Fiery dragon, sleeping tiger

Compared to China, India’s manufacturing is in the doldrums, engineering in the dumps, and its future bleak. No amount of self-praise will change that.

By Amarjit Singh

It's not enough to know simply that China is industrially and economically ahead of India. It is, however, important to realise that China and India were neck-to-neck in their per capita income all the way through their formation till 1991, at which time China took off like a meteor, leaving India in the lurch: now, China's per capita income is twice that of India's (See Fig 1). The fact is that the two countries are somewhat identical in their humble roots and have effectively the same population burden. Why is it, then, that China has surpassed India so convincingly? Currently, China is running laps around India, while India is well known as the “lazy boy of Asia”. The reason: in the early 1950s, India was ahead in its infrastructure and institutional capabilities, so much so that Southeast Asia was India's backwater, and the Indian rupee ran in Bahrain and Kuwait; today, all countries from West Asia to Southeast Asia are richer than India (with the possible exception of some of the impoverished South Asian countries). How is it that Asian nations born around the same time as India— such as Indonesia, the Philippines, and Egypt—are two times richer; Thailand, four times, Malaysia, eight times; South Korea, 23 times; Taiwan 24 times; and Israel 28 times? What is it we can't do without making excuses?

China's steel production is five times that of India’s, cement production six times, coal production four times, and electricity production three times. India was the first country in Asia to begin using nuclear power for electricity, while China did not use nuclear energy for electricity till 1980. Despite that handicap, China has 30 nuclear plants under construction, and 15 more planned, outstripping India in an area in which India had the lead by far. In 2004, China's industrial growth rate was 30.4 per cent, while India's was a consolatory 6.5 per cent. What makes us so proud of our growth rate of 7 per cent per year, when China's is 10 per cent, and when there are 40 nations, including stumbling Ethiopia and nondescript Chad, registering more than 6 per cent growth per year? Yes, we have been growing in India—of that there is no doubt. What we have today is more than what we had yesterday, but others in the world have come up faster than India, leaving India ranking behind in relative terms to where it was in 1950. What a pity, given the talent we supposedly possess.

We are proud of our foreign exchange reserves of $140 billion, but China's are six times more. China's foreign direct investment is $60 billion, while India's is a struggling $5 billion. What's worse, India receives only 3 million tourists a year, while China gets 86 million (tiny Singapore, 5 million; minuscule Hawaii, 7 million). Assuming that each tourist spends at least $1,000 per visit, it means that China has more than $86 billion injected into its economy. Why should tourists wish to visit dirty India with its water problems, pollution, poverty, and disorderly traffic? We are proud of our mobile phone revolution, but we never look outside, do we? To our 40 million mobile phones, China has 300 million; to their 50 million residential Internet subscribers, India has 5 million. The gap between China and India has never been higher, and is increasing. Today, China's economy is 4 per cent of the world’s, compared to India's 2 per cent; by 2025, China will have cornered 15 per cent of the global economy, while India will have 5 per cent. Thus, you can see that India's situation is poised to deteriorate compared to China's—and let's not forget that we were the same in 1955, 1962 and 1971.

We harp a lot on our IT and service successes. Nothing deserves a greater laugh. By 2010, we will have $80 billion of the tech and services market compared to China's 8 billion (yes, we are ahead of China in this), but China's manufacturing exports will be at $1.6 trillion, compared to India's paltry $200 billion. Even if we could wave a wand and increase our tech and services by a factor of 10, we would still have half the exports of China. The message here is that our manufacturing is in the doldrums, our engineering in the dumps, our future in the pits. We have not become an industrial nation and are not set in the direction to becoming one.

Actually, the whole picture is even more dismal. Our per capita income grew at an insufficient 2.8 per cent per year between 1952 and 2002—after discounting for inflation, if the RBI's numbers of inflation over that period are to be believed. If the inflation were actually worse, say 10 per cent, which it was in the late 1980s and early 1990s, we are worse off today than we were in 1952. This is echoed in the fact that in 1965, we supposedly had 60 per cent of the population living below the poverty line; today, we have 80 per cent (World Bank criteria). The rich have gotten richer, the poor, poorer. "Mainstream India" is not in the urban centres, or among the educated and the corporate elite—mainstream India lives in the hinterland, cannot read or write, lives on two meals a day or less, and has its temperatures rising. India has failed to provide opportunities for its people, and nature (read Karma) is bound to take its course in this regard. All we can do is wait to see how.

The truth is that India has the worst case of HIV/AIDS in Asia, with every one person out of 100 infected, and rising—a rate of nine times that of China, while Thailand, which had the reputation of being the worst, is improving. China spends more than twice that India does on per capita health expenditure, and India's maternal and infant mortality are the worst in South Asia. We lag even behind Bangladesh. Consequently, India has succeeded precisely where it shouldn't—in reaching the bottom of the heap in social indicators, women's health, and sickness.

Indian literacy has risen since 1950, but fallen to the levels of Sudan, Rwanda, Malawi, and Burundi, ranking 146th in the world; India's corruption index ranks alongside Mali, Armenia, Iran, Benin and Tanzania; India's per capita income sits alongside Senegal and Pakistan; and it's competitiveness is in the same low league as South Africa and Indonesia. A correlation analysis reveals that corruption is inversely proportional to GDP growth, environmental sustainability, competitiveness and literacy. This refutes those who say that productivity is not affected by corruption. The "Indian boy" has not been growing at quite the same pace as other boys. Who can say that India has not caught a disease? Why should we not fear for its survival?

Yet, there are influential people in India who would deny the data—all the above data that is actually researched and sourced to credible national and international agencies. Now, who lives most in denial here? There are five categories of those in denial: the corporate elite, the government, military officers, the educated, and anyone well-to-do or up-and-coming. The reasons are different, but nonetheless obvious: the irony is that it is educated India that has been holding India back. Moreover, corruption has sucked the blood and strength out of India; and now India sucks poison: 1,000 years ago, the Turks and Afghans looted the country, then the Mughals, and then the seductive British, but now we are looting ourselves. Which nation can succeed when its decisionmakers don't see reality?

Yes, India constructed 2.6 million km of roads between 1951 and 2001, but this only represents a compounded growth rate of 4.3 per cent per year, which is not high enough to beat poverty; but the vehicles on its roads increased from 306,000 to 55 million, representing an 11 per cent annual growth. Our roads are congested and overburdened, the pollution intolerable, we have 100,000 fatal accidents each year—a fate worse than natural disasters that hit India every now and then, yet no one takes this catastrophe seriously enough. Our railways have expanded, but route length, coaching vehicles, and wagons have grown at only 0.3 per cent to 1.6 per cent per year, while demand by goods and passengers has grown 2.6 per cent to 3.5 per cent. China had three times less rail than India in 1951, but by 2001 had surpassed India's rail length. Today, China sends 4.5 times more goods by rail compared to India, 10 times more airfreight, and 16 times more container freight. And, now, the residential sector per capita consumption of electricity in India is even lower than the whole aggregate of Africa. Our electricity distribution losses are the highest in the world at 27 per cent. India is fast becoming the Africa of yesterday.

I fear to talk of our environment because we are sitting and walking on decomposed rot that will suddenly overwhelming us. The sacred Ganga is already unfit for bathing at Varanasi; the Yamuna is unfit for drinking, even by animals, downstream of Delhi. The air pollution of PM10—consisting of sulphur dioxide and nitrogen oxides—is the worst in the world in New Delhi, resulting in rampaging respiratory diseases. Our wastewater treatment facilities are more than 60 per cent below demand. Our waste landfills are an estimated 12 times fewer than they should be, and none of those constructed in the earlier years ever had a lining to prevent leaching. The result is that all people in the major cities have been drinking contaminated groundwater for 50 years. Our groundwater tables are depleting far faster than is tolerable. The threat of viruses and diseases has never been higher. It appears that the Indian Tiger is napping on the job.

India needs dramatic and immediate reversals—sweeping changes in economic, industrial, defence, technology and taxation policies. We have to think outside the box. On average, it takes 80 days in India to start a business, compared to 35 in China; and we require 43 permits at the Central government level and 57 at the state level to start a power plant, with baksheesh at every step. Is this the mark of a civilisation? India has not woken as its poet Rabindranath Tagore prayed for it to.

Economically, a McKinsey report assessed that India could grow 4.3 per cent faster if it did not over-regulate product markets, had better zoning policies for land-use, and reduced widespread government ownership of businesses. To these, I will add that if we open our economy to make foreign investments easier, and allow open banking, we can hope to grow at an additional 3 per cent. Capital goes where it is welcomed, and stays where it is well-treated, yet we don't treat foreign capital with respect, lusting after making a quick, immoral buck at every turn. If we can control ourselves, then at a growth rate of 14.2 per cent per year, we could catch up with China by 2023 and the US by 2044. India can do it, but will it? I only wish that the Indian tiger wakes up before it actually disappears.

[Excerpted from a lecture delivered at the Institution of Engineers (India), New Delhi]

Amarjit Singh is professor at the University of Hawaii, Manoa.