China lagged India in the 1960s, was behind us in the 1980s, but has now overtaken us by a huge margin.
The latest comparison by CRISIL shows India’s economy was 1.75 times bigger than China’s in 1960. By 1980 as well, India’s economy was $0.3 trillion, while Chinese was only $0.2 trillion on a purchasing power parity (PPP) basis. However, by 2013, the Chinese economy had become 2.7 times India’s. By 2018, the Chinese economy will be more than $20 trillion (PPP), while India’s will not even touch $8 trillion, the study noted.
Can India do better by forging closer ties with China? Indians by and large are in a dichotomous mood. On the one hand, they despise Chinese goods while making political statements; on the other, they can’t help buying them, from toys to electronic gadgets.
Industrialist Ratan Tata presses for more collaboration. “We both have large population, we both have tremendous economic disparities, which also give us great market potential,” Ratan Tata, former chairman of India’s salt-to-steel conglomerate Tata Group, said on the sidelines of the Boao Forum for Asia.
“We [China and India] can create an economic superpower,” Tata said. “China has developed technology that India could use, while Chinese investment in industries such as infrastructure and telecommunications would help create jobs and boost India’s economic growth. This requires the endorsement of both governments. But there is no great desire for the two governments to work together. For example, there is no trade agreement to intensify bilateral traffic,” Tata said.
India’s trade deficit with China in the first three months of this year totalled US$5.9 billion, according to China’s customs data. Figures released by India’s ministry of commerce and industry showed the trade deficit in March widened to a five-month high of US$10.5 billion as exports contracted. Economic growth in China and India has been slowing, though to a much greater extent in India. China’s current annual target is about 7.5 per cent while India’s growth rate has slumped to about 5 per cent from double-digit figures of past years.
Will or can the next government India change the scenario drastically? “China will be a really important economic partner for India, and despite the fact that Narendra Modi has made some strong statements with regards to territorial incursions in disputed territories, from China, Modi has also during his time as chief minister, made four separate state visits to China and has built up economic links between his state and China,” Lowy Institute Danielle Rajendram tells a foreign media house.
Beijing uses commerce, soft loans and technical assistance for its major projects to make inroads in markets across the globe while Indian businessmen are troubled not only by high taxation, over-regulation and high rate of interest on borrowing, but also by constant harassment by rent-seeking politicians and corrupt bureaucrats.
The US, whose relations with India had improved remarkably when India had the National Democratic Alliance (NDA) Government despite the nuclear tests referred to as Pokhran II, could have helped ease the pressure from China. But the recent bilateral dispute over the arrest of an Indian diplomat in New York revealed that the relations have soured again.
The flagging Indian economy — about a third of the size of China’s — is a reason for Washington’s lack of interest. This gap partly owes to emphasising swadeshi (indigenous or self-sufficient economy) in sectors where it is unwarranted. Indian policy makers still do not appreciate the economy-military correlation to the extent required. Big investments by a foreigner means it will be in the interest of his country not to be hostile to India. If India had had larger investments from the West led by America, the latter would pressure hina more to have freindlier ties with India.
Since the famous Jaswant Singh-Strobe Talbott bonhomie, India has dedicated neither the external affairs minister minister nor a high-ranking diplomat to specially cultivate Indo-American relations. Defence sales and joint military exercises are thriving, but that again benefits the US more and drains out India. As for the European Union and the UK, both appear more interested in India than vice versa.
This seems about to change. The Congress manifesto still seeks to encourage friendly relations with socialist countries, refusing to take lessons from the economic slowdown and constant military heckling by neighbours. Defeat of this party, known for an outdated political philosophy both for domestic and international purposes, is imminent in the Lok Sabha elections of 2014 that are half over.
The most likely replacement, BJP prime ministerial candidate Narendra Modi’s repeated insistence on indigenous production of military hardware and his constant encouragement to local businessmen that their grievances would be looked into hold a lot of promise for the future of India’s economy, should the NDA form the next government. Modi has foretold the pursuit of a tougher line on ongoing border disputes with China; he wants to see a strong India that cannot be browbeaten by other powers. The BJP manifesto talks of halting certain countries riding roughshod over Indian interests and hints at a revision of India’s doctrine of “no first use” of its nuclear weapons.
Of course, as China’s dealings with the Indian province of Gujarat suggest, mutual trade will not just continue; it will prosper, but not with China gaining more than India from the deal.