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Aug 18, 2010, 07.23 PM IST | Source: CNBC-TV18

Superpower: Can India make up lost ground on China?

Is India ready for superpower status? Or are we irretrievably behind in the game of catch-up with China? What are our key strengths and weaknesses, and what unique things do we have to contribute to the global community in the 21st century?

Superpower: Can India make up lost ground on China?

The latest report that has been put out by Morgan Stanley in its edition of reports on India and China says that by 2020 Indiaís GDP will cross USD 6 trillion while Chinaís will cross the USD 20 trillion mark. But here is the interesting twist. The report says India should start matching Chinaís economic growth barring another global crisis and by 2013-15 India will actually start outpacing Chinaís GDP growth notably.

Q: Let me start with Nandan Nilekani because you are really our hope as far as India being able to fix its governance is concerned. It really is as far as middle class India is concerned you are our hope to fixing our problems as far as governance is concerned. Now that you are an insider, do you truly believe that India is poised to fix its governance and we can compete in this race effectively with China and in fact by 2013 or 2015 outpace China?

Nilekani: I donít know about the race but certainly I am very positive that we will be able to fix a lot of the things that we have. As I have said long back, maybe Mr Kamal Nath may not agree with me, itís harder to build a democracy than to build a road. Therefore I think the fact is that the tough task of building a democracy has been done and now I think actually the challenges are simpler and they are all execution oriented. If you can really get that going I think we can do a lot.

Q: Is there a race then. It is all very well to glorify Indian democracy and say we are a democracy and China is not but because we are a democracy we have some many authorities, we have too many people each wanting to empowered and take decisions and whether it is land acquisition or even the Common Wealth Games. The job does not get done till like a monsoon wedding it happens at the very last moment. I am saying this with Mani Shankar Aiyar in the audience who we will get to respond to this but first you?

Gupta: You've put me in a spot because I am actually on your side in this debate. Metaphorically and literally in the red corner. Having said that, I have to give you the opposite answer right now. I have to take you back to an experience I had in Dalian, one of the great Chinese growth cities where the World Economic Forum held its first 'summer Davos' and that was the year of the Olympics. I am a member of a small group called the International Media Council and we had some meetings.

One of which was with a very high ranking Chinese official. A very senior editor of Time Magazine complained to him. He said my magazine wrote a very flattering story about how Beijing is preparing for the Olympics. But I had one line there saying that there are concerns about the pollution. So what happened. When my copies came every single page of that story had been torn.

What was the Chinese officials response? Somebody tore off pages from your magazine. Who does such a thing in China? You produce them to me and I will take action. It was all nonsense. You can have very quick preparations for Olympics, for whatever you want but you also have to accept it.

So my point is I disagree with the argument that the Chinese get it right because they have no democracy and we cannot get it right because we have no democracy, because one that is very unfair to our democracy. Secondly in the way we run our governance and the way we run our politics, we actually do a great discredit to the idea of democracy.

So I refuse to accept the argument that the Chinese do better than us because they do not have democracy and we do worse than the Chinese because we have democracy. The Chinese, as Kamal said, they are a genius of their own. We should have genius of our own which I am afraid we have not yet discovered.

Q: Doesnít democracy slow down India? Letís be honest, look at the Land Acquisition Act. As Raghav has mentioned in his introduction it is not necessarily elitist yet you have got pulls and pressures within the government with the result that a consensus cannot be built. Then democracy makes it more and more difficult it seems to evolve a consensus particularly in a country like us?

Jalan: No, but I think that the question about democracy and non-democracy and what it can do is about trade offs. You can say that we want a Soviet Union type of government. You can say that we want a Chinese type of government because that can give us higher growth. But what does it mean?

You trade off something else which is perhaps freedom, which is perhaps the media, which is perhaps the ability of Shereen and Rajdeep to ask this question here. So it is all about the trade off.

My main point to you would be that donít think of it as a race to become a super power, donít think of it as India versus China. We were all there in the 60s, Aid India Consortium days and everything, my generation at least, Aid India Consortium, borrowing from the IMF, trying to live through that day in the 60s. Who was the idol? Soviet Union.

In the 70s, oil economies, and all said it was wonderful. In the 80s, everyone was talking about East Asian economies. Then you had an East Asian crisis. In the 90s, it was again the United States with the most vigorous financial system. It was can we do it like the US at that particular point of time.

So my advice to you is believe in democracy, with democracy you can do it. If we can take a sample of countries which are democratic and a sample of countries which are non-democratic, you will find on an average democracies have done better. So it can be done.

Gupta: It is an obscene and self-defeating argument to raise the question whether India can progress inspite of its democracy. We just became too defensive and too negative.

Bahl: Just to add, the worldís wealth resides in democracies. Democracy has become something that we have whipped to hide our own failures. Democracy is the biggest strength of this country but then it cannot become something that we hide behind.

Q: How do we actually get to benefit from this democratic dividend and how do you actually get the democracy actually to work more efficiently. Your answer cannot be to do away with the Planning Commission?

Nath: Sometimes I enjoy a discussion which talks about democracy where many people know the least about it. I am a product of that democracy. I feel proud to be a product of that democracy. As Shekhar said that his magazine was torn up because he said something unpalatable, I think that what we have achieved, we have achived democracy or no democracy. It is our Indian mindset that we are looking at ways not to do things.

When I look at the 80s, what were the aspirations of the people in the 80s. The aspirations were very little. Today, India has the largest aspirational society on this planet. That is what is going to drive. And democracy will be the vehicle to drive those aspirations. Otherwise if I cannot perform, I lose my election. People are watching. That was not the case in the 80s.

Q: The limited point that I was trying to make, I am sorry to pursue - is it easier for China to let us say if it wants to add these 85,000 kilometers of road to push through decisions while in India you have to deal with MPs, with MLAs, I am not saying that democracy is a huge advantage but is it also a constraint when it comes to setting targets in key areas like infrastructure?

Nath: What roads are you talking about? If you are talking about roads in Delhi, I wish you spent more time in rural India. Let me make this point first. We have 3.4 million kilometers of roads in India which is the second largest in the world, bigger than Chinaís. Our roads are district roads, village roads, state roads, national highways. Donít undermine that.

The point is this that having the second largest road network in the world after United States, we have got to now build this to meet the aspirations of people as I said the largest aspirational society on this planet.

China does not have the kind of aspirational society we have I believe. And amongst the studies which have been made of Indiaís aspirational society Ė when I was saying earlier about rural India and what is growing, you are reading 37% growth in the auto sector. Is that happening because of Delhi? That is happening because of growing disposable incomes in rural India.

None of you are talking about growing disposable incomes. A Rs 5 lakh income in Delhi means nothing, a Rs 5 lakh income in Chhindwara, my district, means one SUV. That is the big difference.

Q: On the strength of India's financial system - is that perhaps one of India's biggest advantages over China the fact that we may have a robust, transparent financials system?

Jalan: I don't know whether it's an advantage over China. But it certainly is an advantage and a means to achieve the kind of growth to do whatever you want to do through a financial system. The question is whether we can do it.

Money is not the issue now. Our savings rate is 35-37%, the investment rate is 38%. The question is where it is going, how it is going and what can you do with it. So I don't want to compare China with India. But I do want to tell you that as far as the financial system is concerned there is no issue which is inhibiting growth. Those who want to grow they can raise money, those who want to do something they can do it.

Q: There are question marks at this point in time on the quality of Chinaís growth. Some analysts seem to suggest that this is perhaps the worst time in actual quality of Chinaís growth that we have seen. Do you think this is the key advantage for India the fact that we actually have robust institutions governing the capital markets, governing the financial markets at this point in time?

Damodaran: There are two sets of issues that you are raising. Our institutions are strong and they are robust. You need to do a lot more with them to make them even more robust to meet the future challenges.

As for the quality of Chinaís growth, I have also seen some of these comments about question marks about quality of Chinaís growth. I think somewhere in that book, Raghav has the answer to this. He says that text book economics, the text books that have been out and the ones that economists have been reading and talking about are text books that the Chinese have disproved over the last several years. The point that you make in your book and the one that I am buying into is that they will re-write economic theories.

This business of the Chinese economy will go bust because there are problems that you and I think they donít seem to know how to fix, I am sure they know how to fix that. If you go back to what Galbraith said at the beginning of one of his books and I remember that line because it is so telling. He said that the aerodynamics of the bumble bee is such that it cannot fly but fly it does, thatís what the Chinese are now trying to explain to you. Your theories must be stood on the head. Is that the expression you used?

The real question is I think democracy has been used as a punching bag for far too long to hide our efficiencies. Now you talk about a noisy, messy democracy whatever adjectives you want to use, the point is that, and then you talk about is consensus possible?

The question of consensus arises only in a democracy. In a dictatorship what is consensus, you have only one point of view that flows from the top, good bad, indifferent there is no need for consensus. I just want to complete this. What we need really and these are not inconsistent, you can have a vibrant, noisy democracy. But what you need to have along side that and it is not inconsistent is faster decision making, more accountability in terms of pulling up the guys that donít take decisions.

Where India has gone wrong over the last several years is the guys that donít take decisions have got away with everything. The guys that take decisions have been held up. One point which I wanted to say, I donít know Mr Kamal Nath will agree or not, I think the Planning Commission must be wound up.

I am saying it must, not because I have anything against the people there but you need to look at the institutions that you have. I am taking this as an example, the institutions that over time that you have set up in place, to see whether that is really enabling faster decision making and then go on.

Bahl: The debate often gets sidetracked into this democracy. I do not think it is democracy. What has democracy got to do with the fact that this country has not done policy reforms for 20 years? What has democracy got to do with the fact that this country has written three administrative reforms, reports and not implemented even one?

What has democracy got to do with this? Democracy should be aiding these things. What has democracy go to do with the fact that our judicial reforms have not been done. Democracy I am telling you has become a very convenient whipping boy for not taking decisions.

Q: Let me bring in Nandan Nilekani here because your book suggested a scale of ambition when you wrote 'Imagining India' and that India had to look ahead with a scale of ambition which perhaps China has shown. At the end of the day does it then if it is not about democracy, is it about simply the people and the leadership over the years, that the leadership has been unwilling to take the risks of the kind that China has, you have made the transition in our sense from the private sector to the public sector, had you found that that in the government, the ability to take risks, to take big challenges has diminished?

Nilekani: Before that, let me just defend the Planning Commission. I am in attached office of the Planning Commission. So I think it is unfair to leave it. I think they are doing a great job and certainly for me personally they have been a great host and helped us in this issue.

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