The
results are for all to see. China has spurred growth all
over the world and serves as an inspiring model. As The
Economist notes: Chinas growing influence stretches
much deeper than its exports of cheap goods. It is revolutionizing
the relative prices of labour, capital, goods and assets,
in a way that has never happened so quickly before. Over
the coming years, developed countries inflation and
interest rates, wages, profits, oil and even house prices
could increasingly be Made in China.
We,
in India, have more than a passing interest in this. We
are comparable countries, inheritors of the worlds
two longest continuing civilisations. Both have huge, young
populations. Both are fast-growing economies. But there
are many dissimilarities. China, even after discounting
statistical errors, recorded over 9% yearly growth over
the past 20 years. Its GDP is doubling every eight years,
and since 1978, has grown eight-fold.
With
a stable population, per capita income grew dramatically,
promoting an unprecedented consumer boom. Vast infrastructure
has been, and is being, built: it matches the best the West
can offer. Almost all cities in the east, south and central
China are connected by 6-8 lane express highways. The Maglev
train track scheduled to be completed between Shanghai and
Beijing by 2008 will carry passengers over the 1,400
km
distance (two hours flying time) in four hours! Over
150 million young Chinese found productive employment in
the past 20 years. Indias average of 6-6.5% growth
pales by comparison, doubling GDP in 12 years. Our employment
generation is, at best, tardy.
Why
such a difference in outcomes between China and India, despite
both countries embarking upon market policies? There are
three substantial factors slowing Indias growth. First,
we have never given adequate importance to education and
healthcare. Productivity suffered and the bulk of those
seeking jobs are unproductive in a modern economy. Even
the declared ambitions of the state in the education sector
are extremely modest. Universal enrolment in elementary
schools and low dropout rates are our goals! Quality, guaranteed
classroom instruction for at least eight years, higher education
reform, additional knowledge creation... are not seriously
on the agenda.
Contrast
this with China. They guarantee free, accessible and high-quality
education up to 8th grade to all children. After that, for
high school or college, sizable tuition fee is collected.
But again, quality of education is far superior to ours. Equally
important, our health indicators are appalling. Even now,
with a new rural health mission on the anvil, there is no
serious effort to change incentives in healthcare delivery,
generate public demand for better care, or enforce accountability.
Our public health expenditure continues to languish at 0.9%
of GDP. Even if the projected extra allocation of Rs 100,000
crore by the Union over the next seven years materialises,
we will still be hard put to maintain 0.9% of GDP as public
health expenditure!
Second,
the severe infrastructure bottlenecks. Roads, power, public
transport, ports, water resources, drainage, sanitation
all are in short supply. The only significant improvement
witnessed is in communications, thanks to competition, choice
and technology. Sensible policies, vast investments, public-private
partnerships, competition, rational pricing, effective recovery,
and constant monitoring are required. The devastation suffered
by Mumbai, our financial capital, due to the recent heavy
rains, illustrates the inadequacies afflicting our cities.
Third,
India never acted with consistency even in pursuing economic
reform. Centuries ago, geography and climate dictated a
nations rise or fall. But in todays world, organisation
and ideas are the keys to prosperity. Chinas leadership
over the past two decades exhibited good sense and perseverence,
as opposed to our flip-flop policies and mindless adherence
to failed ideologies. Needless dithering over the role of
public vs private sector, rigid labour laws, stuck pension
reform, irrational and counter-productive subsidies and
lack of fiscal prudence have been our bane.
We
may dismiss irrational policies as the inevitable price
for liberty. The truth is, these are signs of failed leadership.
Chinas success is not because of authoritarianism,
but despite it. Sound policies, greater decentralisation,
more competition and unusual openness to trade and investment
are the keys to Chinese prosperity. Indias sub-optimal
performance is not due to democracy. It is a product of
un-informed public discourse, lazy policies and a continued
propensity for state control.
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