Originally Published 2010-07-26 00:00:00 Published on Jul 26, 2010
India and China will need each other's markets and labour in the future. With rising wages, India can become an important outsourcing partner for China and more Indian finished goods can be sent to China. It could mean faster poverty reduction in India if growth with equity is the chosen path.
India, China - a new partnership
COMPARING India with China has become commonplace in international circles because they are the two big rising economic powers of Asia today. In fact, they were the two great powers in the past also, and it is not surprising that they are rising again after a gap of a few hundred years. But the comparison is mainly in terms of the growth rate - both are growing faster than many other countries in terms of GDP. India's growth rate in the next one year is supposed to be around 9 per cent (if this year's monsoon is good) and China's around 10 per cent. Both have come out of the global financial crisis relatively unscathed. The comparison should not be stretched too far because China is far ahead of India in many ways, and India is ahead of China in giving people personal freedom, the right to information and a democratic set-up.

Many in India from the educated middle class value individual freedoms and want to be able to express themselves. Educated and well-placed Indians are often heard saying that they would never want to settle abroad and they have everything they want in India. It is the not-so-privileged who want to migrate and settle abroad. In China, most people prefer being in China than anywhere else and this is borne out by the fact that reverse brain drain is taking place today.

To the “am admi” in India, however, it is hardly important whether he or she has individual freedom as long as there is enough to eat and children are properly educated and have access to good medical care when ill. China is ahead in this respect and grants its people the basic creature comforts, and the people seem quite satisfied with it. They are able to work and live in peace and earn a decent living, indulge in good food, have cars, ensure a good future for their children, etc. It is a much more uniform society than ours, and people do not have so many identities (caste, regional, religious and class) like we have. They speak the same language also and the task of the government becomes easier in giving primary education and skill training to all.

If the general public is well fed and employed and poverty is only at 8 per cent of the total population compared to our 37 per cent, then we are not comparing two similar entities. India has to resolve many complex problems before it can enter the league of China and other middle income countries of the world where stark poverty has been eradicated. Many scholars point out that China has higher inequality of incomes than India but that is hardly important when the inequality of opportunity is so great in India. A poor man's son has no chance of making it big unless helped by sheer luck or a miracle. No one is able to come out of the shackles of underprivileged childhood and schooling easily. It is a shameful fact that India still has over 60 million child and bonded labourers. It is equally shameful that we still have a huge amount of trafficking in women and children.

There is rampant corruption in India and also in China, but the corrupt are punished by death in China. The authoritarian regime is intolerant of graft.

China has economic power and military might and it plays its card well in the international fora. Just before the G-20 meeting in Toronto, it announced flexibility of its currency's exchange rate, a problem that all countries were going to address. Its yuan may be allowed to float and not kept artificially low in order to facilitate its exports in the future. In fact, it may become an international reserve currency since it is already accepted in a large part of the ASEAN area. Its trade surplus is growing and it seems to be marching ahead in both manufacturing and services sectors.

In its quest for becoming a super power, it has made all the Chinese people very proud and they are working together to make the dream a reality. That kind of national pride is missing in India. Despite promises, the government has also not been able to control runaway inflation or the spread of Maoist activities or the problems in Kashmir.

China does not only have high economic growth but also public policies which are properly implemented though the number of protests has been growing in recent months. Wage protests are becoming more common and the Chinese labour force seems comfortable enough in their villages (thanks to the $585 billion stimulus package that gave subsidies to the rural population for buying appliances) and not wanting to move to factories in large numbers as before. China will experience a rise in wages in the future. But it does not mind that. It is interested in giving more purchasing power in the hands of the people. China has overtaken the US as being the world's largest car market.

With the global economic crisis far from being over and the EU experiencing huge sovereign debt problems and facing slack demand and falling prices or deflation as Prime Minister Manmohan Singh recently said in Toronto, there is strong likelihood that China too may face receding exports. It is already preparing for such an eventuality and, being a big country, it is going to shift its focus from an export-led growth strategy to boosting domestic demand as an engine of growth. Already in tourism, China hardly relies on foreign tourists for revenue; the Chinese are avid consumers of their own beauty and historic spots. Anyone going to the Great Wall in Beijing will bear witness to the hordes of local tourists. They also are steeped deeply into their own culture, having never been colonised by the British. There are not many Anglophiles and pro-American scholars in China, and their model for growth and reforms is their own.

Thus, China is quite a unique country which is all set to be a dominant player in the world arena. The same cannot be said about India. But both India and China will need each other's markets and labour in the future. With rising wages, India can become an important outsourcing partner for China and more Indian finished goods can be sent to China in the future. India and China can have many complementarities which may emerge in the course of the next few years. It will be to our mutual advantage to explore these and in India's case, it could mean faster poverty reduction if growth with equity is the chosen path.

(The author is a Senior Fellow with ORF)

Courtesy: The Tribune

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David Rusnok

David Rusnok

David Rusnok Researcher Strengthening National Climate Policy Implementation (SNAPFI) project DIW Germany

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