Jul 15, 2010, 12.46 PM | Source: CNBC-TV18

India versus China: Who’ll win the race?

Increasingly, the world speaks of India and China in one breathe. They are not only the fastest growing economies but are often considered the engine of world growth. But how do they compare with each other? Why is China’s rate of growth so much faster than India’s?

Increasingly, the world speaks of India and China in one breathe. They are not only the fastest growing economies but are often considered the engine of world growth. But how do they compare with each other? Why is China’s rate of growth so much faster than India’s? Does the aspiration lie in their system of governance or in the character of the countries and which is better suited to handle the challenges that lie ahead?


These are the issues that Pranab Bardhan of the University of California, Berkeley whose book ‘Awakening Giants Feet of Clay’ was published this week and Raghav Bhal whose book ‘Superpower – The Amazing Race between China’s Hare and India’s Tortoise’ published in August, disuss in an exclusive interview on CNBC-TV18.


Here is a verbatim transcript of the interview. Also watch the accompanying video


Q: Let’s start with the questions that in a sense has almost become a cliché. Given that in the 1940’s India and China were at similar levels of development but today clearly China is in almost a class by itself. Would you say that authoritarianism is better suited to development than democracy?


Bardhan: This is what the Chinese would like us to believe, its complete nonsense. Authoritarianism neither necessary nor sufficient for development. There are many countries which have done better with democracy, democracy makes growth sustainable. There are many countries which have authoritarianism, they haven’t done that well. But democracy itself has problems and so the answer is that there is a complex relationship between democracy and development.


Democracy is slow, it takes time to take decisions and is chaotic like India; but at the same time I would say India’s regime its political regime in the long run sense is much more stable; I would say stronger than China’s because the Chinese Government is regarded as stronger but is ultimately brittle because it’s not based on democratic consent.


Q: To be fair it’s not just the Chinese who would like to believe that authoritarianism is better suited to development. But many middle class Indians frustrated with the slowness of the system in this country and perhaps with its apparent chaotic nature would say if only we had firmer government lesser opposition. What's your answer to this divide and debate between authoritarianism and democracy?


Bahl: A firmer government doesn’t mean lack of democracy, a firmer government just means that a democratic system which is discharging its responsibilities; a democratic leadership which is discharging its responsibility. There is no one to one correlation between the fact that you are a democracy so you cannot be a firm government. Yes things take time in a democracy to arrive at decisions but as I said it’s not as if you are completely paralyzed. So when you talk about authoritarianism as Professor Bardhan has said there is really is no correlation between those two things. I take you back to the 1970’s when there was so much commentary on the fact that the Soviet Union was going to overtake the US and I think people had put years, by 1988 it should have happened, that was the commentary in 1970’s. It did not. So I think you can take a slice of time and sort of run some numbers, take some comparative positions and come to where very wrong conclusions.


Q: Let me approach this in a slightly different way, to what extent the disparity between India and China’s development is, explained by the character of the countries they are. China is a homogenous country with very little social, religious ethnic conflict. India on the other hand is a heterogeneous country almost riddled with social and ethnic conflict, does that mean that the Chinese system permits for more decisive and purposeful reform and the Indian on the other hand gets lost in simply ameliorating the tensions?


Bardhan: Yes I agree with you that the social conflicts in India is a big problem whether in India we are democratic or non democratic; conflicts always makes resolution or getting your act together is much more difficult in India. So the Chinese have that advantage, but at the same time I would say India’s strength is democratic pluralism, and I would give you a simple example from the last one and two year’s events in financial crisis.


When the financial crisis hit in 2008, Chinese party news papers started saying that if the rate of economic growth falls bellow 8% the regime would be in trouble. So I jokingly told my Chinese friends if the rate of growth falls to zero nothing will happen to the political regime. Some people will be in trouble but nothing will happen to the political regime because the regime derives its legitimacy elsewhere and that’s where democratic pluralism gives the regime more legitimacy.


Q: Except for that fact, couldn’t you also say, that the character of a country also ends up determining the character of the people and in a sense the culture that influences them. Chinese have a deep fear of chaos and turmoil, I believe they call it lohan (check) in their language, India on the other hand has had centuries of division and compartmentalization but that fear that the country will fall apart if a centre doesn’t hold, doesn’t exists. Do you think that makes the difference that the Chinese are so scared of the unity of their country, that they expect discipline and order in a way in which Indian’s don’t?


Bahl: Yes and no, I mean clearly it would make for difference in certain type of activities, in certain type of industries, where more discipline is needed, where its more shop floor orientation but when it comes to creativity, when it comes to innovation, when it comes to shear entrepreneurial energy, then perhaps its always, its not necessary to be completely tied up in procedure or completely sort of regimented in your thinking.


Q: The rebel is more innovative.


Bahl: It is a fact and a vibrant civil society which India seems to have, which has its downside in terms of pluralism and tensions and conflicts also makes for great strengths at problem solving or great strengths of creative thinking. In India, the problem is that the state does not seem to have the kind of confidence in decision making that the Chinese state has. So at a people to people level there are cultural differences and countries sort of reflect that and economies reflect that so they may get their comparative advantage in a particular kind of industry, in a particular kind of area of economic activity, India will have it in another but the vital difference for me when you talk about different cultural ethos or differences in society is the way the government attack problems. The Chinese seem to be much more confident in attacking problems.


Q: Let me pick up on something you said, you said that one differences that the state in India doesn’t have the confidence that the Chinese state has in making decisions and certainly taking risky ones. Yet one would argue that the state in India being a democracy has greater legitimacy than the Chinese states, so why is there this diffidence?


Bahl: No question the Indian state has so much more legitimacy, every survey that has been done off late seems to suggest that India has a far more broad based approach and therefore the people of India are happier with the economic decision making than the people of China.


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