NYT
_Steven Rattner_
(http://opinionator.blogs.nytimes.com/category/steven-rattner/) | January 19,
2013
India Is Losing the Race
As recently as 2006, when I first visited India and China, the economic
race was on, with heavy bets being placed on which one would win the
developing world sweepstakes.
Many Westerners fervently hoped that a democratic country would triumph
economically over an autocratic regime.
Now the contest is emphatically over. China has lunged into the 21st
century, while India is still lurching toward it.
That’s evident not just in columns of dry statistics but in the rhythm and
sensibility of each country. While China often seems to eradicate its past
as it single-mindedly constructs its future, India nibbles more judiciously
at its complex history.
Visits to crowded Indian urban centers unleash sensory assaults: colorful
dress and lilting chatter provide a backdrop to every manner of commerce,
from small shops to peddlers to beggars. That makes for engaging tourism, but
not the fastest economic development. In contrast to China’s
full-throated, monochromatic embrace of large-scale manufacturing, India more
closely
resembles a nation of shopkeepers.
To be sure, India has achieved enviable success in business services, like
the glistening call centers in Bangalore and elsewhere. But in the global
jousting for manufacturing jobs, India does not get its share.
Now, after years of rocketing growth, China’s gross domestic product per
capita of $9,146 is more than twice India’s. And its economy grew by 7.7
percent in 2012, while India expanded at a (hardly shabby) 5.3 percent rate.
The New York Times
China’s investment rate of 48 percent of G.D.P. — a key metric for
development — also exceeded India’s. At 36 percent, India’s number is robust,
particularly in comparison with Western countries. But the impact of that
spending can be hard to discern; on a recent 12-day visit to India, not many
rupees appeared to have been lavished on Mumbai’s glorious _Victoria
Terminus_ (http://whc.unesco.org/en/list/945) , also known as Chhatrapati
Shivaji
Terminus, since it was constructed in the 1880s. Parts of Mumbai’s recently
built financial district — Bandra Kurla Complex — already look aged,
perhaps because of cheap construction or poor maintenance or both. It’s hardly
a
serious competitor to Shanghai’s shiny Pudong.
China has 16 subway systems to India’s 5. As China builds a superhighway to
Tibet, Indian drivers battle potholed roads that they share with every
manner of vehicle and live animal. India’s electrical grid is still largely
government controlled, which helped contribute to a disastrous blackout last
summer that affected more than 600 million people.
Yet Morgan Stanley stands resolutely behind its 2010 prediction that India
will be growing faster than China by the middle of this decade.
It isn’t going to happen, India’s better demographics notwithstanding.
For one thing, many of India’s youths are unskilled and work as peddlers or
not at all. For another, despite all the reforms instituted by India since
its move away from socialism in 1991, much more would have to change.
Corruption, inefficiency, restrictive trade practices and labor laws have to
be
addressed.
Democratic it may be, but India’s ability to govern is compromised by
suffocating bureaucracy, regular arm-wrestling with states over prerogatives
like taxation and deeply embedded property rights that make implementing
China-scale development projects impossible. Unable to modernize its horribly
congested cities, India’s population has remained more rural than China’s,
further depressing growth.
“China” and “corruption” may be almost synonymous to many, but India was
ranked even worse in corruption in Transparency International’s annual
_Corruption Perceptions Index_ (http://www.transparency.org/cpi2012/results) .
At its best, the Indian justice system — a British legacy — grinds
exceptionally slowly.
To be sure, summary executions don’t occur in India, and its legal system
is more transparent and rule-based than China’s. But a recent visit
coincided with the tragic gang rape of a young Indian woman that led to her
death;
the government’s ham-handed initial response was to ban protesters from
assembling and impound vans with tinted windows like the one in which she was
abducted.
India’s rigid social structure limits intergenerational economic mobility
and fosters acceptance of vast wealth disparities. In Mumbai, where more
than half the population lives in slums often devoid of electricity or running
water, Mukesh Ambani spent a reported $1 billion to construct a _27-story
home_
(http://www.businessinsider.com/antilia-mumbai-most-expensive-house-mukesh-ambani-2012-5?op=1)
in a residential neighborhood.
Don’t get me wrong — I am hardly advocating totalitarian government. But
we need to recognize that success for developing countries is about more
than free elections.
While India may not have the same “eye on the prize” so evident in China,
it should finish a respectable second in the developing world sweepstakes.
It just won’t beat China.
--
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