By virtually any metric, the Chinese economy is more than five times the size of the Indian economy. The defense capability of China is far more than that of India. China is also vying for global leadership in the fields of information technology, artificial intelligence and robotics, while India is not even a major player. These vast differences in size and capacity put India at a disadvantage in engaging with China. But given China’s recent assertiveness, it must and must be actively involved. Rising to the China Challenge (Roopa, 2021), Gautam Bombwale, Vijay Kelkar, Raghunath Mashelkar, Ganesh Natarajan, Ajit Ranade and Ajay Shah have suggested in an occasional volume that India should exercise strategic patience and play a long game Should, ensure a high. Growth, compared to China over the next two to three decades, enables it to engage with China on a more equal playing field. It helped that China’s annual growth rate had come down to around 6%, similar to that of India, before the pandemic. The important question is whether India can really reach a higher long-term growth trajectory than China. In this endeavour, India itself can draw lessons from the growth story of China and East Asian ‘miracle’ economies, as well as its potential comparative advantages over China.
India’s great comparative advantage is its growing demographic share of its young working age population, while China is facing a serious problem of aging. This could further curtail China’s growth, while providing it with a potentially high-growth window for the next two to three decades, the so-called ‘demographic dividend’, to a growing share of India’s working-age population. Whether India can use this potential window depends on how quickly it can productively employ its growing labor force, a large part of which is currently unemployed or in very low productivity jobs. is unemployed. Employer surveys indicate that only 40% of the Indian workforce has the skills needed to be productively employable (see Sudipto Mundele’s ‘Employment, Education and the State’, Journal of Indian Labor Economics, 11 December 2017). So far, the skilling programs of the government have met with little success. This was inevitable, as a large section of the workforce lacked the foundation of basic education needed to acquire the necessary skills. Eight years of free basic education is now a legal right. But learning outcomes are extremely poor, reflecting the failure of education policies.
If the government can rapidly switch to a result-oriented approach to integrated education with a massive skilling program, as part of a major radical transformation of the state (a big ‘if’), India could possibly be a high growth strategy. Japan, East Asian ‘miracle’ economies and was recently followed by China and Vietnam. A fundamental feature of this East Asian model is an inclusive growth strategy based on high rates of investment, exports and gross domestic product (GDP) and led by a strong developmental state. The institutional framework for this is state-directed capitalism, referred to in China as “socialism with Chinese characteristics”.
The second key feature of this model is the focus on basic education, skill training and public health care, combined with land reform in the early stages. Apart from making development inclusive, it has ensured availability of a large educated, skilled and healthy workforce, which is essential for high growth. The model also emphasizes on the active nurturing of private enterprises to help firms grow and become globally competitive in selected sectors, i.e. industrial policy a la East Asia. With the state playing a leading role in the development, the fourth pillar of this East Asian model is an efficient and disciplined bureaucracy. Its commitment is ensured by linking career progress with performance.
India’s prospects for achieving high long-term growth depend on the state’s ability to implement an East Asia-like development strategy adapted to India’s current conditions. Unfortunately, the Indian state is what Gunnar Myrdal describes as a “soft” state in Asian drama. A highly divided politics with competing interests of different regions, classes, religions and castes has led to a collective action stalemate. Instead, a large part of the state’s revenue is appropriated for various transfers and unfair subsidies to accommodate the many competing special interests. Moreover, despite the stated targets, the actual growth has not been inclusive at all. As Thomas Piketty has recently reiterated (Capital and Ideology, Harvard University Press, 2020), India is one of the most unequal countries in the world.
On the private enterprise front, instead of businesses growing at scales that allow global competition, India’s regulatory framework has inhibited their expansion, resulting in the highly distorted structure of some large enterprises coexisting with hundreds of thousands of smaller and smaller businesses. – is in existence. , Efforts to improve this framework have met with limited success.
Finally, for the fourth pillar of an efficient and performance-oriented bureaucracy, the elitist self-image of India’s bureaucracy has to do with lifelong job security at high wages, relative to GDP per capita, and not related to performance.
So we end with a question: Can the nature of the Indian state undergo the radical change that is needed for India to play the long game successfully? Can India continue on a high growth trajectory by successfully leveraging its ‘demographic dividend’ which could put it on the same ball park as China in the next two to three decades?
Sudipto Mundle is the President of the Center for Development Studies, Trivandrum. These are personal views of the author.
Don’t miss a story! Stay connected and informed with Mint.
download
Our App Now!!
,