London, May 11: This isn’t the sort of thing anyone really wants to be told, that a place or country is some 13 years behind the great regional rival. But it is in fact true, as the Chinese Ambassador to India has pointed out, that India is about 13 years behind China in economic development.
The reason given is also true–India started to liberalize the economy around and about 13 years later than China did. But if we put aside any bruised amour propre we can actually see that this is excellent news for India. For now that India is indeed following in those liberalizing economic paths we can expect the next 13 years to follow that of China.
Not exactly and precisely of course, Marx was wrong, history does not repeat itself. But in general we can expect something like the same path to be followed. India should, as long as no one does anything silly, follow China’s path of economic development. Move from being a poor country to being most definitely middle income at the least.
This is of course something to be welcomed for it will mean over a billion of our fellow human beings living much better lives and why wouldn’t we be happy about that?
“Now the GDP of India is roughly that of China in 2004, some 13 years ago. China leads India by 13 years mainly because we started reform and opening-up 13 years earlier,” the Ambassador said while addressing a session at the United Service Institution of India here.
As to the equivalence and the times, that’s around and about right. I never take these international economic statistics too seriously as there are large problems in determining the actual output of something as complex as an economy. Most especially when so much is, as in India, in the informal sector. But the usual recorded GDP (at market exchange rates) for India in 2015 is around and about $2 trillion. The same number in China for 2004 is the same sort of number, around and about $2 trillion.
Given the roughly equivalent populations, that gives per capita GDP (again, at market rates, PPP or living standards are quite, quite different) either side of $1,500 for the two countries on the two dates.
There are, of course, huge differences, India is a democracy and China, well, umm, no, not really, eh?
But the economic observation is entirely correct. China stopped the Maoist idiocy in 1978 with Deng’s comment about it not mattering whether a cat is black or white but whether it catches mice.
The plans didn’t stop, there’s still a significant portion of the economy in those state owned enterprises and so on. But the real secret of Chinese growth has been not in those SOEs but in the fact that everyone else has been left to get on with things in what is almost certainly the most viciously free market economy on the planet.
Yes, even more so than Hong Kong, for the Mainland economy is less hampered (in a bad way) by such things as property rights, the rule of law and patent protections. These are going to cause terrible problems really soon now as the move from middle income to developed economy depends upon those very things.
But from peasant destitution to middle income, China’s done well and quickly. And they’ve done so by letting that free market capitalism rip, red in tooth and claw.
We might not describe India’s economy in quite the same manner but the over arching story is roughly the same.
The Licence Raj held back economic development as government tried to do too much. Manmohan Singh and Narasimha Rao changed that in 1991, beginning the process of dismantling that Raj. And that’s when the economic growth really started. And for the same reason. Government now left room for market processes to work, the room necessary for economic development to take place.
Yes, India is 13 years behind China and it is because the economic liberalization process started 13 years later. This is good news though–we don’t think that India is going to follow exactly the same growth path, a 5 times rise in GDP in only 13 years.
But at growth rates of 7 and 8%, instead of China’s 10%, a 3 times growth over that period, possibly a 4 times, isn’t out of reach. And the good news is that China, as S Korea, Japan, Singapore and so on before, show that it is possible. India started later than China but there’s really no reason at all why it shouldn’t get to the same place, even if a little later again.
(The image featured at the top is that Luo Zhaohui, China’s Ambassador to India)