Wednesday, May 6, 2009



(Comments contributed by me to a futuristic study being made by a US think-tank )

(1). Both India and China started in the 1950s as
bureaucrat-dominated States. The aspiration of many young Indian and
Chinese was to become a bureaucrat. Government service provided a
certain status in society though not high emoluments and a security of
job. As the two countries embarked on their economic development in
the 1980s, the bureaucrat-dominated States started giving way to
entrepreneur-driven States. This transformation was faster in China
than in India. The emoluments in the world of business were
mind-boggling, the opportunities for travel were many and the quality
of life was much higher than in the world of bureaucrats. One saw in
both countries the phenomenon of government service losing its
attraction for the young people. Particularly in India, the
better-educated upper class youth, which used to dominate the
bureaucracy, started gravitating to the private world of business and
the not-so-well educated youth from the under-privileged classes, who
could not compete in the past against the better-educated upper
classes, found the world of bureaucracy opening up to them. The world
of business in which merit and quality determined one's ability to
enter and prosper, remained closed to the under-privileged and
under-qualified. As the under-privileged, who entered Government
services started doing well despite their belated start at the bottom
of the social ladder, they started demanding that they should be given
an opportunity to enter the world of business too despite their
perceived lower qualifications and merit. The business world is
strongly opposed to this on the ground that the sacrifice of merit
for recruitment in order to favour the under-privileged, will dilute
India's competitive edge----particularly against China--- and further
aggravate the gap between India and China. As the hitherto
under-privileged classes acquire more and more political power, the
demand from them for equal job opportunities in all sectors of the
economy will increase.The Chinese society, which is more homogenous
than the Indian society, does not face this problem.

(2).But China faces a different kind of a problem. In India individual
opportunities are not equal, but in China they are to some extent. But
in India, regional opportunities are more equal than in China. In
China, Deng Xiao-Ping first opened up the coastal areas. He told the
Chinese people in the interior provinces: "Let them get rich first,
you can get rich later." Since it was an authoritarian State, the
people in the interior had no other option but to accept it. India
being a democracy, no political leader can tell the people of one
region:" Let the people in another region get rich first, you can get
rich later." He will lose the election. He is , therefore, forced to pay
equal attention to all regions. Indian economic development is much
more widespread than in China where till recently it was focussed on
the coastal areas. Foreign observers were dazzled by the economic
miracle in the coastal areas without realising that in the interior
areas, which are developing only now, the dazzle was not there. In
India, the kind of dazzle which one sees in China, was not there
because the fruits of economic development were spread across a
much,much larger area than in China. When the spread is over a large
area, it appears thin and does not dazzle.

(3). The educated Indian youth had a head start over the Chinese youth
because of its command of the English language. The quality of English
education in India has gone down during the last two decades, but
despite this, the command of the English language in India is the
highest anywhere in Asia. As the economies all over the world shifted
their focus from the manufacturing to the services sector, the demand
for qualified and English-educated Indian youth went up steeply. In
contrast to the Indian youth, the educated Chinese youth found the
opportunities in the services sector very limited. It gravitated to
the low-tech manufacturing sector where inadequate command of the
English language is not a handicap.

(4). This phenomenon was reflected in the educational sector. In India,
IT Schools, business management and financial services schools,
hospitality sector schools etc mushroomed. In China technical schools
imparting manufacturing and industrial skills grew up. The Chinese have
now realised that if they have to maintain and expand their lead over
India, they have to improve their command of the English language and
have similar schools of excellence in mind or knowledge-driven
technologies and not in hand-driven or skills-driven technologies.
There has been a steady increase in the number of Chinese students
coming to India to learn English. Some years ago, when A.B.Vajpayee
was the Prime Minister, Dr.Murli Manohar Joshi, his Minister for Human Resources Development, had visited China. His Chinese counterparts requested him to depute a large number of English teachers from India to China to launch a crash programme for improving their command of the English language. Their request was considered at a very high policy-making level in New Delhi and it was decided not to accept it
since it was felt that it would not be in India's interest to help the
Chinese catch up with India in this field. This attitude has since
changed and more and more Chinese students are coming to
India---particularly to the South--- to improve their English.

(5). The economic development in the two countries took different
paths. In China, the emphasis was on the development of
exports-dependent and exports-driven manufacturing sector and
infrastructure development. In India, it was on Indian
consumer-dependent and driven manufacturing sector and the services
sector. China's is a skills-driven economy. India's is a
knowledge-driven economy. Infrastructure development has been rotten
in India. The results: First, the Indian economy is not as dependent on
exports as the Chinese economy is. The current drop in consumer demand in the US and the EU countries has caused more hardships in China than in India. Second, a much larger prosperous middle class in India than in China. Third, distortions in the education sector. India has been producing more IT experts and business executives than China. China has been producing more construction and other engineers of high
quality than India. Four, the beginning of a consequent
inter-dependence. Indian software experts helping Chinese companies
and Chinese engineers working in Indian construction projects such as
in the gas pipeline and electric power sectors.

(6). As the manufacturing sector and its exports boomed in China,
linkages developed between the Chinese and US economies. The Chinese
manufacturers became dependent on the US consumers. The US Government became dependent on the Chinese purchase of its Treasury bonds. The current economic hardships in China have made Beijing realise the dangers of over-dependence on the US market. It has been trying to learn a lesson from India by expanding the domestic market. Thus, one finds the Chinese trying to reduce their dependence on the US economy, but the US wanting more Chinese money flow into its bond market to keep its economy stable. The past Chinese dependence on the US market gave the US a handle to moderate China's strategic policies whether in respect of Taiwan or North Korea or some other issue. If the Chinese manage to reduce their dependence on the US market, this handle will get increasingly weaker. If the US dependence on Chinese money flows increases, its ability to enforce moderation on Chinese strategic policies will be further weakened. The medium and long-term strategic impact of the current economic crisis in so far as it relates to the
US and China needs careful study. One is already seeing initial signs
of this impact in the US silence on issues such as human rights
violations in Tibet and Myanmar since the economic crisis started.

(7). While the Indian manufacturing sector has no unhealthy dependence
on the US market, the continued prosperity of the Indian IT sector is
linked to the US services sector and the policies of the Obama
Administration in matters such as outsourcing. The signals in this
regard are worrying for India. Whereas in the case of US-China, the
dependence is mutual, in the case of US-India, the dependence is a
one-way street with India more dependent on the US policies than the
other way round. The Obama Administration's action against outsourcing
can create for the first time in recent years disenchantment and
unhappiness against the US and slow down the development of the
strategic relations between the two countries.

(8).India being a democratic state, the needs of the common man have
priority over the needs of the State. China being an authoritarian
State with aspirations of becoming the strategic equal of the US, the
needs of the State have priority over those of the common man. Thus,
the Chinese Armed Forces are never short of funds for their
modernisation. The Indian Armed Forces are perpetually short of funds.
This has given China a head start in the development of its strategic
sectors. Its focus has been on strengthening its naval and space
capabilities. It thinks that it is the naval power, which enabled the
US become a super power. It is determined to become the equal of the
US in naval capability and presence in all the seas of at least the
Asian region. It thinks space related and based military power will
determine the future strategic equations in the world.

(9). It is not as if China is not paying adequate attention to the IT
sector. It is, but its focus is on the use of its IT capabilities for
strategic dominance. India's development of its IT capabilities is for
the benefit of the common man. China has been concentrating more on
the malign uses of its IT capabilities by way of producing a capable
corps of hackers and cyber warriors. India has been concentrating more
on the benign uses of its IT capabilities as inputs for improving the
lives of its people, for better health care etc. What impact this will
have on India's emergence as a significant strategic power? This
question is not receiving in India the attention it deserves. (6-5-09)

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt.
of India, New Delhi, and, presently, Director, Institute For Topical
Studies, Chennai. E-mail: ).