ECONOMIC HIGHLIGHTS
New Delhi, 29 September 2005
Lessons For Prosperity
CHINA MOVES FASTER THAN INDIA
By Dr. Vinod Mehta
A visit to Beijing and Shanghai gives
a feeling as if one is in Singapore
or Kuala Lumpur.
One sees high rise buildings on both sides of the wide roads, glittering
offices, posh hotels and good service culture. I was again in China after a
gap of 16 years. And these years the skyline of both Beijing
and Shanghai
has totally changed. So also the work culture.
Construction activity is getting on a feverish pace. One gets the feeling why India is not
moving at that pace?
It
is common knowledge that both India
and China
started their journey along the path of economic development almost at the same
time and from almost the same economic level, one under the democratic system
of governance and the other under one party rule. However, China
took to economic reforms almost two decades earlier than India. The reforms there are still being pursued
vigorously. In China the
Communist Party has become the catalyst for economic reforms, while in India there are
political groups that are still opposing economic reforms.
Since the introduction of economic reforms more than twenty
years ago, China
has traversed a long way in its development.
Before the introduction of reforms, China had wiped out illiteracy and
assured minimum level of social security, including health care to its
citizens. India
till date has not been able to eradicate illiteracy and assure a minimum level
of social security to all its citizens. China has seen vibrant economic
growth, over 9.4 per cent. We are still
struggling to reach 6 per cent growth rate.
The
industrial sector of China
has been enjoying a very high growth rate since the introduction of economic
reforms and the opening up of the Chinese economy. According to the data made available by the
State Statistical Bureau of China, the industrial sector has been registering
an annual average growth rate of 12 per cent. Beijing attributes this remarkable growth to
two factors. First, the reform in the
industrial sector was initiated by enlarging the decision-making powers of the
enterprises and relaxing of controls on the functioning of industrial
enterprises. This was followed by
privatization of the enterprises.
Secondly,
the introduction of huge amounts of foreign capital and the opening up of the
economy quickened the pace of China's
industrialization. The FDI in the construction sector as well as in infrastructure
is quite visible. One can see construction activity at a feverish pace in both Beijing and Shanghai. To quote the Chinese sources, "The
establishment of a large number of joint ventures and exclusively foreign
funded enterprises has brought in capital, advanced equipment and modern
management expertise, greatly enhancing the technological and management, level
of China's industrial enterprises, enabling the production of China's
manufactured goods to quickly catch up with or approach the world advanced
level and increasing exports by several fold."
During
my stay in Beijing,
a batch of state-owned companies “rolled out the red carpet for foreign
investors by launching a share-stake promotion conference.” As many as 156 small
and medium public enterprises with total assets of US $ 3.6 billion were opened
to all investors, according to China
Daily.
Beijing also claims that the gap between China and advanced countries in
terms of the overall industrial technological and equipment level has narrowed
by 10 to 15 years. As against this, the
reforms in the industrial sector in India have considerably slowed down
over the years. If we take the average
annual growth rate of industrial sector it is hovering around less than per
cent. Still there are many constraints
on the flow of foreign capital and technology in India.
The
public sector reforms and disinvestment in some of the public sector units are
floundering. The technology level of
Indian industries is still very low.
Though, no studies have been made to find out the technological gap
between India
and other advanced countries. One hunch
should be that the technological level of Indian industry could be 30 to 40
years behind the advanced countries.
The
agricultural sector of China
has also witnessed a very robust growth in the past two decades. It must be noted that unlike India where reforms in this sector are yet to be
discussed, the rural reforms went hand in hand and with industrial reforms in China. In the past 20 years, the average annual
growth of agricultural production in China has hovered around 6.7 per
cent. Before the reforms the China was net
importer of grain to meet its food requirements. After the reforms the country has been
continuously reaping good grain harvests with the output in 1996 topping 500
million tons. It may be noticed that the
landmass of China is bigger
than that of India, but the
arable land available to China
is just half of India’s.
It
is true that India
is able to meet its food requirements from its own sources. But the agricultural sector has not been
growing at the rate at which it should. It has come down to one per cent from
three per cent in the eighties. That is
why the agricultural experts fear that if India does not move now to raise
its agricultural output it may face severe food shortages in 20 years from
now. The average annual rate of growth
of agricultural sector has been hovering between three and four per cent for
the past 20 years.
Far
from reforms in the agricultural sector, we do not have any agricultural policy
at the moment. We are still dithering
over foreign investment in the industrial sector. The Chinese are going in for foreign
investment in the agricultural sector in a big way. This sector in China which was opened to foreign investment
has attracted large foreign investments.
According
to the Chinese sources nearly 60 per cent of foreign direct investment in the
country’s agricultural sector has gone into the developed coastal region. But now the Government is encouraging foreign
investors to invest in the agricultural sector in western and central China. The
Chinese feel that they would be able to increase the output of grain by 50
million tons in the next few years and achieve that it needs to invest between
20 and 50 billion dollars in the agricultural sector. Precisely for this reason it will encourage
foreign investment. In India, it would
be some achievement for the agricultural sector if we are able to remove all
restrictions on the movement of agricultural products within the country.
There
is very little information available on the agricultural technology being used
in China. But going by the fact, its arable land is
half of India’s
and is yet able to produce five times the grain output, shows that Chinese
productivity per hectare is much higher.
This should be a challenge for us and should afford us an opportunity to
increase agricultural output by devising appropriate strategies.
This
is not to say that everything is alright with the Chinese economy; it has its
problems and that corruption in China
is also rampant. There are areas and regions where poverty is acute and
unemployment relatively high. The non-performing
assets (NPAs) of the state- owned banks are reported to be much larger than the
NPAs of state-owned Indian banks and economists are expecting that it may burst
at any point of time.
Whether
the Chinese banks go bust or not, the above observations should make our nation
think seriously as to how we can match their growth and emerge as an important
economic power in the region. There is
an urgent need to push economic reforms in all the three sectors of the economy
viz., agriculture, industry and service.---INFA
(Copyright, India News and Features Alliance)
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