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Sep 06, 2010, 12.06 PM IST | Source: CNBC-TV18

Raghav Bahl on the amazing race between India and China

A veteran in his field of journalism, a keen commentator on global economic movements for over two decades now Raghav Bahl, Author of Super Power and Founder & Editor of Network 18 has some answers in his debut book on this amazing race.

Raghav Bahl on the amazing race between India and China
India and China: The History

1260 AD - those were the Middle Age when people searched for precious metals to make coins. Chinaís Mongol emperor Kublai Khan struck gold. Khan needed money to bolster his army and knew how to get it. Barks were taken off trees and made into a paste which was turned into fine sheets. The sheets were then engraved with his emblem resulting in the worldís first paper money.

As Marco Polo discovered that Western traders visiting China would have to give out their gold and silver coins and exchange them with the Chinese bank notes for trade, Kublai Khan took little time to build his reserve. Those are the beginnings of the Chinese economy 

India and China: The Contemporary

We have all learned this fable in school; the fable of a sincere little tortoise that challenges a boastful hare to a race. The slow little tortoise had little chance to begin with and the hare almost took the challenge up. It would sprint ahead and take rest leaving time for the tortoise to catch-up and when the tortoise would come close enough it would sprint some more. But in one of his bouts of rest the hare went wrong and slipped off the slumber. The sincere little tortoise with short yet sure steps surpassed the sleeping hare.

So why are we taking you back to the story of the hare and the tortoise? Two Asian economic power houses India and China are almost behaving akin to the fabled hare and tortoise. While China, almost hare like, leaps ahead and captures global attentions through its manufacturing juggernaut, India too in very sure steps is upping its way to set an economic sweet spot. As the global economy almost resurrects its meltdown, who among India and China would establish leadership within the final leg of this race?

A veteran in his field of journalism, a keen commentator on global economic movements for over two decades now Raghav Bahl, Author of Super Power and Founder & Editor of Network 18 has some answers in his debut book on this amazing race.

Here are excerpts from his interview with CNBC-TV18ís Shereen Bhan.

Q: Let me begin by asking you, there has been so much curiosity about this comparison between India and China. A lot has been said about it, a lot has been written about it. Why the decision for you to write about this race and are the conclusions going to be any different from the fable?

A: I will tell you why I thought of writing about this. One, was a very personal reason for me, I had spent the last 5-7 years of my life concentrating much more on the business and entrepreneur side and not so much on the content side so I wanted to get back into content and therefore I said let me do something different.

So that was a personal side. But professionally speaking the story has me completely spellbound. If you just look at what China has done and what India has perhaps not done, few people realise that when China started its economic reforms India was a large economy; we were bigger, we had all the institutional strengths that a good economic structure should have.

China virtually had obliterated all its intuitions. So China had come down to ground zero, it didnít have a central bank, it virtually had no monetary policy transmission, it virtually had very little contact with the world, it didnít have a stock market, it really had nothing so therefore it was at ground zero.

India on the other hand had all institutions of economic governance; it had a very pedigreed central bank. It had an open economy, so it baffled me that China today is four times Indiaís size while just 20-25 years ago or 30 years ago we were ahead and that set me thinking - what is it that they have done so right and what is it that perhaps we havenít done good enough that they gotten four times our size. I can understand 1-1.5 times but 4 times and thatís what started me thinking that let me go in and look at the story, a little bit more granularly and then figure out for myself.

Q: Do you think your conclusions would have been different if you would have written this just as an Editor as opposed to an Editor-entrepreneur?

 A: I think so because I think as a journalist or even as a commentator or even as an academician you end up looking at things somewhat more black and somewhat more white because thatís what you are trained to do. But as someone who was also an entrepreneur you tend to look for grey because thatís what you are dealing within life everyday.

Q: India is a story of greys, isnít it?

A: India is a spectacular story of greys but surprisingly I even found China to have many more greys than the academic or the journalistic debate around China which tends to be black and white. Either they are very good at what they are doing or that economy is going to collapse. But there are shades. Both are Asian and therefore both are mysterious and therefore both have lots of greys.

Q: I want to talk to you about the shift in the global discourse and you talk about it in your book with regards to the way the world is viewing India and China. Up until maybe 2008 and the Lehman Brothers crises, China could do nothing wrong and India was a story of missed opportunities and disappointments. There has been a shift, hasnít it?

A: At the subterranean level itís a dramatic shift but India by its very nature is country which doesnít come out and strut too much on the world stage so therefore at the subterranean itís a great shift while itís not so manifesting in commentary but its changing, you are right, you are very right and I think the reason for that is that once the Lehman collapse happened and once the Western world went into such a severe economic crises, it was expected that the transmission effects of that on India and China would be severe. Everyone expected the transmission effects to be severe on India.

Q: And there was a surprise there, wasnít it?

A: And there was a surprise because China fell much more than India; China fell from 13% to 6% and we fell from 9% to 6.7% so in percentage terms we fell half or put it the other way round, we outperformed China by half. So Indiaís bounce back from that 6.7% and Chinaís from 6% and then Indiaís bounce back also happened a little bit sturdier for instance we had much lower debt; our banks do not go out and lend the way Chinese banks lend. We had much less debt in our turnaround; we also had a bit of inflation in our turnaround so in nominal terms Indian economy started growing twice as fast as China while China turned around but China turned around on the tailwind of huge debt.

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