The Road Ahead

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

Both India and China started in the 1950s as bureaucrat-dominated states. Theaspiration of many young Indian and Chinese was to become a bureaucrat.Government service provided a certain status in society though not highemoluments and a security of job. As the two countries embarked on theireconomic development in the 1980s, the bureaucrat-dominated states startedgiving way to entrepreneur-driven states. 

This transformation was faster in China than in India. The emoluments in theworld of business were mind-boggling, the opportunities for travel were many andthe quality of life was much higher than in the world of bureaucrats. One saw inboth countries the phenomenon of government service losing its attraction forthe young people. Particularly in India, the better-educated upper class youth,which used to dominate the bureaucracy, started gravitating to the private worldof business and the not-so-well educated youth from the under-privilegedclasses, who could not compete in the past against the better-educated upperclasses, found the world of bureaucracy opening up to them. 

The world of business, in which merit and quality determined one's ability toenter and prosper, remained closed to the under-privileged and under-qualified.As the under-privileged, who entered government services started doing welldespite their belated start at the bottom of the social ladder, they starteddemanding that they should be given an opportunity to enter the world ofbusiness too, despite their perceived lower qualifications and merit.  Thebusiness world is strongly opposed to this on the ground that the sacrifice ofmerit for recruitment in order to favour the under-privileged, will diluteIndia's competitive edge--particularly against China-- and further aggravate thegap between India and China. As the hitherto under-privileged classes acquiremore and more political power, the demand from them for equal job opportunitiesin all sectors of the economy will increase. The Chinese society, which is morehomogenous than the Indian society, does not face this problem. 

But China faces a different kind of a problem. In India individualopportunities 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-Pingfirst opened up the coastal areas. He told the Chinese people in the interiorprovinces: "Let them get rich first, you can get rich later." Since itwas an authoritarian state, the people in the interior had no other option butto accept it. India being a democracy, no political leader can tell the peopleof one region:" Let the people in another region get rich first, you canget rich later." He will lose the election. He is , therefore, forced topay equal attention to all regions. 

Indian economic development is much more widespread than in China where tillrecently it was focussed on the coastal areas. Foreign observers were dazzled bythe economic miracle in the coastal areas without realising that in the interiorareas, which are developing only now, the dazzle was not there. In India, thekind of dazzle which one sees in China, was not there because the fruits ofeconomic 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. 

The educated Indian youth had a head start over the Chinese youth because ofits command of the English language. The quality of English education in Indiahas gone down during the last two decades, but despite this, the command of theEnglish language in India is the highest anywhere in Asia. As the economies allover the world shifted their focus from the manufacturing to the servicessector, the demand for qualified and English-educated Indian youth went upsteeply. In contrast to the Indian youth, the educated Chinese youth found theopportunities in the services sector very limited. It gravitated to the low-techmanufacturing sector where inadequate command of the English language is not ahandicap. 

This phenomenon was reflected in the educational sector. In India, ITSchools, business management and financial services schools, hospitality sectorschools etc mushroomed. In China technical schools imparting manufacturing andindustrial skills grew up. The Chinese have now realised that if they have tomaintain and expand their lead over India, they have to improve their command ofthe English language and have similar schools of excellence in mind orknowledge-driven technologies and not in hand-driven or skills-driventechnologies. There has been a steady increase in the number of Chinese studentscoming to India to learn English. 

Some years ago, when A.B.Vajpayee was the Prime Minister, Dr.Murli ManoharJoshi, his minister for human resources development, had visited China. HisChinese counterparts requested him to depute a large number of English teachersfrom India to China to launch a crash programme for improving their command ofthe English language. Their request was considered at a very high policy-makinglevel in New Delhi and it was decided not to accept it since it was felt that itwould not be in India's interest to help the Chinese catch up with India in thisfield. This attitude has since changed and more and more Chinese students arecoming to India--particularly to the South-- to improve their English. 

The economic development in the two countries took different paths. In China,the emphasis was on the development of exports-dependent and exports-drivenmanufacturing sector and infrastructure development. In India, it was on Indianconsumer-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, theIndian economy is not as dependent on exports as the Chinese economy is. Thecurrent drop in consumer demand in the US and the EU countries has caused morehardships in China than in India. Second, a much larger prosperous middle classin India than in China. Third, distortions in the education sector. India hasbeen producing more IT experts and business executives than China. China hasbeen producing more construction and other engineers of high quality than India.Four, the beginning of a consequent inter-dependence. Indian software expertshelping Chinese companies and Chinese engineers working in Indian constructionprojects such as in the gas pipeline and electric power sectors. 

As the manufacturing sector and its exports boomed in China, linkagesdeveloped between the Chinese and US economies. The Chinese manufacturers becamedependent on the US consumers. The US government became dependent on the Chinesepurchase of its Treasury bonds. The current economic hardships in China havemade Beijing realise the dangers of over-dependence on the US market. It hasbeen 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, butthe US wanting more Chinese money flow into its bond market to keep its economystable. The past Chinese dependence on the US market gave the US a handle tomoderate China's strategic policies whether in respect of Taiwan or North Koreaor some other issue. If the Chinese manage to reduce their dependence on the USmarket, this handle will get increasingly weaker. If the US dependence onChinese money flows increases, its ability to enforce moderation on Chinesestrategic policies will be further weakened. The medium and long-term strategicimpact of the current economic crisis in so far as it relates to the US andChina needs careful study. One is already seeing initial signs of this impact inthe US silence on issues such as human rights violations in Tibet and Myanmarsince the economic crisis started. 

While the Indian manufacturing sector has no unhealthy dependence on the USmarket, the continued prosperity of the Indian IT sector is linked to the USservices sector and the policies of the Obama Administration in matters such asoutsourcing. The signals in this regard are worrying for India. Whereas in thecase of US-China, the dependence is mutual, in the case of US-India, thedependence is a one-way street with India more dependent on the US policies thanthe other way round. The Obama Administration's action against outsourcing cancreate for the first time in recent years disenchantment and unhappiness againstthe US and slow down the development of the strategic relations between the twocountries. 

India being a democratic state, the needs of the common man have priorityover the needs of the state. China being an authoritarian state with aspirationsof becoming the strategic equal of the US, the needs of the state have priorityover those of the common man. Thus, the Chinese Armed Forces are never short offunds for their modernisation. The Indian Armed Forces are perpetually short offunds. This has given China a head start in the development of its strategicsectors. 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 presencein all the seas of at least the Asian region. It thinks space related and basedmilitary power will determine the future strategic equations in the world. 

It is not as if China is not paying adequate attention to the IT sector. Itis, 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 byway of producing a capable corps of hackers and cyber warriors. India has beenconcentrating more on the benign uses of its IT capabilities as inputs forimproving the lives of its people, for better health care etc. What impact thiswill have on India's emergence as a significant strategic power? This questionis not receiving in India the attention it deserves. 

B. Raman is Additional Secretary (retd), Cabinet Secretariat, Govt. ofIndia, New Delhi, and, presently, Director, Institute For Topical Studies,Chennai.