CAN INDIA OUTSHINE CHINA IN NDUSTRIAL AND ECONOMIC GROWTH ?

In recent time, there have been several reports by international agencies including International Monetary Fund, stating that?economic growth in India is showing ?upward trend ?and is higher than several ?countries in the world. While developed countries like USA, UK and China are facing recessionary trends and inflationary pressure, it is said that India’s economic growth profile is intact and is improving steadily.?These observations from credible global agencies have?created a feeling of euphoria in India , as if Indian economy is now at the top of the world.

?View of global credit rating agencies on India’s economy :

?According to World Bank , the services sector and the infrastructure sector are the fastest?growing sectors in India. There is still a huge structural agenda in India to make growth more inclusive . Private investment?from abroad is needed to be increased. Government has done a lot to improve the social protection but that by itself not enough.

?According to Asian Development Bank, between 2015 and 2019,India’s contribution to GDP growth in developing Asia was 22%, while China’s contribution was 53%.?The rapid growth?in India reflects healthy domestic consumption which will be further boosted by tax cuts.?India will be less affected by the slow down in the advanced countries, since exports have limited role in the Indian economy.

?India - A few positive pointers

?Of course, India is the fifth largest economy in the world and is well placed to achieve spectacular growth of it’s economy in the coming years.

?In the last nine years?after Prime Minister Modi has taken over, several reform measures have been introduced and number of infrastructure projects have been launched , apart from social welfare measures to lift the countrymen from poverty level.?

?Defence shipments have risen by more than ten times since?2016.?In 2016-17, defence exports stood at Rs.1521 crore and reaching Rs.15920 crore in 2022-23.

?India’s cumulative solar module manufacturing nameplate capacity has more than doubled to 38 GW in March,2023 from?18 GW in March,2022

?Now, India is the largest provider of generic drugs globally.

?On May,8, 2020,?Indian Council of Medical Research launched Made in India COVID Vaccine Campaign and Indian pharma companies produced massive quantity?of COVID?vaccine in?very short period , not only for India’s needs but for?several countries in the world.?The world was pleasantly surprised to see?India’s?such achievement

?While India is a net importer of petrochemicals and intermediates, India now has become a net exporter of diverse range of speciality chemicals.

?Government of India has sanctioned Rs.40,900 crore to over 80630 accounts for the Start Up India Scheme in the last seven years, which are yielding results?now.

?There are so many other pointers such as in space research and so on.

? Comparison of India with China

?Probably, the best way of assessing India’s?economic and industrial?growth profile and measuring it’s performance and future prospects would be to compare India with China, since the economic status of India and China around a ?few ?decades back were almost at the same level and both are highly populated countries with high population density?and reasonable level of?natural and mineral resources.

?Of course, India is heavily dependent on import of crude oil and natural gas, which are essential input?to sustain industrial and economic growth, for it’s requirements and so is China.

Factors influencing ?China’s spectacular progress in the last three decades

China?has a totalitarian regime, with media being heavily censored , personal freedom of people severely curtailed?and rule of law by force rather than by consent.

?The ground reality is that China is pretending to be a communist country and it is so only in ?name and is virtually adopting the policies and methods of capitalist economy.

?Foreign direct investment?(FDI) has been an important part of the Chinese economy since?1980s.??To accelerate the process of opening to foreign capital and technology, the Chinese government has been providing favoured treatment to foreign direct investment. That include tax incentives and loosening of administration restrictions.

?Realising that China needs massive overseas Investment and well developed technology from abroad to exploit it full potential, from 1980s onwards, China ?liberalised it’s economy to the extent of ?any other capitalist economy and threw open it’s market and investment ?potential to international and?multinational companies.

?As multinational companies are all the time looking for market openings, invitation from Chinese government became irresistible attraction for them. Several of them came to China with huge investments and updated technologies, which immensely benefited China in variety of ways including technology gain. What was another attraction for multinational companies is that China strictly maintained it’s promises ?to them and ensured?well structured and?orderly political and economic climate , so that multinational companies can comfortably work and stay in China.

?Even as multinational companies came in a big way to China, China also ?encouraged and facilitated the growth of domestic companies,?so that many of the domestic companies ?could acquire the technological capability by learning from multinational companies to compete with the multinational companies in China itself in the course of time. At the same time , China continued to invest in public sector companies like Sinopec and encouraged collaboration between domestic companies and overseas companies.

?Under such ?conditions,.today China’s industrial ??and economic structure is an elegant mix of private owned domestic companies, government owned public sector companies and multinational companies as well as joint ventures.?The fact is that all these four entities are complimenting each other and there ?appears to be no conflict of interests between them.

?Today, the confidence level?of the multinational companies?and overseas organisations ?in the stable policy of Chinese government is so high, that these companies from abroad are contributing to further growth of Chinese economy and technology standard in significant way.

?All said and done, the underlying reason for spectacular economic and industrial growth of China is that China has thoughtfully created a situation, which is a win win situation for both China and multinational companies and overseas organisations.

?Can India match China ?

Though India has made significant progress in multiple directions, as outlined above, the question is whether India can catch up with China’s present level of growth and outshine China at any time in future.

India is endowed with large??land area and coastal belt , different climatic and soil conditions ,?mineral resources , well established?agricultural base and “army” of?scientists, engineers and technologists. Certainly India has the potential to match China in economic and industrial growth. The question is whether it can happen?

?However, the ground reality is that India lacks large scale investment capability and also lacks well developed technology to realise its full potential.?Therefore, it is absolutely necessary that India has to create appropriate conditions to make it attractive for overseas investors with updated technology to invest and operate in India.

?Further, what is required to achieve big leap forward?in India is that India should exhibit ,governance capability ,?ensure growth oriented political structure , promote ?innovation and R & D capability.?Further, India has to create a progressive work culture climate, where countrymen?would be committed to attain sustained growth ?by hard efforts, similar to what Chinese people have exhibited in the last few decades.

?In this context , one cannot but point out that in China , apart from the proactive policies of government of China, people in China responded to the opportunities by exploiting the developing favourable conditions.?The question here is whether Indians can emulate Chinese citizens in such greed for results and achievements.

?An issue in India, which China does not have, is the democratic structure in India and the unrestricted freedom of speech and action enjoyed by the citizens. As a result, every step of the government in India become a matter of debate and counter view and in recent years , several massive projects have been stopped or delayed or prevented from operating in India due to agitations and protests. It appears that the country is losing industrial and economic opportunities due to such permissive conditions and many wonder whether India is paying a big price due to it’s democracy.

?Often government policies are revised or changed due to political?and other pressure and such of conditions is also a matter of concern to overseas investors.

?In such conditions, the multinational companies?and investors from abroad face sort of uncertain conditions and cannot get the needed level?of confidence to operate in India, similar to what they enjoy in China.

?With frequent elections and multiple political parties and number of political parties being family controlled, development of vested interests in Indian democracy structure have become a hurdle for India’s progress.

?India has the potentials in multiple ways to achieve the type of progress that China made. But it appears that India’s progress would be much less than the potential level, in view of ?the present political structure and the mind set to?force?decisions by one group or the other, ?sometimes even without ?having larger economic interest of the country in view.?This is a matter of high concern.

If such conditions were to continue to prevail and would not be checked, the economic and industrial growth of India would be much less than the potential level and India outshining China in economic and industrial growth would only remain as a dream.

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N.S.Venkataraman

Director

Nandini consultancy Centre

Email:- [email protected]