Introduction:
China and India together account for almost 40% of the world’s population. Both countries emerged from centuries of colonial domination and exploitation albeit of different forms and intensities around the same time (1949 and 1947 respectively). Both countries have autonomously charted out different social and economic trajectories since then. In both countries the last two decades have witnessed major changes in terms of integration into the world market, although China began earlier, compared to earlier emphasis on self-sufficiency. Both countries have succeeded in substantial reduction of poverty, although the degree of reduction varies considerably between the two. The comparable circumstances and radically differing outcomes make a comparative study of India and China exciting to researchers.
The challenge of analyzing the economic and social progress of the two nations within this essay with all their political, economic and social complexities and historical and geopolitical nuances is as daunting as ever. It is therefore important to have a framework within which to situate the analysis. The comparison will begin with a brief analysis of the historical contexts and socio economic challenges confronting the two countries at the time of emergence from colonialism. It will then adopt a dynamic analytical framework, which will explore how the two countries adopted policies to counter their social and economic problems and how their priorities evolved over the successive decades and with what outcomes.
Post Colonial China and India: Prevailing conditions
At the time of liberation from colonial domination albeit of different forms and different characteristics both China and India shared similar levels of social and economic backwardness. Both were largely agricultural economies with little industry, with large populations, mired in poverty, high illiteracy, high infant mortality, low life expectancy, crippling malnutrition and ill health. Table from Subramaniam Swamy presents some of these largely comparable conditions.
Table of Level of Development around the time of founding of each Republic
Indicators Unit Year China India Ratio of indicators: China to India
Per Capita Purchasing Power Parity 1970 (US $) 1952 101 154 .66
Population Millions 1952 574.8 367 1.57
Birthrate Per 1000 1950 37 40 .93
Death rate Per 1000 1950 18 28 .64
Life expectancy Years 1950 40 32 1.25
Infant Mortality Per 1000 1950 175.5 190 .92
Adult Illiteracy % 1950 25 20 1.25
Calories Per Capita per day 1952 1917 1540 1.24
Food grains Million Tonnes 1952 163.9 69.9 2.35
Yield of Rice Tonnes per hectare 1931-37 2.5 1.3 1.9
Yield of Wheat Tonnes per hectare 1931-37 1 .6 1.66
Irrigated Area % 1949 20.7 14.6 1.42
Cropping Index 1949 20.7 14.6 1.42
Fertilizers 1000 tonnes 1951 129 53.7 2.4
Coal Million tonnes 1952 66 39.3 1.69
Electricity Billion KWH 1952 7.3 6.1 1.2
Crude Oil Million tonnes 1952 .4 .4 1
Cement Million tonnes 1952 2.9 4.1 .71
Railway 100 kms 1950 25.7 54.8 .47
Highway 1000 kms 1949 130.2 391.8 .33
Literacy % 1951 14.3 16.7 .86
Students in higher education 1000s 1954 253 594.1 .43
College graduates 1000s 1952 326 721 .45
Engineering College graduates % 1952 31.4 17.8 1.76
In terms of factor endowments, however, Communist China with a land mass nearly three times the size of a partitioned India and a slightly larger population had a comparative advantage with a more favourable land: people ratio and less density of population. China’s population was also much more homogenous and cohesive compared to India’s. Both countries had suffered famines and missed the industrial revolution in the colonial era. However China’s state of agriculture was better placed than India’s in the 1950s. (Evidence from above table). This was an outcome of the agricultural boom in China from 1870 till 1949, which was due to China’s larger share of farm area and retention of political sovereignty, which was responsible for implementation of agricultural reforms, a progressive move which India was deprived of due to direst political entrenchment by the British government. The marketable surplus available from agriculture could be used for rapid industrial growth in China, a privilege not available to India. This was enhanced by China’s larger share of engineering college graduates and greater energy sources.
It was in the backdrop of liberation from colonial exploitation, that food and industrial self-sufficiency assumed paramount importance for both nations. The social and economic trajectories followed by the two in nearly the first three decades of popular and independent governments, emanating from diametrically opposite political systems, differed substantively in the domain of agriculture and ownership of property, while retaining similarities in the realms of priority to industry and restrictions of foreign trade.
The rebuilding of post colonial China and India
China adopted a form of centralized planning and communist government control combined with socialist public ownership of the means of production following the Soviet model. This was achieved during the 50’s through wide scale nationalization of industrial and commercial enterprises and the collectivization of land, often with considerable coercion and force.
India also followed a five year planning process and established a national planning commission but sought a middle path, mixed economy, under which the private sector would co-exist with the public sector subject to state controls and regulations designed to ensure a “socialistic pattern of society” and a gradual move so that the public sector attains the commanding heights of the economy. The right to private property was guaranteed under a Constitution, which stipulated a parliamentary democracy.
Following the three-year recovery period ending in 1952, China began her first five-year plan reconstruction in 1953 with major emphasis on heavy industry with the help of Soviet experts and under strict centralized communist party control. More than half way through the period in 1957, the Chinese began to realize that such complete centralization had major draw backs and started decentralizing power to the enterprises and local governments. However from 1949-57 China’s progress in agriculture and industry exceeded India’s by leaps and bounds. In 1958 Mao’s embarked on his famous Great Leap Forward (1958-60) to hasten all round development. This was followed by a number of shock waves by way of a natural disaster (1959-61), Soviet withdrawal (1960-62) and the Cultural Revolution (1966-70).
Despite these convulsions resulting from Mao’s experimentation, through careful state control over private consumption and heavy government investment in industry, reflected in high savings and investment rate of 46%. China continued to maintain a high overall growth rate exceeding India’s, growth rate in industry being very impressive, till the late 70’s when the market reforms started. According to Nirupam Bajpai and Tianlun Jain (Reform Strategies for China and India etc), computing from National Income growth rate figures, the annual constant price compounded growth rate was above 5.99% during the period 1952-78 for China.
The fact that China had become a nuclear power in 1964 and became a member of the elite United Nations Security Council in 1971, shows that there was enough generation of surplus required for military prowess while India joined the nuclear club three decades later.
In India the approach to economic development was that of mixed economy with large and growing public sector focused on core and basic industries as elaborated under the Industrial Policy Resolution of 1956. The state gradually extended near monopoly of steel, mines including coal, fertilizers, banking and insurance while co-existing with the private sector in other areas such as hotel and tourism, transport, heavy and light engineering etc. In some areas such as agriculture, plantations, jute, cotton the state had no presence at all except to step in when private sector units needed to be bailed out under situations of financial crisis. The state’s policy of centralized planning over resource allocation was played out through an elaborate system of controls and regulations articulated through various licensing regulations and price controls till 1991, when considerable reduction of licensing to private sector and reduction of subsidies and withdrawal of price controls and subsidies took place.
The first plan in India was primarily focused on consolidation and agricultural growth, while the second plan period, also christened the Mahalonabish Plan named after the distinguished Indian economist and statistician, Professor P. C. Mahalanobish who laid through this plan the foundation of heavy state investment on core sectors and state control over the private sector. Drawn on and adapted from the Leon Tief equilibrium (input-output) model, these controls distorted the economy and the economy was caught in a “low level equilibrium trap” (term used by Professor Jagdish Bhagwati). The Mahalanobish model of economic development was followed till the end of the Fifth Five Year Plan. India’s average annual growth rate of GDP during 1950-80 was only 3.5%, nearly 2.5 % less than China. India, like China also had its share of crises emerging in the form of drought and three wars with Pakistan that starved the industrial sector of agricultural raw materials and electric power, which was diverted to military industries. There were meager land reforms in agriculture in India and agriculture, the bulwark of the economy was left in private hands and skewed distribution of land continued in agriculture. The oil shocks following the West Asian conflict of the 60’s had their toll on the economy. At the end of the 60’s about 50% of India’s population was living in absolute poverty, China being far better off.
During the end of the fourth plan and beginning of the fifth plan period, a notable development was the ushering in of the wheat-based green revolution in India which in one go catapulted India from a food deficit nation up to the 60’s dependent on PL 480 food imports from the US to a food surplus nation (based on effective demand) in the late 70’s and 80’s onwards. This accounts for the comparable although relatively less agricultural output in India vis-à-vis China in the pre-market reform period.
China and India at the commencement of the period of economic reforms
At some level therefore India and China followed a similar approach of state led industrialization with focus on core and heavy industries. A fundamental difference was, however related to the way the ownership of property was organized which in turn was related to the political/ ideological moorings of the two countries. Complete socialist ownership of capital and means of production in China vis-à-vis state becoming a major player in allocation of resources but guaranteeing the right to private property and private enterprise in India constituted the principal difference in approach in the two countries.
Tables from Subramaniam Swamy and Wilson Quarterly) shows the differences of growth in industry, growth of agriculture and its output, acreage and yield, growth of GDP, social and economic indicators of progress, and ratios of output from 1950-1986 where China was in its initial phase of market reform and India had also considerably increased its participation in privatization and foreign trade.
Processed Food grains Output in China and India in MMT (1952-72) Table
Year China India
1952 123.5 52.7
1957 148.4 70.6
1965 192.0 90.3
1972 206.0 109.0
Output, acreage and yield of food grains in China and India (1952-65) Table
Period China India
1952-56
Output (tonnes) 136.3 63.9
Acreage (hectare) 116.2 105.8
Yield (tonnes/hectare) 1.2 .6
1957-60
Output (tonnes) 160.9 71.2
Acreage (hectare) 120.8 112.2
Yield (tonnes/hectare) 1.3 .6
1961-65
Output (tonnes) 175.4 83.5
Acreage (hectare) 126.3 117.0
Yield (tonnes/hectare) 1.4 .7
Index of industrial production of China and India (1951-71) Table
Year China India
1951 100 100
1957 291.1 141.8
1965 625.6 250.9
1971 802.2 320.3
Net Domestic Product at constant 1952 prices in billion rupees (China and India) by sectors
Sector China India
Agriculture
1952 58.46 44.4
1957 69.1 52.5
1965 87.24 65.1
1971 87.98 75.7
Industry
1952 17.18 15.2
1957 31.47 18.4
1965 45.96 25.3
1971 66.89 30.2
Service Sector
1952 50.34 31.6
1957 59.92 39.0
1965 65.39 60.7
1971 65.91 72.5
NDP
1952 125.98 91.2
1957 160.29 109.9
1965 198.59 151.1
1971 220.78 178.4
China and India indicators in 1977, Table
Indicators China India
GNP per capita 410 US$ 160 US$
Life expectancy 64 years 55 years
Literacy 70 % 40 %
Calorie per capita per day 2100 2100
Cement per capita 25 kg 31 kg
Steel per capita 58 kg 16 kg
Ratio of outputs of China to India (1952-86) Table
Product 1952 1957 1965 1971 1978 1986
Rice 1.99 2.01 1.06 2.8 2.04 2.06
Wheat 2.42 2.67 1.28 1.28 1.54 1.21
Food grains 2.35 2.46 2.07 2.01 2.07 1.94
Oilseeds .79 .76 .47 .45 .49 1.17
Tea .27 .32 .26 .81 .45 .45
Milk .01 .01 .02 .05 .04 .08
Meat 5.23 6.65 6.22 9.74 9.84 14.01
Farm Output 2.03 2.27 2.13 2.28 2.30 2.26
Cotton cloth .77 .77 .85 1.2 1.17 1.14
Sugar .25 .34 .42 .38 .39 .64
Paper & boards 2.72 1.22 3.09 3.09 4.35 6.01
Light bulbs 1.2 1.6 2.56 3.24 3.72 3.51
Bicycles .67 1.03 1.13 1.81 2.53 5.83
Radios 1.31 1.84 1.15 1.83 5.84 20.12
TV sets 0 2 4 1.2 .86 3.72
Sewing Machines 1.43 1.66 2.87 10.01 35.16 33.88
Light Industry .8 .92 1.72 2.17 3.54 6.12
Coal 1.68 3 3.3 4.64 6.0 5.23
Crude Oil 1.01 3.47 2.43 4.51 8.97 4.14
Electricity 1.2 1.7 2.04 2.08 2.5 2.4
Natural Gas .15 .29 1.5 1.99 4.88 2.09
Energy 1.61 3.3 3.16 4.37 6.83 4.76
Steel 1.25 2.55 1.87 2.69 3.19 3.84
Cement .71 1.12 1.51 1.8 3.32 4.45
Fertilizers 2.4 1.15 5.09 2.3 3.21 2.32
Machine tools 2.94 6.95 3.3 9.33 2 1.65
Motor vehicles .01 .28 .57 1.01 1.98 2.09
Tractors .22 .44 .72 1.6 2.38 .58
Rail Wagons .84 1.22 .09 1.24 1.46 1.42
Heavy industries 1.75 2.02 2.04 3.02 3.63 2.78
Total Output 1.51 1.66 1.94 2.51 3.26 3.77
Clearly by 1986, when China was already into the market reform phase and India into a high growth phase with high government expenditure financed largely through foreign borrowings, China had outstripped India in light industries, in energy, in heavy industry and in total manufacturing output in the secondary sector. The only comparable area was farm output where India had by 1986 performed impressively thanks to the wheat based green revolution, which transformed India into a grain surplus nation, though behind China in farm output. Table from East West Journal shows the corresponding situation in the demographic and social sectors, where again China’s superior indicators of social and demographic transition are obvious.
Demographic and social indicators in China and India around 1987
Indicators China India
Population growth rate (1980-87) 1.2 2.1
Crude Birth Rate per thousand (1987) 21 32
Crude Death Rate per thousand (1987) 7 11
Population per physician 1000 2520
Population per nursing person, 1984 1700 1700
Daily Calorie supply per capita, 1988 2630 2238
% of age group in secondary education, 1986 42 35
Urban Population as a % of population, 1987 38 27
The Market Economic Reforms Phase: the genesis, the trajectories and the differences
Diverse experiences in terms of the improvement of living conditions of people following the market reforms and liberalization policies in the late 70’s and early nineties respectively in China and India have been the subject of much debate and it is important to examine the broad divergences as well as similarities and the different outcomes thereof. China’s spectacular annual average growth of nearly 10% since 1978 has transformed China into the most attractive market and investment destination as well as the virtual global production house for a range of consumer goods throughout the world. India initiated her reforms in 1991 and has achieved some success moving out of the traditional Hindu growth rate syndrome and achieving over the last 10 years an annual average growth rate of around 5-6% and becoming the 4th largest economy in the world after USA, China and Japan in terms of purchasing power parity but being much below China in terms of per capita income and almost all other indicators of human well being. (Table of World Development Report 2003 for the year 2001).
Indicator China India
Population (billion) 1.3 1
Annual growth rate of population (%) .7 1.5
Life expectancy (years) 70.5 63
Fertility rate (births per woman) 1.9 3
Infant Mortality Rate per 1000 live births 31 67
Under 5 Mortality Rate per 1000 children 39 93
Child immunization % 79 56
Prevalence of HIV among females in ages 15-24 (%) .1 .7
Illiteracy total for ages 15 and above (%) 14.2 42
Illiteracy for females 15 and above (%) 21.3 53.6
Surface area (million sq. km) 9.6 3.3
Gross National Income (current billion US$) 1100 477.4
Gross National Income per capita (current US$) 890 460
Gross Domestic Product (current billion US$) 1200 477.3
Annual Growth of Gross Domestic Product (%) 7.3 5.4
Annual Growth of Gross Domestic Product implicit price deflator (%) 0 3.5
Value added in agriculture (% of GDP) 15.2 25.1
Value added in industry (% of GDP) 51.1 26.5
Value added in services (% of GDP) 33.6 48.4
Export of goods and services (% of GDP) 25.8 13.7
Import of goods and services (% of GDP) 23.4 15.4
Gross Capital Formation (% of GDP) 37.9 22.5
Fixed lines and mobile telephones per 1000 people 247.7 43.8
Personal Computers per 1000 people 19 5.8
Internet users (millions) 33.7 7
Aircraft departures (thousands) 840.9 214.3
Trade in goods as share of GDP (%) 44.3 19.5
Foreign Direct Investment net inflows (current billion US$) 44.2 3.4
Present value of debt (current billion US$) 164.1 67.8
Total debt service (% of exports of goods and services) 7.8 11.7
Short-term debt outstanding (current billion US$) 43.9 3
Aid per capita 1.1 1.7
The most notable difference in the economic liberalization policies of the two countries was that while in India, reforms were inevitable given the serious economic and financial crisis faced by that country, in China reforms were not necessitated by any serious crisis. The factors leading to the Chinese reforms were essentially related to the negative impact and disappointment resulting from the Cultural Revolution and the ideological shift that permeated from the top to the bottom of the political hierarchy. The leadership under Deng had realized that the exclusive focus on heavy industries had distorted the economy and that suffient exports were necessary in order to finance a number of large projects with large import content and to obviate future strain on the balance of payments. Since China was not facing any serious economic crisis at the time, there was neither any need for macro economic stabilization or adjustment processes nor any compulsion of meeting externally imposed targets regarding macro economic indicators. The prevailing conditions at the beginning of the market reform process in China were marked by an inflation rate of just 0.7% under a state controlled price regime. Urban unemployment was slightly above 5%.
The second major difference between the two countries was that in China there was national conviction about the reform unequivocally reaffirmed at successive congresses of the CCP across the country while in India the process of consensus building has followed a bumpy, uncertain road typical of a multi party, federal, parliamentary democracy especially with coalition politics rather than single party dominance characterizing the current political scenario. This has had considerable impact on the nature, pace, extent and evenness of reform in both countries.
A third area of difference was that China followed an extensive policy of decentralization and devolution of resources and responsibilities. In India the reform decision-making processes still continue to be largely centralized.
The reforms in China were cautious, experimental and gradual and followed a graded priority sequence. The major issues which the reforms in China sought to address include the following problems: Urban unemployment, short supply of consumer goods, asymmetry in industrial production with its exclusive focus on heavy industries and neglect of service sector, restraints on light manufacturing, the excessive centralization of decision making, transition to a market economy and opening of previously closed markets. Market Reform was commenced in the rural areas and gradually moved to the city and the area of state-owned enterprises. The policy of communal agricultural was dismantled in the market reform period of China’s development, when private incentives were introduced in agriculture. These state-led market reforms would accelerate agricultural growth and lead to flourishing agriculture, which would vastly increase the per capita incomes of the farming population in China. The opening up of trade sector to foreign trade through trade reforms, township village enterprises and special economic zones and foreign direct investment has revolutionized living standards in China In keeping with the gradual approach, instead of privatizing the state enterprises in one go, China went through a phased process. Macro reforms were carried out to introduce competition, and market oriented policies while maintaining stability in terms of low unemployment and low inflation rates. In the area of production, the emphasis was on light industries and agriculture. Price control on agricultural products was relaxed and prices raised a number of times to give adequate incentives. The policy on self-reliance in grain production was replaced by a policy encouraging a choice of economic activities depending on regional comparative advantages. Military industries were changed to produce consumer goods. An open door policy inviting foreign investment was the most important aspect of the macro economic reform with detailed and very favourable terms and conditions. Laws were made keeping in mind international standards. As a result Chinese foreign trade volume doubled every five years since the reform. Foreign trade as a percentage of GDP increased from 9.9% in 1978 to 33% in 1993. Foreign direct investment increased dramatically. For example annual foreign direct investment increased from a zero base per year before the reforms to $27 billion per year in 1993.In 1995 the cumulative foreign investment in China was $110 billion. However, in keeping with its cautious approach, even now China does not allow portfolio investment and therefore protects itself against the volatility of international capital markets. These were underscored by a thriving market for land leasing for commercial purposes. Foreign trade was decentralized with provinces and localities being allowed to set up foreign trade corporations. Even revenue collection was decentralized, with the result that both fiscal revenue of the central government and fiscal deficit has remained at the level of 2% of GDP. Tax reforms and extensive financial sector reforms were carried out.
In India the immediate reason for economic reforms was clearly the economic and foreign exchange crisis in 1991 when India was left with enough foreign exchange reserves to last only a fortnight and its international credit rating being severely eroded with the risk of default in interest payment obligation looming in the horizon. The genesis of this crisis however can be traced to the high growth period of the 6th and 7th Five Year Plans when India registered some of the highest growth rates (around 8%), breaking out of the low growth rate trap as it were. These growth rates of the eighties were achieved through an aggressive government led expenditure strategy fuelled by external commercial borrowings and internal borrowings and increase in money circulation. This resulted in major macro economic imbalances: such as gross fiscal deficit of 8.3% in 1991, inflation rate close to 16% in 1991, internal debt amounting to 52.9% of GDP in 1991 and interest charges amounting to 4% of GDP in the same year (working out to 20% of total government expenditure). (Nirupam Bajpai and T. Jain 1996). The Government of India in 1991 had to pledge gold to obtain foreign exchange in 1991 adding to national humiliation. Reform was therefore inevitable.
Unlike China where the emphasis of reform was on dismantling controls, maintaining stability, creating competition incentives and stimulus, decentralizing economic decision making, reforming tax, revenue, pricing and trading systems and creating an open door policy towards foreign direct investment, India had to focus more on getting its macro economic essentials right and stabilized with stringent internationally imposed time bound targets to achieve. China therefore had much more freedom to innovate and chose its reforms package than India.
Like China, India has also adopted a gradualist approach to reforms. Being crisis induced, the first phase of reforms was on macro economic stabilization efforts including getting the fiscal deficit in check, removing price distortions through the reduction of subsidies and changing the exchange rate polices. The second phase of reforms was directed at increasing factor productivity by slowly dismantling the elaborate system of industrial licensing etc., which had for long stifled the economy. It also saw the gradual removal of restrictions on imports and high tariff regimes, with focus on boosting exports. A major aspect of this third phase was also in the withdrawal of controls on foreign investment and foreign equity participation. Taxation reforms and reform of interest rates have also followed. The third phase of reforms aimed at liberalizing the labor markets by allowing greater mobility and flexibility has got mired in lack of consensus and the power of trade unions. Trade liberalization has also been part of this phase involving compliance with WTO obligations regarding patents on intellectual property, lowering of tariffs etc. This phase has also been grappling with reforms in the insurance sector allowing for foreign equity participation and withdrawal of government from a wide variety of areas where the private sector and the markets could have performed with far greater efficiency. The latter includes the hotel and tourism industry, the steel industry, the textile sector, the electricity sector etc. Public sector disinvestments have been proving to be extremely difficult to implement, given the lack of consensus in multiparty, coalition politics.
There have been many satisfactory results from the Indian reform process. Inflation has been brought down to 4-5 %, the foreign exchange reserves are today a staggering $75 billion, GDP growth has been a steady 5-6%, external commercial borrowings, external assistance, IMF loans etc. have gone down very substantially. Foreign direct investment has also been growing. However when compared to China, India has certainly fallen behind in a very big way. The differences between India and China at the turn of the century have deepened much more today. (Above Table from the World Development Report). In terms of outcomes for the economy and the people some of the differences have been quite stark while others have been subtler.
Economic reforms alone, however tell part of the story. Human development is not just about economic growth and economic well being by itself does not only depend on economic factors. It is therefore necessary to deepen our analysis to see why reforms in India have not brought about the dramatic changes in people’s lives and opportunities as they have dome in China. Professor Amartya Sen argues that the stark differences in economic and social progress that are much sharper today than at the time of founding of each republic are directly related to the differences in their approach towards structural reforms and the social sector: a difference which had critical implications for the outcomes in terms of people’s living standards and human development in the pre- market reform period, which would lay the groundwork for fostering the Chinese economic boom in later decades, when market reforms were launched .
He argues that India followed far more urban-oriented, elitist policies in respect of social policies than China, which followed mass-friendly policies manifest in revolutionary social mobility, removal of decadent and outdated institutions, land reforms, focus on primary education, higher education and scientific education, preventive and basic health care for rural population on a mass scale unprecedented in China, in addition to creation of a disciplined work force. India, on the other hand did not carry out land reforms, allowed old and divisive caste, feudal and labor relations to exist, focused on scientific and higher education and curative health care, which did not redress the social and economic backwardness of the masses, thus making the reforms only partially effective.
Prof. Sen argues that the market reforms in China have benefited from pre- market reform achievements like dramatic reduction of chronic undernourishment, state-led nutritional support, reduction of parasitic diseases and various illnesses, expansion of longevity, social security in the form of employment, masses of people receiving basic education and drastic lowering of illiteracy, human development of female population and job creation for females, all of which helped to reduce fertility levels and population, all of which gave a stimulus to the economic efflorescence of the market reform epoch in Communist China which brought about radical, popular economic growth in China which had reduced poverty in China from 28 % to 11% in 1990 while in India 40% of the population was living in poverty at the same time. In India 28.6 % of the population was living in poverty in 2001 while China’s poverty rate is probably around 6%.
More than fifty years of popular, independent rule in both countries have improved their economic and social progress. However it is quite clear that China has outperformed India on both social and economic fronts. The reasons for this can be found in the better state of the Chinese economy at the time of establishment of both republics, radical and pragmatic economic and social policies in the pre-market reform epoch in Communist China, which created channels of social opportunities for the masses and was the bedrock of the fantastic growth of the Chinese economy since 1979 when pragmatic moves such as establishment of private incentives in agriculture and township village enterprises in the rural sector, diversion of investment from heavy to light, consumer goods industries, development of the service sector, massive foreign direct investment and large amount of foreign trade through trade reforms and establishment of special economic zones played a crucial role in China leapfrogging India. India, on the other hand had an economy, which was slightly less developed than China at the time of independence. The gap between China and India widened due to lack of political commitment and bickering politics of multi-party democracy, little land reform legislation and little redistributive policies in agricultural sector, lack of nutritional support, lack of primary and basic education for the masses, burgeoning and heterogeneous population, divisive elements like the caste system, impractical development priority to public sector enterprises, licensing regulations for the private sector, political corruption, high taxation rates for private enterprises, heavy foreign borrowing and resultant inflation. However, the crisis-induced market reforms implemented since 1991 have improved the Indian economy but India in 2003 is still miles behind China in the race for economic and social development.
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