Can India rival China?

By Raz Koroh

Since India overtook China’s GDP growth by a small margin, the gossip today is whether India can overtake China as the global economic power.  Sceptics are quick to point out that, yes it is true that India’s annual growth is astounding over the last several years but this is because India starts from a very low base compared to China and every dollar investment put into a country the size of India will inevitably produce a sizzling annual growth rate.  And yes it also true that the smart Indian diaspora residing in Silicon Valley can potentially unleash Bangalore into another world-beating tech-hub but China had the same dream and capability too but is never going to imagine that this alone is sufficient to propel it into economic superstardom, not without its now-weakening manufacturing sector.  So, can India really beat China?

Here are several factors to consider.

Leadership.  Since gaining its independence from British colonial rule in the late 1940s, India has boasted possibly the most thriving democratic system the world has ever seen.  In the Cambridge-educated Jawaharlal Nehru, not only did it produce the most sophisticated prime minister a developing country could ever have, but his English educational background also encouraged an independent mind that unfortunately (for India) strayed into a Soviet-style economic planning throughout the 1950s and 1960s.  India was predictably estranged by Western leaders, and therefore the global money go-round, who were happy to leave it alone and not giving it a damn.  Fighting the Chinese (1962) and the Pakistanis (1965) forced India to buy Russian-built tanks and MIG-25s (while Pakistan used Pattons and F-14s) and turned Western indifference to suspicion, turning India swiftly into a military adversary.  When Nehru was succeeded by daughter Indira Gandhi in 1964, her equally independent mind was pro-Soviet, and banks were nationalized, marginal income taxes were hiked nearly 100 per cent, multinational corporations were forced to disinvest majority stakes, another war with Pakistan was waged in 1971 (to liberate Bangladesh), the American bluff was called over the 42nd Fleet in the Indian Ocean, an undisguised affection was shown for General Secretary Leonid Brezhnev, a test nuclear device was detonated, and India actively took pro-South/anti-American stance at international conferences; in the West, political and commercial, India was a virtual renegade state to be bitterly opposed.  Ironically, all these happened when India was touted as the world’s biggest democracy; Indira’s government itself was dethroned in 1977, two-party system emerged, and India changes governments every five years at provincial level.  The free press was truly free, ordinary Indians turned doctors, engineers and other high-calibre professionals with surprising dexterity.  An astonishing affluent class of non-resident Indians emerged and migrated to and feted in the United States and Europe.  Some Indians were truly cosmopolitan global citizens but India itself languished in dire poverty.  So what went wrong?  The answer lies in a lack of governance, not governments.

Governance.  For example, when the stylish and truly westernized forty-year-old Rajiv Gandhi succeeded his mother as India’s third prime minister, India finally reached out for global investment, and this continued after Rajiv’s rule was cut short by assassination, under Narasimha Rao and acclaimed economist Manmohan Singh.  Singh’s revolutionary policy changes included abolishing industrial licensing, privatization, allowing MNCs to set up factories and businesses, convertibility of currency, foreign capital allowed into India’s stock markets, and so on.  India’s dormant entrepreneurial energy suddenly woke up, and the world investment community sat up and took notice.  At least the bitterness dissipated, but not the indifference.  This is partly due to India’s political legacy that under its present circumstances, continues to generate political instability, but also partly due to the lack of governance.  By comparison, China was, is and foreseeably continues to be ruled by a ruthless Communist Party since 1949, and as such provides an image of political stability to the outside world.  The United States fought the Civil War in 1861-65 and emerged with a declaration to the outside world that it was dealing with a continent united not only physically but in a common purpose of pursuing global economic hegemony.  Malaysia was ruled by a mild dictator in Mahathir Mohamed from 1981 to 2003, who not only imagined an advanced economy by the year 2020, but indoctrinated every single Malaysian soul young and old, supporters and opponents, with the same vision; the result is, despite changing prime ministers and foreseeably also governments, foreign investors are confident that Malaysia is crystal clear of where it is heading towards.

The same cannot be said of India; the British Raj that was painstakingly assembled by the British were systematically dismantled via the Mutiny of 1857, Government of India Act 1935, and finally the Indian Independence Act 1947 and partition of India and Pakistan.  India was the so-called Jewel of the British Empire, but today it can barely hold itself together without internal implosion.

Comments welcomed.