Will India Overtake China? No so Fast!
By Amandeep Sandhu
Global Beat Syndicate
BANGALORE, India--Can India overtake China?
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.
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.
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
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.
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.
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.
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
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.
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.
global integration is devastating this artisan class.
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.
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.
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.
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.