A decade ago, China emerged as a role model for Indian politicians. All of them wanted to turn India into
another China. Corporate honchos and political leaders even pledged to work together
to turn Mumbai into another Shanghai. Fortunately, the project was abandoned
quietly.
Dibakar Banrejee’s Shanghai (2012) captures the sleaze and
shady dealings of the Indian political class as it continues to pillage the
country in the name of economic liberalization, and emulating the Chinese model
of economic development.
Middle class in India – as the middle class in the West – is
enamoured by China’s rapid advances. And despite India’s stationary status on
many fronts during the last decade under the UPA government, during which China has powered on, Indians are
delighted to be put into the same bracket as China.
Indians who’ve been to China realize that the comparison
between the two countries is silly because China is well and truly miles ahead
of India on almost all economic and social parameters of comparison.
Some of these advances are truly amazing: China has succeeded
in reducing absolute poverty substantially in the last decade. India’s
performance on this front has been less than exemplary.
Economist Dr. Amitendu Palit is a former Indian bureaucrat
and now researcher at Singapore’s National University. His book China-India economics: Challenges, Competition and Collaboration is an important
contribution to the on-going debate on the growth trajectory of these two
economies. Recently, he spoke at in Toronto’s Munk School of Global Affairs on
the theme of his book.
The steady rise in the trade between China and India will
have a deep impact globally. “Their economic relations will matter to everyone,”
Palit said. He observed that both countries have had similar experiences
despite different policies, and are facing an acute lack of solutions to the
problems they face.
He delineated these similarities: Both are non-OECD
countries; both are non G8 countries; 2nd and 10th largest economies; 2nd and 4th largest by the purchasing
power parity; neither high income countries; large population below poverty
line 41% in India and 15.9% in China; both countries have internal imbalances
and both have rising inequalities.
The economic challenges that both countries face include the
following:
Challenges
Urbanisation
China urbanisation is 50% and is largely migration driven
because of the one child policy (28-2% slums)
India urbanisation is 32% and is driven by natural increase.
28.1% slums
Securing
energy
Both countries consumer 1/3rd world energy by
2025
2nd and 5th largest crude oil
importers
High cost of coal import
Illegal mining
Depleting
water resources
China: Demand growth 61% (2030)
India: Demand growth 58% (2030)
High
carbon emission
1st and 3rd carbon emitters
28% of global CO2 and additional 56% additional emission
during 2005-30
Inefficient land market
Involuntarily land acquisition
High
cost of business
China is 91 and India is 132
Volatile bilateral dynamics
Competition
Growing economies have pitchforked both countries to compete
globally. Palit listed some of the key area of competition between China and
India. These include:
Energy: As China
and India have a phenomenal dependence on oil and coal, they are in a race for
hydrocarbons in Africa, Central Asia, and Africa.
Water: India
is a lower riparian state and there is growing competition (and concern in
India) over the sharing of river waters. Of the five rivers that start in Tibet,
four flow into India. The rivers are Indus, Sutlej, Brahmaputra, Ghaghara and
Torsa and except the Indus, the other four are important for India’s economy.
Market
access: Both countries are competing for market access across the global
South, and have emerged as major donors in the Asia, Africa and South America. India
is in the forefront of anti-dumping actions on China
Both have long-standing and irresolvable political
differences. This includes claims over each other’s lands and constant skirmishes
over the border. India accuses China of pursuing a String of Pearls approach by
building antagonistic relations with India’s neighbours. China accuses India of
Encircling Democracies policy where it is building alliances across the globe
with democracies that inimical of Chinese dominance of the region.
Collaboration
Both countries are increasingly aware of their significance
to each other and are learning in the process, and both have started to
collaborate in a small way to secure economic advantages by not competing for
the same resources openly. Both have realized that when they move into the
market, the spot prices escalate and the bid prices hit the roof. It makes
better sense to collaborate for the same set of resources.
Palit other observations include:
- 69% of what we use from the time we get up and the time to go to sleep is made in China
- China’s neighbours are dynamic economies – Japan, Korea, Malaysia, and Singapore
- Except China none of India’s neighbour is an economic achiever; India thinks that it can grow without despite neighbourhood. India needs to match China pragmatism
- Trade deficit that India has with China is 25% of its overall trade deficit
- There’s an enthusiasm surplus but that is balanced out by trust deficit
- B2B = Good
- G2G = improving
- P2P = low
- India hasn’t had a situation where economics defuses political tensions as in the case of China
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