Five Lessons that India Can Learn From China

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After my recent trip to Beijing, I was wondering why it was that India continues to fall further and further behind China on every possible economic and social metric. Hiding behind our usual excuse of the pitfalls of democracy versus an authoritarian regime does no one any good. We need to find a way forward within the confines of our political system. There is no other way.

Here are five steps that can be taken within our legislative process. There is no reason that a BJP government committed to economic progress cannot make this happen.

1. Investment in infrastructure: The Indian government should invest $50 Billion from its reserves of over $300 Billion in infrastructure. Given the current low price of oil, we now have a once-in-a-century opportunity to make this investment. If oil prices do go back up, we will need to conserve all our reserves for a rainy day—this opportunity cannot be squandered. Having a great road and rail infrastructure will make it possible for the economy to grow at a pace needed to lift tens of millions out of poverty. Without improving infrastructure, it is not possible for any other policy to have its intended effect. And this fits in nicely with the Congress government’s stated policy of providing work for all those who request it. Infrastructure creates millions of jobs.

2. Make public sector units (PSUs) efficient: The government would like to escape its responsibility by talking about disinvestment—it has never come close to meetings its disinvestment targets any way. Keep in mind that 80 percent of the Chinese economy is state run. The private sector in China is only 20 percent of the GDP. So instead of failing miserably at disinvestment, it is better to take this issue head on by appointing successful private sector leaders to drive efficiency in these public sector organizations. They do not have to meet the standards of Infosys or Airtel—but even a 10-20 percent improvement in operations can give a massive payoff. Imagine the boost to the national image by a better run Air India or a State Bank of India. There are enough patriotic people who will work without pay to serve the country.

3. Protect certain new industries, not the old: I was surprised to see that Google and Facebook are banned in China. It is not at all surprising then that some of the largest internet players now are Chinese because they have been allowed to flourish without external competition until they reached scale. Alibaba, Tencent, and Baidu could not have reached their current scale without such protection. What India has done is to protect the kirana stores from competition but not eCommerce. This makes no sense. If you must keep protecting kirana stores by stopping international chains from coming to India that is fine. However, allow our leading eCommerce players to flourish by clarifying relevant laws and also giving them protection from foreign players. Similarly, with smartphone handset makers—there are some aggressive Indian players that are coming up with great new designs and models. Let them build market share in India, the world’s largest market for smartphones, instead of letting the Chinese players squeeze them out. I know this protectionism failed for India when we tried it in the car industry, but that is because it was a state run effort whereas I am talking about private players being offered protection for ten years or so.

4. Enforce the Offset policy: The Indian government has stated that 30 percent of any procurement in defense, aerospace, and other strategic sectors must be sourced locally. India intends to spend over $100 Billion in these sectors over the next few years but can anyone explain how say $30 Billion of this will be sourced locally? Our entire manufacturing capability in these sectors is only a fraction of that. Just making sure that the Offset policy is implemented by Boeing, Dassault, and others benefiting from Billions of dollars of purchases will be enough to give a much needed boost to the Make in India program. Currently very few companies are actually fulfilling their Offset obligations, making this entire program an exercise in paperwork rather than real results.

5. Publish a monthly corruption scorecard: The leading Chinese newspapers carry a regular column titled “Corruption Scorecard” where they list the number of officials caught for corruption, the types of corruption disrupted, and other interesting statistics. This enables their citizenry to track progress on how the government is doing on corruption. I am not arguing that China is less corrupt than India. I am only arguing that bringing this topic to the forefront in terms of highlighting progress made will help move us all towards a less corrupt and more transparent India.

I realize that this is a risky article to write since most Indians believe that there is nothing we can learn from China. Our popular view is that if not for our inefficient and corrupt government, we would have left China in the dust. But the reality is what it is and we need to find a way to make progress and China has some very useful lessons for India.The BJP government is hiding behind its lack of support in the Rajya Sabha to implement its reform program. However, a lot can be done without legislative approval and the government needs to show its commitment to economic progress by implementing such ideas.