Can India replicate China's economic success?

It has been repeated quite often in our media that the economies of India and China were almost equal in size almost three decades back, but now China’s economy is six times bigger than India’s. The remarkable success of China’s economy has changed the world and pushed the frontiers of human achievements in different areas including space. Perhaps the greatest impact of economic development was the lifting of more than 800 million people out of poverty. The whole of the developing world today looks up to China to understand how to achieve similar economic transformation and many countries in South East Asia, most prominently Vietnam, are replicating the success of China. And India is struggling to industrialize itself by emulating China’s success story. Now the question is ‘can India do it’. If yes, how can India do it?

It is important to understand that the world has changed in the last three decades. China is the greatest beneficiary of globalization pushed by the United States for decades. The entire western propaganda machine that includes the news media, think tanks, universities, and films promoted the virtues of globalization to developing countries. There was a widespread belief that globalization-induced free trade, privatization, and investment among the nations will mostly benefit the existing economic powers. The left-leaning thinkers are of the opinion that globalization is an attempt to protect the existing structures of unequal distribution of wealth among nations. It would be difficult to conclude that their skepticism about the economic world order propagated by western powers was totally baseless. Though the economic success of China highlights visionary leadership, the ability to think long-term and discipline can help developing countries benefit from globalization.

The stupendous changes in China’s economic fortunes spooked the US. Now the US has decided to pull the plug from the narrative that progress and the welfare of mankind depend on the success of globalization. It means India will not get the unrestricted support of industrialized countries to emulate the Chinese economy that focuses on promoting domestic companies with the potential to replace multinational companies in the long run. There is a firm view of the ruling establishment in the US that China becoming the world’s largest economy is not in the interest of the world, meaning Western powers. Hence, China's containment must start before it is too late. 

China’s population is five times more than the United States's, although the US economy is still bigger than China's. Regarding per capita income, China has a long way to go to reach the levels of Western powers. Despite so many changes in the global discourse, the fundamentals of international economic intercourse have not changed. Multinational companies will be reluctant to share technology with India but would be willing to invest if India provides them with the ambiance to operate a business without hassles. To create a better business environment, India needs to do three things.

First, invest heavily in building infrastructure. Build highways, airports, ports, and waterways to provide seamless connectivity to domestic and global businesses to transport their products in all parts of India and all parts of the globe. There is no doubt Modi govt. is building major roads across the country, though the speed of infrastructure development other than roads is far less than satisfactory. Second, India must shed its desire to create local companies by scuttling the opportunities for multinational companies and should rather encourage companies to invest, which would generate jobs and increase tax revenues of the govt. in the long run. 

Thirdly, India should simplify the process of setting up the business, acquiring land, recruiting and removing staff (meaning easy labor laws), providing a long-term policy outlook, and the ability to wind up the business, among other things. Fourth, the bureaucracy, media, politicians, and masses change attitude. Fifth, increased spending on education will create skilled manpower for industries. The people must be educated through mass media about the long-term benefits of trade and investment. All companies need consumers for their products, and India has an edge as the world’s most populous country. In short, India needs to invest 100s of billions of dollars and an equal amount of energy in building infrastructure, education, attitude changes, and simplifying processes to do business.

[Mukesh Devrari]