long term national outlook on any matter. So are we doomed to miss another opportunity as we have done countless times earlier?
kinda rhetoric article isn't this financial melt down has caused slow down in China two more then 20 million people lost jobs. Exports orders were not coming in steel the decline is as great as 80%. Just because there is no news every think is hunky dory on other side of Himalayas or what?
Actually the recession has increased China's importance in the world. China is using it's reserves to buy up resources all over the world on the cheap while India is sitting on it's thumbs.
The USA is beholden to China as it holds a trillion dollars worth of their paper. It has big big leverage on USA. Let's accept that India needs to get it's act together if we are ever to compete with China. Our private sector is capable of that, our government is not, at least not yet.
vinod so you are saying the India is just sitting and doing noting let's not start it. Isn't we are getting out of technology denial regime and that too in good terms as recession is creeping in. We are also taking the benefits. Isn't US has leverage over China as it is holding just papers. Why you think from only one side of the coin?
Well, I think we are not as proactive as the Chinese. The Chinese have much more hard power than India and they are making the better use of it.
India does have potential (it always had) but has failed to make use of it till now. It is by no means sure that we can do so now. The political chaos gives no comfort.
Only thing that assures me is that the private sector has taken the lead in the economy and the economy in the last few decades had grown in spite of political mismanagement. It is already beginning to lose steam because of the stopping of the next generation of reforms by the politicians.
See, I think the incremental growth of India will not help us come out of the rut. We need big bold steps and I don't see them happening. At least not at the scale that is required.
vinod now you said it the point is how you look at the things what is this rhetoric that "we are in rut" isn't the situation is improving at all? Or do you really think that all the Chinese are like Mr. Mukesh Ambani that is why we are in rut?
India is a democracy and it has it's benefits see even the communists are saying that they will not Kill the N deal the steps are being taken and getting us in right direction with taking all the people along not like China where it is CCP way or the highway
Vinod we have to accept the fact that economically prc is at least 15yrs ahead than us if not more and I think there is no shame in accepting that fact as it stands as of date. A small figure tells all the difference, india as an economy stands at 1.1t usd on the contrary prc's gdp last fiscal was 4.3t usd a figure we will be able to achieve sometime around 2022-25 and by then in all probablity prc would be fighting for that top slot with the US and all this at a time when their currency is supposedly highly undervalued and with the present slowdown this walk of ours will be that much more treasonous. Just today PM in an interaction with the press said we need to have a gdp growth rate figure of 9-10% to really get the monkey of average economy off our backs and this needs to be sustained over a period of time, and in all fairness it has been just two fiscals this decade and one in 90s that we have been able to do any thing close to that figure.
PRC is where it is after having slogged their asses for decades together and by that benchmark we had just made a move forward in that direction but as happens in a democracy the best of the ideas would have to take back seat. India's failure to do sustained reforms in quick succession has done us no favors, as a matter of fact look at the last one decade and one wonders what are the major reforms done, the only reforms done by the present govt have been the ones we have witnessed in the last few days of this govt and those have been woefully halfhearted attempts and like this we are heading no where. The biggest reform in the labor sector is waiting to happen for almost now 2 decades since this process started in 1991 and it has still not seen the light of the day, and till the time we can not work on this be rest assured the dream of PM to make india a manufacturing hub would never see light of the day, come to think of it this statement of making india a manufactuting hub was coined way back in 2006 and since two and half years have gone by. We are ourselves to blame for the mess we are in.
no matter how much one would hate the authoritarian rule in prc but that one thing has assured a certain quality of life for most in the urban areas and their reform process that started since 1978 has continued unhindered, something we can only dream off in our political system where the name of the game is certainly not development, and on top of that if we have the likes of mulayum singh's in indian polity then we seriously have no where to go. We are feeling the unease because prc has started realising its true potential at the regional level be rest assured it will be unbearable when prc truly reaches the global arena.
I doubt we are equated with pakistan, though the terrorism coming from their territory has certainly bogged us down and that has been our own making in more ways than one. Our internal security setup is pathetic to say the least and it was only a 26/11 that made us wake up to our toes but be rest assured post the elections we will be back to square one because it is our nature to not do our work.
I think we have missed the bus yet again, this govt had the opportunity to put the house back in order post the communist withdrawal of support to the upa but they have again failed and they have not come up with concrete reform process which is the need of the hour because if we cant do it today then be rest assured when the investors look to make investments off shores once this economic melt down is over then we will certainly not be their first choice and as usual those investments will fly to prc. There was a big euphoria about the 500b usd investment in infrastructure sector in the present 5ys plan, now all seems like we never had any such talk and they had also started talking about 1.5t usd investment in the present and the next 5yr plan in the said sector. Most of the sez investments are more or less stalled and there could have been a great fillip to all this process if the govt of the day had unleashed measures of reforms on all fronts but then we only know how not to catch the bus and then aspire to be like prc in our dreams a tale well written by our polity.
For starters, let me inform that India is not depended on any "Aid". It's the stated policy of India that it welcomes investments and collboration but not aid and that India itself will now provide Aid to other countries. The first such case was the tsunami where India refused any aid and infact shipped to others like Sri Lanka and Indonesia.
India may not be a big "giver" as Mr Swami said, but it also is not a taker.
The Chimerica equation will be put to test when the Chinese start to worry about all the treasury bills they have happily acquired, but will get nothing from it.
Talking about China surviving this recession, well personally I am into imports and know how they are fighting for every cent and how many of their factories are out of work.
If they think their 2 trillion bucks will bail them out, it's their mistake. It will not take too long for Uncle Sam to show their thumb and that will be the end of the illusion called Chimerica.
Seriously, do people really think that these terms actually carry the importance that the media attaches to them?
Who is America's most important ally... Canada.
Who is China's most important ally... Pakistan.
Who is India's most important ally... Russia.
Why? Cause these relationships have been established over years if not decades. These relationships have withstood the test of time.
And, may be China today is in a better position than most and hence is the darling of the world, how long do you think that honeymoon will last? Also all the bonds that China holds are worthless if America goes down. China faces her own issues and will deal with them as and how she sees fit. She has a long way to go.
And guys, I'm very happy with the way things are turning out to be for India. And I'm glad that there are no socks-cities in India.
And do you really think America will sell F-18s to China?
Well I don't know about Chiamerica, but the GOI has failed miserably on the economy.
There have been no economic reforms since 2004, no police, agrarian or infrastructure reform.
The IT sector employs on the order of a million people. If we think IT is going to make us developed then lets stop dreaming.
Hi Ritesh, I think you are saying the same thing in essence as the article I posted. China is ahead of us by a decade and a half and has positioned herself well to be a leading member of the international order.
We are still struggling to meet the basic needs of the society. The system doesn't work in India and we all know that. The democracy has helped us keep our country together and make the voice of the last person heard but is that nearly enough?
Don't know about you guys but my head hangs in shame when I see our HDI rank. Has it improved since the 80s. Our economy is multiple times of what we had back then. The resources that the government has are much more but is it being used wisely? How much is being sucked by the corrupt system? Are there any signs of improvement?
See, whatever we do at the international level and all these alliances et al, if we can't do well at providing the basic necessities of life to our people, it doesn't mean anything.
China does have it's own massive issues and there is no doubt that they face massive challaneges. I think they seem better placed to meet their challenges than we are placed to face ours. At least that is what I can see.
Well, to start with, hyphenating India and China as Chindia was itself a big stupidity as we are nowhere near their economy levels. And now hyphenating China and America as Chimerica is another stupidity. This jargon jumbling of hyphenating words, in reality, have zero value.
The author has not revealed anything different or special than what is known already about this, China is way ahead than India. I'm yet to see if china has been really successful in this downturn. Their economy is suffering, there is a job loss in millions, there is a fall in the exports and the only thing chinese are seen doing some thing good is buying resources abroad like mine companies with their cushion of foreign reserves.
What are they doing with their foreign reserves which is mostly in dollar denominations?. They have a given a stimulus of $585 billion to their country which in itself indicates that they are suffering a lot. Can they spend all of their remaining foreign reserves?, the answer is NO. The moment they start spending their reserves exuberantly there will be excess of liquidity (at the same time US is also minting a lot of money in its mint press) in the market which in-turn appreciates their Yuan and will lead to further fall down of exports. Chinese, right now on a double edged sword, they have to tread carefully other wise they might become casualty.
India, no doubt, is way below compared to china in economy and has been for past two decades and will be for next two decades. Lacks of reforms during UPA regime has affected FDI inflow in our country unlike in China where FDI is received with open arms. While China is chugging away with massive infrastructure building over the top that it already has, India is unable to even build the basic infrastructure needed for sustained growth of economy. Our democracy, right now is acting as an impediment in our economy while CCP is doing a precision like work to finish what it has set out to do.
Only time will tell, who is going to be come out winner from this downturn. We need to wait and see.
I'm cross posting two articles in this context of India, China economy discussion...
'China's investment-led growth a time bomb'
'China's investment-led growth a time bomb'
As a political economist who tracks China and India closely, Yasheng Huang has long argued that Asia's two largest emerging economies hold developmental lessons for each other. "But my worry," says Huang, "is that they're learning the wrong lessons from each other." In this first part of a two-part interview to DNA in Hong Kong, the MIT Sloan School of Management professor and the author of, most recently, Capitalism with Chinese Characteristics traces the problems in China's growth model, the effects of which are showing up acutely during this global economic downturn.
Sudhir Shetty / DNA
Yasheng Huang has long argued that Asia's two largest emerging economies hold developmental lessons for each other.
You argue that China's growth model, which is the envy of India and much of the world, is flawed. Why?
In my view, the true China economic miracle happened in the 1980s, when the country was powered by bottom-up enterprises, especially in the rural areas. In the 1990s, China changed its development strategy by placing greater emphasis on big cities like Shanghai and Beijing. To me, the 'Shanghai model' represents the most extreme example of economic and financial distortion, but today that model is being replicated elsewhere in China.
The 'Shanghai model' is an extreme version of a model that's effective in building production but not in building a consumption base. Indicatively, in the 1990s, Shanghai's GDP per capita grew dramatically in comparison with the national average, but household incomes relative to the rest of the country were virtually unchanged.
That goes to the heart of the problem that China faces today: It's been successful in generating GDP growth, but far less successful in generating household income growth.
It's been good at building a huge production base but equally good at suppressing a consumption base. And now, as a result of the financial crisis and the global economic downturn, unemployment is rising and wage growth for China's rural migrants has slowed, which will only suppress incomes further.
If the model is flawed, how do you account for China's supernormal GDP growth for 30 years?
It's not a mystery. Some 50% of China's GDP comes from investment, which has a huge multiplier effect on GDP. Now, there's evidence that they are doing that again, with the 4 trillion yuan ($585 billion) stimulus package.
Sure, some of that will go into social spending, which is good. But much of that will trigger another wave of huge investments. You only have to look to Japan to know that such investments cannot get you out of a hole.
I feel very strongly that if you see a fast GDP recovery in China and if that recovery is powered by investment, it is a time bomb.
In the past, that kind of growth was sustained by high demand from the US and other developed countries. I don't see any evidence that the US economy will recover magically to the level it was before the financial crisis.
So, the stuff that China puts out has to be absorbed somewhere. The government is trying to increase domestic consumption, but they're trying that within the existing level of the income rather than thinking of growing the income.
In terms of household income and the small asset base, China is very poor - in some ways, poorer than India. China's consumption-to-GDP ratio is lower than India's. Savings rate of households are not high in China: It's only government corporations' savings that are high.
Since 2003, China's leaders have emphasised rebuilding the social safety nets and narrowing the income gap between rural and urban areas. Do these mark a return to the policies of the 1980s, which you believe underlie the China growth miracle?
There's an attempt to go back to the 1980s, but these developments have been mixed. Sure, there is more emphasis on rural issues and social safety nets. And connected to that is the emphasis on rural education and rural health provisions.
But there's very little connection with the 1980s in terms of the methods.
We're now seeing only baby steps, and more administrative measures, more government involvement. In the 1980s, on the other hand, rural financial reforms were put at the front and centre and at a very high level of policy response. In that sense, we've not returned to the 1980s model at all, even though leaders are talking about rural entrepreneurship today.
One similarity between now and the 1980s is that then too the country faced a huge unemployment problem. But support for rural entrepreneurship in the 1980s was driven not by ideology but pragmatism. Today, a majority of the policy emphasis is on preserving GDP growth at 8% by supporting exports. Even if there is a rural entrepreneurship initiative, it's not been highlighted.
There's been a slideback in China's efforts at poverty reduction since the 1990s. How did this happen despite high GDP growth and what are the socio-political implications of this?
The whole issue of rural migration has shaped many of the economic and social developments in China. Some of these are positive effects: China created this huge export industry, which was very successful for a time. In fact, I'd argue that India should have more of this broad-based export success.
But the issue in China is whether we need this level of migration to create this level of success. I acknowledge the success, but I also see a huge downside.
When rural migrants go to the cities for employment, they are excluded from the social services, educational services and health services. When I was in Guangdong province (in China's south, home to many special economic zones) recently, I saw a sign that said: "People born between September 1 1994 and October 1 2008 should report to the government to receive free immunisation shots."
Basically, one entire generation of rural people who were born in the 1990s simply fell off the map! The same is the case with education. Because the migrants are not urban residents, their children are not entitled to education in the cities. And when NGOs started schools for migrant workers' children, the government shut them down.
An entire generation of people in the 1990s fell through the cracks.
All this has enormous political implications. The rural situation makes politics less stable rather than more stable. I link everything to rural development. When rural development in China was successful, the country as a whole was successful.
The rural issue has to be front and centre - similar to what (Mahatma) Gandhi said. I disagree with Gandhi's methods, but the philosophy was right.
(To be continued)
I appreciate your sentiments and share them as well. I do not think in our political process the last persons voice is heard, leave that last person alone even the affluent people like u, our members and I are not heard till we have the right connections, a certain kalawati is recalled only to make statements in our country and after all the media frenzy is over millions like kalawati are all too soon forgotten for another kalawati to just pass another statement.
Mate this issue can only be tackled by educating people, make them understand the importance of development in their lives, and make them get over with caste, religion and regional based politics. Personally speaking if the communists who do not inspire me even a wee bit show me the development path I will be the first one to vote for them just like I am ready to vote for the congress or the bjp. we have moved in terms of time but our mindsets are still stuck in the medieval era which so well gets reflected when people look for brides and grooms and all the irrelevant talk of religion, region, caste come back even in our so called enlightened lot of which I am as much a culprit as any one of us. Seriously if we can change the thought process we have believe me the politicians elected will all surpass our expectations and the mulayams of today would be the obamas of tomorrow because as the need is so is the supply.
Till the time we are stuck in all this off beat track records we will only reflect back and regret on the past mistakes we have made in the past and soon we will be making another mistake of electing a govt which will be a complete divided and again our country will be taken for a ride for the next 5yrs just like it has happened for most part of our independent history, having said this reminds me of yusuf saying that next 5yrs are very crucial for our tomorrow, but I am not very optimistic for sure there will be another coalition govt which will hamper what could be beautiful morning tomorrow. We are for the moment stuck in a vicious cycle of which it has got very difficult to get off.
The other thing is prc has gone from no where to a dominant position with in a span of some 3 decades, something that has no parallels in the history, and when we try to replicate the same and are unsuccessful at the attempt we feel hurt because we feel the distance between our 2 countries will grow that much more, but mate look where prc went right and one of the indicators is education and today people there only dream of a better tomorrow and most there give a damn to our political process and they believe we are stuck where we are because of this very system and there is no denying to that. They think of something and the next thing one knows is its all implemented, on the contrary we are as usual stuck in our babudome and we just keep discussing and implementation takes decades. We still have the “chalta hai” attitude and till the time this is not a goner I am sorry to say we will again be regretting. You recall I had written a reply to the same author almost a month back and I sounded a little more optimistic than I do now as I saw another 2 months for this govt to implement the reform process but as it was to be the case nothing came, as I said mate we are ourselves to blame.
India learning wrong lessons from China'
India learning wrong lessons from China'
Wednesday, April 8, 2009 3:35 IST
Indian policymakers' fascination with the 'Shanghai model' of development shows that India is learning precisely the wrong lessons from China's growth, says political economist and MIT Sloan School of Management professor Yasheng Huang. In this concluding part of a two-part interview to DNA, Huang, author of, most recently, Capitalism with Chinese Characteristics, points to the most important 'Chinese takeaway' for India.
Indians are enamoured of Shanghai, but your most recent book has an entire chapter detailing Shanghai's failings as an economic model. What is wrong with Shanghai?
A successful economic model creates value for everybody, rather than for some at the expense of others. Shanghai didn't do that. In Shanghai, the government intervened to acquire land as the sole buyer, without competition, from rural households, and gave it to domestic and international real estate developers. That creates value on huge infrastructure projects and impressive high-rises, but the average Shanghainese people's household income has not grown relative to the rest of the country.
My hunch about Shanghai -- even though I couldn't find the data to support it -- is that its growth was subsidised by the rest of China. I've heard that when Pudong (the Special Economic Zone in Shanghai) was built, virtually every Chinese province was required to invest there. There's a fundamental difference between Shanghai in the 1990s and Shenzhen in the 1980s. Shenzhen's development was a bottom-up, bootstraps model: in the 1980s, Shenzhen too drew entrepreneurs from the rest of the country, but it didn't receive subsidies from the central government the rest of China. And my biggest concern going forward is that the Shanghai model is being repeated for the whole country.
China's model of reckless urbanisation is also distorted. Migrant workers are denied entitlements in cities, and so urban areas get a labour contribution but they don't have to pay for it. I'm not against urbanisation; but urbanisation implies certain responsibilities and costs that are not currently reflected in the way China is urbanising itself.
In China today, there's a phrase that reflects mainstream view: political aesthetics, that is, beautiful cities for political reasons. There is a view that economic growth means gleaming airports, high-rises, six-lane highways... That's not productive.
If it's wrong for Mumbai to aspire to be a Shanghai, is there a China template to replicate?
You can have Mumbai becoming the next Shanghai - if you neglect Bangalore, Kerala, Tamil Nadu and so on.
But my criticism of the Indian model is this: If you're not building highways and buildings, are you investing your resources in education, health and so on? India isn't learning the truly successful Chinese model, which is the social model of the 1970s and 1980s, with emphasis on education and public health, especially in the rural areas. Instead, they are fascinated with high-rises, Shanghai and things like that.
But the Shanghai model is troubled, also because it relies heavily on foreign direct investment (FDI), which has slowed down in China. Shanghai relies so much on external sources of efficiency and business improvement that as soon as it runs out of external sources of capital, it will face problems.
The biggest lesson for India from China is the importance of the social sector: education and health. When India doesn't educate its girls, it's counterproductive --- economically and socially. The other important lesson is for India to get the sequence right. You look at China, and you see airports, highways and you think that China succeeded because of these. Whereas, in fact, these things followed China's success. China succeeded in the first place because of the social investments it made in the 1970s.
The conventional view is that democracies pay for political liberalism with slower growth; people cite India and China as contrasting examples. But you disagree...
I don't see a trade-off between economics and politics. India failed economically in the 1960s and 1970s, and people blamed it on democracy. But India had a centralised economic system then, so you have at least two competing hypotheses to explain India's slow growth.
In fact, in both China and India, the period when their growth was meaningfully fast was when they experienced some political liberalisation. We can have a debate about what constitutes political liberalism. I'd argue that India perhaps has to work on increasing accountability and reducing corruption. But the general principles of accountability and liberalism -- and some form of constitutional checks and balances -- constitute the formula for economic success. China, too, had a system of checks and balances in the 1980s: its politics was centralised, but economics was decentralised. The central government and the provinces had to consult each other. But in 1993, they centralised the economic system. Many of China's problems can be traced back to that: it deprived the country of a productive consultation process.
In the 1980s, for instance, you heard all kinds of opinions because various policy options were debated openly. People's Daily would run articles debating major policy issues. You don't see that now.
In that sense, what can China learn from India?
Economist Amartya Sen, in his book The Argumentative Indian, uses the term 'democracy by discussion'. I like that. China should more have 'democracy by discussion' even in the absence of a formal democracy.
The biggest value of the Indian model is that there isn't necessarily a contradiction between political liberalism and economic growth. When scholars in China cite India's problems, I say, "Yes, I acknowledge these problems, but the fact is that India showed it too can grow at 9%, so you have to convince me that there is a huge downside with that system."
When I first advocated the Indian model, it was much more difficult because India was a slow grower, but now it's a little easier. My view is that the Indian system is able to efficiently use the limited things it has, whereas China has lots of things in its favour but it also wastes its resources. Indian companies, for instance, may have old buildings or slow computers, but they have good managements and the right ideas, whereas in China, factory buildings are very good and the equipment is modern, but you still have quality problems.
So, I think both countries have a lot to learn from each other, but my worry is that they are learning the wrong things from each other.
China was always closer to America than India...their development is mainly in infrastructure and workplace technology. They never concentrated much on the well being of the people and skill. They were more bent on proving the world that they are developing bysacrificing the content and happiness of the people. This might lead to future problems due to the people's discontentment and ppor living conditions whic might result in economic slowdown.
Ritesh, what I actually meant by "the last person" was that the voice of a lot of erstwhile marginalized communities like OBCs, MBCs, Dalits rtc. is now quite strong in the political circles. You see the impact that someone like Ramdoss or Vaiko can make now as also people who command just 5-6 seats by claiming to represent a single community.
The rise of Mayawati, Laloo, Paswan, Nitish kumar, Ramdoss etc. is an affirmation of the identity politics that we are going through as a nation. I think this phase would decline soon and wear itself out and then we can go back to business but we have to go through this phase where the people can find their voice.
China is more homogenous than us and has a political system that is working for it to grow rapidly. I don't think the problem for us is democracy. It is the divided polity.
Separate names with a comma.