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Economy

Jan 15, 2003
Revisiting the China v. India debate

The China v. India, debate is important because if China-pushers win it would be a blow against democracy. It is strange how often India’s intellectual heavy weights are seduced by China’s visible progress and even suggest that maybe we could use a bit of totalitarianism [- as though ‘a bit’ were possible]. The idea of India will collapse without democracy, however fragile it may be. Which is why GoodNewsIndia keeps track of it and updates it frequently.

Two sharp minds have joined the debate just now. Maverick politician, Harvard economist and China expert Dr. Subramaniam Swamy writing in the Hindu [Jan 14, 2003] strips bare many of the hyped up statistics coming out of there that make it seem it is impossible for India to ever catch up with China.

Dr Swamy says first of all China’s compliance with the UN Statistical System is partial whereas India’s is total. For example, China includes potatoes in food grains while we do not and were we to list as China does, the figures for paddy --instead of the de-husked rice that we do-- our rice production would be 25% higher!

Swamy cuts finer slices: if we adjust for uniform reporting China’s GDP growth for two previous decades is 7.4% and not 10%. Yes, India’s is lower at 6% but cut finer: in the last decade China’s growth is decelerating and about the same as an accelerating India’s 6%! Swamy goes on to confirm earlier reports by GoodNewsIndia [see below for links] that far from having to admire the huge direct investment that China attracts, we need to note how inefficiently it uses it. He says that if India raises its savings rate and foreign investments marginally, even at its current conversion efficiency it can ramp up to 10% growth. He points out that for China to catch up with India on efficiency, it needs to face the issue of dead debts with its financial institutions: it is a whopping 45% v. India’s 12% --and getting better. Swamy goes on to analyse China’s vaunted ‘export performance’ and concludes that there are worms in there too: the ‘convenience-place’ it has become for the Far Eastern Tigers may end when rising wages catch up and WTO forces open its doors.

At about the same time as Dr Swamy was writing his piece, T N Ninan, the respected, senior business journalist was visiting another abiding myth: China is a manufacturing powerhouse and India --while it may be a software giant-- can never catch up. Ninan --in a facts-packed, hard hitting article online at rediff.com [Jan 11, 2003]—brings a gust of fresh air to Indian lungs.

He show cases how Indian manufacturing efficiency is on a roll. Kalyani Forge has cut costs by 30% and will slash 30% more; SRF incurs 30% less to make tyre cord and is planning to buy out a Chinese rival; Reliance sells half a billion dollars worth its products in China; Tata Steel has become the second lowest cost producer in the world; in commodity businesses like paper too Indian companies are getting efficient. There are tens of other companies—TVS Motors, Tata Engineering, Moser Baer, Ballarpur Industries...-- that may soon be seen in global skies. In the last decade Ninan says India has been listening and acting: “...credit now costs less than before; the ports are more efficient; the roads are getting better; duties have become more rational; labour’s attitude has changed; government clearances come through faster; foreign exchange is not a constraint. Add to this, some of the raw material endowments and the quality and intelligence of Indian engineers and workmen (and how little they cost), and dozens of companies have discovered that they have a winning formula.”

Thoughts to ponder for those impatient with the slow march of the gentle Indian elephant.
_______
Related stories:
Ninan’s article
GoodnewsIndia on India v. China
GoodNewsIndia on India’s economy now.

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