Presently the story of the dragon and the tiger captivates the minds of people across the globe. This is where all the action is. And this is where most of the money in the world economy would probably come from. The dragon and the tiger are both busy to recapture 50 to 60% of the world economy as they once enjoyed till the beginning of 17th century.
There are various economic viewpoints about this story. There are good number of predictions about who would overtake whom and when that might happen. The environment is rife with speculation of all sorts. The projected trend graphs of GDP growth of the two countries provide one of the several examples of such intellectual debates and optimistic predictions.
But I look at this story from a completely different perspective. The interesting and gradually unfolding story is a story of thinking and demographics.
We have generally believed having a large population is an untenable proposition from economic and sustainability viewpoints. However, for the two most populous countries in the world high population proved to be a boon rather than a bane in times of crisis. As the graphs show both the dragon and the tiger survived the worst ever world economic crisis quite well and did much better than any other country keeping the growth rates ticking well above 5% while China actually clocked more than 9%, which is admirable by any standard. Both weathered previous economic storms like the Asian crisis. What helped them overcome such crisis time and again? Surely large population of both countries created a huge internal market for them to survive well without depending too much on exports. What helped them more was the existence of healthy agricultural economy contributing a large share to the national economy.
The present and the projected growth rate is good enough for both countries to keep doubling their economy every 7 years or so. If that be so, given China’s present economic superiority, India cannot overtake Chinese economy in the near future until something radical occurs, which is quite unlikely. I for one can’t see any hidden trump card up India’s sleeve.
One more thing is clear. Both the dragon and the tiger have decided to peg their growth to around 9% and keep it in a steady state situation. This is definitely a wise move considering overheating and collapse of the economy initiated by double digit growth rates. Economic experts seem to be unduly worried about slowing down of the Chinese economy. But China seems to harbor a completely different thinking about this.
What is interesting is the way the two countries want to take the well being of their people forward.
China is showing less and less interest in rapid industrialization which was their mantra from about 1978. They have had enough of it which has made them immensely cash rich nation. Now suddenly they no longer want to have it or rather slow down the process. This is a conscious decision. The decision comes at a time when they have almost cornered the major mineral resources across the globe. Sensing that they don’t need to accelerate too much, they are busy stopping polluting industrial plants and manually intensive labor oriented industries. They have been preparing for this moment for quite some time. Having developed their industrial base and the living standard of the urban people to an enviable position they are now turning their attention to the uplift of the vast rural population to improve their standard of living. In short after achieving a huge cash surplus, they now aim at balanced growth that calls for slowing down their economy to provide the time and resources to take up the job at hand in a planned manner. On the other hand they are also aiming to become the world’s foremost design center. The intent had been made clear by their huge investment in the ‘design thinking’ studies, the first country to do so at a national level. Strong political control at the center helps them do this better and rather easily. For the last three decades they have been busy copying anything from anywhere. This has now provided them the critical and necessary social skills to innovate and manufacture original economic artifacts that can rake in tons of money through intellectual efforts. Innovation and raising the national standard of living are their recent buzz words.
The Indian side of the great story is quite different. India is probably relying on something else. It is still relying on the old fashioned capitalistic approach of eternal cycle of higher production and higher consumption through rapid industrialization without realizing the fact that it needs time to develop an industrial climate that calls for careful thinking and planning at a national level. This is missing. What is happening at a national scale might be aptly described as staunch belief in ‘trickle down economy’. Keep making factories, somehow push out goods and the economy would flourish. But the results are not very encouraging. Fair to say India was a slow starter compared to China. They started this race at least ten years behind China. As on today the economic benefits have reached only the top 10% of the population from a previous level of 3% (as on 1990). This top 10% enjoy a standard of living comparable to that of the US. For the balance 90% poverty appears to be the destiny. There does not seem to be a firm plan in place to improve the lives of 90% of the population. This is a matter of serious concern. The growth rate, though impressive, does not appear to be inclusive. Innovation is taking a beating. This is probably a result of too much fragmentation within the country. Fragmentation and federal government impede innovation, which is not the case with China with no fragmentation backed up by strong central leadership. For India as of now, innovation does not appear to be the growth strategy though the economic importance of design is been slowly appreciated and recognized in small ways. Indian growth is heavily dependent on outsourced jobs which might dry up in no time. The development story so far in India is lop sided without any clear thinking on the part of the leaders and politicians. It is ‘go as you like’ for most. Go out and do something is the watchword. It is probably relying to much on spontaneity and serendipity of market dynamics, which as we have all experienced is not too reliable after all.