Who's Really Ahead In The Economic Race, China or India?
As one of India's most famous and successful entrepreneurs Raghav Bahl is constantly bombarded withquestions from people who are bewitched and bewildered by India.
Why, they ask, "are Indian business regulations so weak and confusing? Why is your foreign investment policy so restrictive? How come your hotels are world-class, when the roads leading to them are full of pot holes?" Oh, and here's a goodie, "How is it that you speak such good English?"
India is the largest English speaking country in the world by the way—some 350-million residents speak and understand English. Theirs is the largest democracy and their economy is booming: more than half of its GDP is consumed by its billion plus residents. India is witnessing unprecedented levels of economic expansion ... and yet, it is always - always - compared to that other economic powerhorse, China.
In his new book, SUPERPOWER? The Amazing Race Between China’s Hare and India’s Tortoise Bahl examines the difficulties that both outside corporations and homegrown companies have in doing business in both India and China.
He offers a twist on the classic tale asking, Who will get to the finish line first - China who is moving at warp speed or slower paced India?
There is no country that can match China when it comes to its massive investments made in infrastructure, health, education and rural technology. But Bahl says the race is far from over.
He cautions the victor might not be the one who is investing more and growing faster today - but rather the country that has superior innovative skills and is more entrepreneurial savvy.
In the end, it might come down to just one deciding factor: Can India fix its governance before China changes its politics?
Bahl is the founder, controlling shareholder and managing director of Network 18, India’s largest television news and business network, which broadcasts content from CNBC and other US-based networks addresses that question and more in this Guest Author Blog - click ahead to read it and check out the excerpt from SUPERPOWER? The Amazing Race Between China’s Hare and India’s Tortoise
LESSONS FOR INDIA
Guest Author Blog: Why India Should Not Be Daunted By China’s Growth by Raghav Bahl’s author of SUPERPOWER? The Amazing Race Between China’s Hare and India’s Tortoise
I began thinking about writing this book in April 2009 when the world was getting back on its feet after the economic recession that had crippled it.
When looking for themes, one story that fascinated me both as an entrepreneur and as a business journalist was the relentless rise of China. I was intrigued that when Deng Xiaoping put China on the path of reform, its economy was smaller than India’s. Even more critically, the decade-long Cultural Revolution that ended 34 years ago had virtually decimated China’s economic institutions. So the odds seemed to overwhelmingly favor India in 1978; China seemed such a hopeless case!
Yet today, China is four times India’s size.
Unwittingly or by design, China seems to have picked up some of the most effective economic policies of the two “miracle economies” that preceded it. Note that I use the word effective and not efficient. From the Soviet Union, which was touted in the 1970s to overtake America in a couple of decades, China seems to have learned the art of extracting massive surpluses from peasants and accumulating them in the hands of the State. China also extracted surpluses from its workers by keeping wages extremely low. It did the same with consumers and trading partners by keeping the price of its currency artificially devalued against the American dollar.
The trick it learned from Japan, another “miracle economy”, was to dramatically engage with the western world. This was at sharp variance with the insular economy that the Soviets tried to build, leading to their miserable failure. But China boldly opened itself to a flood of foreign direct investment. This brought in a cascade of dollars, technology and management practices. It created a huge amount of foreign equity in the economy and laid the base for technological progress in the coastal areas.
What China did with the surpluses is even more dramatic.
It invested massively in the economy – close to 50 percent of GDP in infrastructure, farm productivity and soft areas like education and healthcare. No other country, at no other point in history, has invested capital at this astonishing scale. In the book I have called this the “escape velocity” model of capital investing that India must examine very carefully. I have often wondered why India is so reticent about making huge investments in its economy. I know there are constraints but there are options as well.
Of course, such hyper investment has led to terrifying dualities; no one is saying that this has been an easy ride for China. Today it is grappling with major imbalances: between investment and consumption, in the massive bad debts that its banks are saddled with, and in a ravaged environment. But equally, it cannot be denied that no other nation in history has pulled more people out of poverty in as short a time.