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.
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
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 |
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
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.
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
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.
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.
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 |
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 |
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 |
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 |
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.
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
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 |
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.
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.
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.
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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