Dear readers,
Today I chose to write my article slightly different than usual, using a different approach.
Horrible toilets. Stagnant puddles buzzing with disease-spreading mosquitoes. Collapsing infrastructures. A terrorist attack. India's preparations for the Commonwealth (ironically named "Common-filth" by the british tabloid headlines) games which are scheduled to open in Delhi on the 3rd of October have not won favourable reviews*. The contrast with China's flawless hosting of the Olympic games in 2008 could hardly be starker. A big sporting event, tells you something important about the nation that hosts it. Efficient countries build flawless, organised stadiums and make the shuttle buses run on time. The fact that India cannot seem to do any of these things might suggest that it will always be a second-rate power.
Or... does it ? Despite all the negative headlines, India is doing surprisingly well. Its economy is expected to expand by 8.5 % this year. Although it has a long way to go before it is as rich as China (the Chinese economy is 4 times bigger) but its growth rate could overtake China by 2013, if not before. Some economists predict that India will grow faster than any other large country over the next 25 years. In simple worlds : rapid growth in a country that accommodates 1.2 billion people is exciting.
In my opinion, there are 2 reasons why India will soon start to outpace China.
Demography
China's workforce will shortly start ageing : in a few years time, it will start shrinking mainly due to its one-child policy. Back in the 70's, Indira Gandhi tried something similar by introducing a forced-steralisition programme only to face uproar of protests. Coercive population policies were abandoned. Democracy was restored.
India is now blessed with a young and growing workforce : the proportion of children and old people to working-age adults is one the best in the world and will remain so for a generation.
Democracy
The notion that democracy retards development in poor countries has gained currency in recent years. But, certainly it has its disadvantages. Elected governments bow to the demands of selfish and interest groups, and the most urgent decisions are usually endlessly debated and delayed.
China does not have this problem : when its technocrats decide for example to dam a river, build a road or move a village, the dam will go up, the road will go down and the village will disappear. The villagers may be eventually compensated but they are not allowed to stand in the way of progress. Chinese leaders make rational decisions and balance the needs of all the citizens over the long term leading to rapid and sustained growth that has lifted hundreds of millions of people out poverty.
No doubt that a strong a central government could have given India a less chaotic Commonwealth games. But I clearly think that there is more to life than badminton and gymnastics. India's government may be weak, but its...
Private companies are strong
The Indian capitalism is driven by millions of entrepreneurs all furiously doing their own thing. Since the early 1990's when India opened up to foreign trade, India's businesses boomed. India now boasts countless small businesses and a fair number of world-class ones often innovative : they have pioneered the $2,000 car, the ultra-cheap heart operation and some novel ways to make management more responsive to customers. Moreover, India lacks the chinese culture of secrecy and censorship, hence the idea flow easily.
For now, India's problems are painfully visible : the roads are atrocious, the public is a disgrace and many entrepreneurs waste hours each day stuck in traffic. Thanks to a surge of a cheap private schools for the poor, India's literacy rate is rising (but its still far behind China)
India vs China : Advantage India
The Indian government recognises the need to tackle the infrastructure problems and is getting better at persuading private firms to come up with the capital. But the process is really slow, filled with corruption.
In my opinion, given the choice between doing a business in China or India, I would probably pick China as the market is bigger, the government easier to deal with. But as the global economy becomes more knowledge-itensive, I think India's advantage will grow.
Yacine Dessouki
For now, India's problems are painfully visible : the roads are atrocious, the public is a disgrace and many entrepreneurs waste hours each day stuck in traffic. Thanks to a surge of a cheap private schools for the poor, India's literacy rate is rising (but its still far behind China)
India vs China : Advantage India
The Indian government recognises the need to tackle the infrastructure problems and is getting better at persuading private firms to come up with the capital. But the process is really slow, filled with corruption.
In my opinion, given the choice between doing a business in China or India, I would probably pick China as the market is bigger, the government easier to deal with. But as the global economy becomes more knowledge-itensive, I think India's advantage will grow.
Yacine Dessouki
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