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India & China: Looking Ahead

(Comments contributed by me to a futuristic study being made by a US think-tank )

(1). Both India and China started in the 1950s as bureaucrat-dominated States. The aspiration of many young Indian and Chinese was to become a bureaucrat. Government service provided a certain status in society though not high emoluments and a security of job. As the two countries embarked on their economic development in the 1980s, the bureaucrat-dominated States started giving way to entrepreneur-driven States. This transformation was faster in China than in India. The emoluments in the world of business were mind-boggling, the opportunities for travel were many and the quality of life was much higher than in the world of bureaucrats. One saw in both countries the phenomenon of government service losing its attraction for the young people. Particularly in India, the better-educated upper class youth, which used to dominate the bureaucracy, started gravitating to the private world of business and the not-so-well educated youth from the under-privileged classes, who could not compete in the past against the better-educated upper classess, found the world of bureaucracy opening up to them. The world of business in which merit and quality determined one’s ability to enter and prosper, remained closed to the under-privileged and under-qualified. As the under-privileged, who entered Government services started doing well despite their belated start at the bottom of the social ladder, they started demanding that they should be given an opportunity to enter the world of business too despite their perceived lower qualifications and merit. The business world is strongly opposed to this on the ground that the sacrifice of merit for recruitment in order to favour the under-privileged, will dilute India’s competitive edge—-particularly against China— and further aggravate the gap between India and China. As the hitherto under-privileged classes acquire more and more political power, the demand from them for equal job opportunities in all sectors of the economy will increase.The Chinese society, which is more homogenous than the Indian society, does not face this problem.

(2).But China faces a different kind of a problem. In India individual opportunities are not equal, but in China they are to some extent. But in India, regional opportunities are more equal than in China. In China, Deng Xiao-Ping first opened up the coastal areas. He told the Chinese people in the interior provinces: “Let them get rich first, you can get rich later.” Since it was an authoritarian State, the people in the interior had no other option but to accept it. India being a democracy, no political leader can tell the people of one region:” Let the people in another region get rich first, you can get rich later.” He will lose the election. He is , therefore, forced to pay equal attention to all regions. Indian economic development is much more widespread than in China where till recently it was focussed on the coastal areas. Foreign observers were dazzled by the economic miracle in the coastal areas without realising that in the interior areas, which are developing only now, the dazzle was not there. In India, the kind of dazzle which one sees in China, was not there because the fruits of economic development were spread across a much,much larger area than in China. When the spread is over a large area, it appears thin and does not dazzle.

(3). The educated Indian youth had a head start over the Chinese youth because of its command of the English language. The quality of English education in India has gone down during the last two decades, but despite this, the command of the English language in India is the highest anywhere in Asia. As the economies all over the world shifted their focus from the manufacturing to the services sector, the demand for qualified and English-educated Indian youth went up steeply. In contrast to the Indian youth, the educated Chinese youth found the opportunities in the services sector very limited. It gravitated to the low-tech manufacturing sector where inadequate command of the English language is not a handicap.

(4). This phenomenon was reflected in the educational sector. In India, IT Schools, business management and financial services schools, hospitality sector schools etc mushroomed. In China technical schools imparting manufacturing and industrial skills grew up. The Chinese have now realised that if they have to maintain and expand their lead over India, they have to improve their command of the English language and have similar schools of excellence in mind or knowledge-driven technologies and not in hand-driven or skills-driven technologies. There has been a steady increase in the number of Chinese students coming to India to learn English. Some years ago, when A.B.Vajpayee was the Prime Minister, Dr.Murli Manohar Joshi, his Minister for Human Resources Development, had visited China. His Chinese counterparts requested him to depute a large number of English teachers from India to China to launch a crash programme for improving their command of the English language. Their request was considered at a very high policy-making level in New Delhi and it was decided not to accept it since it was felt that it would not be in India’s interest to help the Chinese catch up with India in this field. This attitude has since changed and more and more Chinese students are coming to India—particularly to the South— to improve their English.

(5). The economic development in the two countries took different paths. In China, the emphasis was on the development of exports-dependent and exports-driven manufacturing sector and infrastructure development. In India, it was on Indian consumer-dependent and driven manufacturing sector and the services sector. China’s is a skills-driven economy. India’s is a knowledge-driven economy. Infrastructure development has been rotten in India. The results: First, the Indian economy is not as dependent on exports as the Chinese economy is. The current drop in consumer demandin the US and the EU countries has caused more hardships in China thanin India. Second, a much larger prosperous middle class in India thanin China. Third, distortions in the education sector. India has been producing more IT experts and business executives than China. China has been producing more construction and other engineers of high quality than India. Four, the beginning of a consequent inter-dependence. Indian software experts helping Chinese companies and Chinese engineers working in Indian construction projects such as in the gas pipeline and electric power sectors.

(6). As the manufacturing sector and its exports boomed in China, linkages developed between the Chinese and US economies. The Chinese manufacturers became dependent on the US consumers. The US Government became dependent on the Chinese purchase of its Treasury bonds. The current economic hardships in China have made Beijing realise the dangers of over-dependence on the US market. It has been trying to learn a lesson from India by expanding the domestic market. Thus, one finds the Chinese trying to reduce their dependence on the US economy, but the US wanting more Chinese money flow into its bond market to keep its economy stable. The past Chinese dependence on the US market gave the US a handle to moderate China’s strategic policies whether in respect of Taiwan or North Korea or some other issue. If the Chinese manage to reduce their dependence on the US market, this handle will get increasingly weaker. If the US dependence on Chinese money flows increases, its ability to enforce moderation on Chinese strategic policies will be further weakened. The medium and long-term strategic impact of the current economic crisis in so far as it relates to the US and China needs careful study. One is already seeing initial signs of this impact in the US silence on issues such as human rights violations in Tibet and Myanmar since the economic crisis started.

(7). While the Indian manufacturing sector has no unhealthy dependence on the US market, the continued prosperity of the Indian IT sector is linked to the US services sector and the policies of the Obama Administration in matters such as outsourcing. The signals in this regard are worrying for India. Whereas in the case of US-China, the dependence is mutual, in the case of US-India, the dependence is a one-way street with India more dependent on the US policies than the other way round. The Obama Administration’s action against outsourcing can create for the first time in recent years disenchantment and unhappiness against the US and slow down the development of the strategic relations between the two countries.

(8).India being a democratic state, the needs of the common man have priority over the needs of the State. China being an authoritarian State with aspirations of becoming the strategic equal of the US, the needs of the State have priority over those of the common man. Thus, the Chinese Armed Forces are never short of funds for their modernisation. The Indian Armed Forces are perpetually short of funds. This has given China a head start in the development of its strategic sectors. Its focus has been on strengthening its naval and space capabilities. It thinks that it is the naval power, which enabled the US become a super power. It is determined to become the equal of the US in naval capability and presence in all the seas of at least the Asian region. It thinks space related and based military power will determine the future strategic equations in the world.

(9). It is not as if China is not paying adequate attention to the IT sector. It is, but its focus is on the use of its IT capabilities for strategic dominance. India’s development of its IT capabilities is for the benefit of the common man. China has been concentrating more on the malign uses of its IT capabilities by way of producing a capable corps of hackers and cyber warriors. India has been concentrating more on the benign uses of its IT capabilities as inputs for improving the lives of its people, for better health care etc. What impact this will have on India’s emergence as a significant strategic power? This question is not receiving in India the attention it deserves.

(The writer, Mr B.Raman, is Additional Secretary (retd), Cabinet Secretariat, Govt.of India, New Delhi, and, presently, Director, Institute For TopicalStudies, Chennai. E-mail: ).

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