March 8, 2006 © The Center for War, Peace and the News Media. All Rights Reserved.


Will India Overtake China? No so Fast!

By Amandeep Sandhu
Global Beat Syndicate
(KRT)
BANGALORE, India
--Can India overtake China?

Not too long ago, India was often hyphenated with Pakistan in the news media. But the hyphenation has shifted: increasingly, India is now paired with China. Since 1978 the Chinese economy has averaged growth rate of 10 percent, while India has averaged 6 percent since 1991. Economic forecasters predict that the Chinese economy will overtake the US economy between 2030 and 2040, with India following in 2050.

A growing majority of commentators predict that India's democratic structure and the resulting transparency will allow it to overtake China, because China will eventually have to come to terms with the mismatch between China's economic dynamism and its political sluggishness. The services-led character of India's globalization and numerous fault lines among its diverse society, however, make a smooth Indian economic trajectory and eventual overtake of China questionable.

Indian economy's globalization is based upon services, which are more capital intensive than labor intensive. India's IT and BPO (Business Process Outsourcing) services sector employs only a mere million out of a workforce of 470 million. The manufacturing sector, on the other hand, provides employment to seven million as compared to 100 million in China.

The paucity of jobs in services-led growth will cause future problems for India. As rural population moves to cities, the relative lack of manufacturing jobs will result in a squeeze felt in urban areas. In contrast, the rural population moving to cities in Eastern China will find manufacturing jobs.

The urban-rural imbalance in India will affect the polity, slowing the pace of reform. The southern state of Karnataka, where India's Silicon Valley is located in Bangalore, portends the future.

The globalization of IT-sector in Bangalore has resulted in rapid urban growth while rural Karnataka has stagnated from draughts. Because of the rising anger among rural population -- which in India constitute two-third of population and decides elections by its numerical supremacy -- the Congress-led S.M. Krishna government that facilitated the rise of Bangalore lost power in the 2004 elections.

The succeeding coalition -- in which the powerbroker styled himself as a defender of rural interests -- antagonized Bangalore's IT industry. Results from the conflict are visible now: India's IT giant, Infosys, favors Hyderabad as its biggest center; SemIndia, the consortium for building a semiconductor center, has chosen to invest 3 billion dollars in Hyderabad.

Although it is often asserted that India's democracy allows it to manage diversity, a greater threat to India's growth can come from within. In the recent pass, India has experienced or is experiencing conflict in Kashmir, Punjab, North East India, and it experiences regular urban communal riots between Hindus and Muslims. China, in contrast, has seen stability -- except for Tiananmen Square uprising -- because of its underlying ethnic homogeneity.

In urban India Hindu-Muslim tensions have often resulted in riots. The 140 million Indian Muslims -- second largest Muslim population after Indonesia -- face higher poverty: with 40 percent Muslims versus 22 percent Hindus living on six dollars or less per month. A large number of urban Muslims work as artisans, because artisan trades came to India in wake of Muslim invasions from Central Asia.

India's global integration is devastating this artisan class.

Outside Bangalore, Ramanagram -- an erstwhile center for silk processing -- is a study in contrast to Bangalore's booming IT sector. When India lifted tariff restrictions under WTO obligations in 2000, cheaper Chinese silk flooded India, reducing the Muslim majority city to a ghost town as the silk processing units shut down.

In Varanasi -- long synonymous for Indian women with beautiful silk saris -- 100,000 mostly Muslim Indian weavers have lost jobs in face of Chinese silk imports. Some of them have committed suicide while others have to resort to selling their blood for survival. In Aligarh, 100,000 Muslim locksmiths have lost jobs in the past few years in face of cheaper Chinese locks.

Sociologists have shown that potential for conflict peaks in a society when rapidly rising expectations are not met. It is quite possible that India, with its lethargic job creation in manufacturing and increasing conflicts along urban-rural and Hindu-Muslims axes, will not be able to sustain a focus on reforms.

True, China has to worry about one big revolt resulting from the mismatch between its economic and political structure. But India can be stalled by a million little mutinies.


ABOUT THE WRITER
Amandeep Sandhu is a political sociologist who writes on South Asia and the Middle East, and is a Chancellor's Fellow at University of California, Santa Barbara.

© 2006 The Center for War, Peace and the News Media. All Rights Reserved. The Global Beat Syndicate, a service of The Center for War, Peace, and the News Media, provides editors with commentary and perspective articles on critical global issues from contributors around the world. For more information, check out http://www.bu.edu/globalbeat/syndicate/.

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