You are here

National Strategy Lecture - China and India in the Near Future -- A Political-Economy Viewpoint

  • Share
  • Tweet
  • Email
  • Whatsapp
  • Linkedin
  • Print
  • March 25, 2011
    Speeches and Lectures

    Chair: Mr. N.S.Sisodia

    Professor Bardhan spoke on “China and India in the near future – A Political Economy viewpoint”. His comparative analysis of the two emerging giants had statistical and structural perspectives.

    He began by pointing out various indicators that capture the commonalities, and differentiate India and China’s economic growth at the same time.

    1. Percentage of world income: In the year 1820, the contribution in share of world income of India and China was 49% (33% for China and 16% for India). A hundred and thirty years later, the share was down to 9%. Nevertheless, by 2025, it is predicted that there would be a partial restoration in the share of India and China to 36%. Professor Bardhan qualified this by stating that China is way ahead of India in terms of per capita income. According to data, over the last quarter century its per capita income growth has been at least twice that of India.

    2. Emphasis on demographics: India hopes to reap benefits out of its demographic dividend when compared to an ageing China. The positive externalities of this are

    a) The younger population is more productive.
    b) The younger people save and the older people dissave.

    However in so far as China is concerned, it compensates the quantity by quality of labour force. In terms of savings by the younger population, particularly in India, people start saving at a later stage in life. Hence, saving from the demographic dividend would come later in India. To suffice, in India the population is younger in relatively less economically developed states than in economically well developed states, which the speaker pointed out as another qualification. It was also pointed out that the saving age population will not peak so soon in China and will happen only in the 2030’s. However, both countries are high saving countries even though there are differences in per capita income. This is due to lack of full social security system.

    3. Economic Growth: Professor Bardhan said that economic growth of countries in the long run depends on rate of technological progress. In that context, the speaker pointed out that China has surged ahead of India in R&D and education. In the 1990s, India was ahead of China in the number of science and technology articles published in peer reviewed international journals, but now that number is also going down. With regard to higher education, he noted that while two Chinese universities rank in the top 50 universities in the world, there are no Indian Universities.

    As far as the composition of growth is concerned, India is predominantly service oriented economy driven by the IT sector doing really well. However, the number of people employed in IT and ITES is less than one half of 1% of the Indian labour force. China on the other hand is considered to be the manufacturing hub of the world. However, from a value added perspective, it is not the leading manufacturer as it accounts for only 15% of the total manufacturing output in the world.

    With respect to foreign trade, though many say, the economic growth in China is export driven, but in reality it is domestically driven, largely through domestic investments. In India also the economy is not export dependant, but depends on domestic investment and consumption.

    4. Poverty and Inequality: The speaker pointed out to the extent of poverty alleviation in China and India over a time span of 25 years from 1981-2005. The statistics show drastic poverty alleviation in China from 73.5% to 8%, while that of India from 42.1% to 24.3%. The common causal factor for poverty alleviation is considered to be the integration of both the economies with the rest of the world. However the speaker added that in addition to globalization, China’s agrarian reforms have led to a shift from the commune system to household and to an individual, which has impacted poverty alleviation in its own right. This has not been the case in India wherein land reforms have not been successfully implemented. This is attested by the fact that most of the people have either very less land, or are completely landless.

    In the context of social indicators, economic growth does not seem to be a comprehensive indicator of development. According to National family Health Survey conducted in China, the percentage of malnourished children (between the age of 0-6) in China is between 0-8% which is much less than that of India, that is 44-45%. After economic reforms, basic health and education system in China became increasingly privatised due to the decline of commune system. Consequently, we can see for example that most of the poor people are not being able to afford to access the facilities even of the public hospitals, because of high costs, leave alone private hospitals. However, inequalities in China are still lesser than in India, as regards, inequality of opportunity in terms of social hierarchy, of land distribution and in education.

    The sex ratio in China is worse than in India. In spite of this shortcoming, the level of female participation and female literacy is way ahead in China than in India. There is a huge difference in the physical and social infrastructure of the two countries, which includes health and education. It is because the Indian government has comparatively less monetary resources and also suffers from cost recovery problem. China does not have such a problem, because the system is decentralized, which makes management easier and brings about efficiency in the system.

    5. Governance and Nature of Capitalism: Professor Bardhan stated that the corporate sector in India is vigorous than in China but accounts for only 2-3% of the total growth, and hence even a big change in it will not have much of an effect on the potential growth rate of the country. In case of China, many of the success stories are state funded.

    According to the speaker, the problem of crony capitalism is more severe in China than in India. He pointed out to the statistics of 2007, where it was found that out of the 3500 millionaires, 3000 were high ranking party officials. Moreover, the composition of the Communist party has also undergone a change. Out of 75 million people in the party, now only 29% are workers and peasants and 71% of them are professionals. Authoritarianism is neither sufficient nor necessary for development. China is ruled by technocrats who take quick decisions, and hence the execution and implementation is quite often more efficient than in the case of India.

    According to Prof Bardhan, the Indian political regime derives its legitimacy from democratic pluralism and not from high growth rate as is the case with China. China appears to be strong but actually there is a strong sense of insecurity and brittleness. However there is a flip side to it that as this leads to excesses of capitalism in today’s China in different forms such as environmental pollution, and local inequalities. As regards accountability, the local officials easily get away with capital excesses because they do not have to contest elections and even if they are to do so, it is a one party election. In India, in spite of democracy, the officials especially at the local level lack accountability. In this context, what has to be seen is not the difference between democracy and dictatorship, but the accountability mechanisms, where India has failed. The speaker concluded by pointing out that there are serious accountability failures in both the countries, and cannot be construed and understood with a simplistic analysis of democratic vis-à-vis totalitarian systems.

    Event report prepared by Haifa Peerzada, Research Intern at IDSA.