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The Economic Times - - The Edit Page - Aurodeep Nandi

Let’s ad­mit it. China is the coun­try-equiv­a­lent of ‘Shar­maji ka beta’ for In­dia. Re­gard­less of how much you stud­ied, or mir­a­cles you prayed for, there was al­ways that prodigious child of the neigh­bour­hood Mr Sharma who hap­pened to be a shin­ing ex­am­ple of the stu­dent you could never be­come. And while it is true that re­cently In­dia’s GDP growth seems some­what com­pa­ra­ble to China’s, the sta­tis­ti­cal high jump comes on the back of a broad-based slow­down in the Chi­nese econ­omy.

Only a few years ago, when the Chi­nese econ­omy was grow­ing at full steam, it was haul­ing with it com­mod­ity prices and the for­tunes of dozens of economies around the globe. While China has be­come a global man­u­fac­tur­ing pow­er­house, the share of man­u­fac­tur­ing in In­dia’s GDP has re­mained static at 15-17% lev­els for the last 40 years.

China has not just emerged as the world’s fac­tory, but has changed the def­i­ni­tion of what fac­to­ries around the world make. Glob­ally, man­u­fac­tur­ing no longer hap­pens in one coun­try or work­shop, but small bits of ev­ery­thing get added by com­pa­nies in dif­fer­ent coun­tries, in ef­fect, cre­at­ing a mega global as­sem­bly line: global value chains.

Coun­tries that man­age to align their ex­port strat­egy such that they sit snugly within such chains are gen­er­ally more suc­cess­ful in man­u­fac­tur­ing in the new glob­alised world. 60% of China’s ex­ports link into ex­ist­ing global value chains. Only 36% of In­dian ex­ports man­age this feat. In­dian man­u­fac­tur­ing, nat­u­rally, is far from cap­tur­ing the global imag­i­na­tion the way China has man­aged to do. The com­mon nar­ra­tive has been that China has beaten In­dia in its gov­ern­ment’s abil­ity to ag­gres­sively in­vest in in­fra­struc­ture, en­cour­age more for­eign di­rect in­vest­ment, build city-like spe­cial eco­nomic zones, in­crease ac­cess to credit and pro­mote trade with a vengeance. Most of th­ese, In­dia hasn’t per­fected. Thus the com­mon no­tion that In­dia needs to pi­ously build a glitzy sky­line of re­forms and ini­ti­ate big-ticket in­vest­ment projects to get any­where close to the eco­nomic heft of China.

China’s ac­tual eco­nomic lib­er­al­i­sa­tion didn’t start with con­struct­ing grand cities or pro­duc­ing ev­ery­thing from ink pens to iPhones. It be­gan with re­form­ing the farm sec­tor and, in the process, im­prov­ing hu­man devel­op­ment indi­ca­tors like health, nutri­tion and ed­u­ca­tion.

When China de­cided to re­form in the 1980s, it re­alised that 80% of its cit­i­zens were agri­cul­tural peas­ants. Wide­spread land and agri­cul­ture re­forms were first in­tro­duced to un­lock pros­per­ity in the farm and, con­se­quently, in the non-farm sec­tor. China’s agri­cul­tural pro­duc­tiv­ity saw a dra­matic im­prove­ment as th­ese re­forms con­tin­ued. Ru­ral-based pri­vate en­ter­prises were strongly in­cen­tivised by the gov­ern­ment that, in turn, had a mul­ti­plier ef­fect on em­ploy­ment.

In the case of In­dia, 50% of the work­force is in­volved in agri­cul­ture. How­ever, In­dia’s flir­ta­tion with agrar­ian re­forms ended with the Green Revolu- tion sev­eral decades back. Since then, In­dia’s strat­egy — or, rather, the lack of strat­egy — has been to prop up the sec­tor with sub­si­dies and min­i­mum sup­port prices.

Ag­gres­sive re­form of farm in­fra­struc­ture, land leas­ing, pro­duc­tiv­ity and free­ing up the mar­ket from the clutches of self-serv­ing traders re­main a pipe dream in In­dia. To give a sense of how un­re­formed mar­kets in In­dia are, sea­soned mid­dle­men in Delhi’s Azad­pur mandi, Asia’s largest whole­sale fruit and veg­etable mar­ket, are known to ne­go­ti­ate by touch­ing each other’s hands un­der a hand­ker­chief and com­mu­ni­cat­ing with ges­tures. So much for trans­par­ent pric­ing for farm­ers.

To that ex­tent, it is a wel­come move that fi­nance min­is­ter Arun Jait­ley in his Bud­get speech un­veiled am­bi­tious plans for the gov­ern­ment’s new elec­tronic na­tional agri­cul­ture mar­ket (e-NAM) that is in­tended to get buy­ers and sellers on a plat­form with­out ge­o­graph­i­cal bound­aries.

The other ace up China’s sleeve has been hu­man devel­op­ment. In­dia ranks 130 out of 188 coun­tries in the Hu­man Devel­op­ment In­dex, even lower than war-torn parts of the world like Iraq and Palestine. China ranks 50 notches higher at 90, and is in the top 10 in Asia. China spends 2% of its GDP on health, dou­ble of what In­dia man­ages to do. Deep caste and gen­der in­equal­ity here fur­ther ex­ac­er­bate health, ed­u­ca­tion and nu­tri­tional out­comes.

China’s fe­male-to-male labour force ra­tio is al­most dou­ble that of In­dia’s. Over 96% of China’s adults are lit­er­ate com­pared to around 71% for In­dia. Half a mil­lion still­births hap­pen in In­dia ev­ery year, the high­est in the world. Over 600 mil­lion In­di­ans defe­cate in the open.

So, while it’s im­pres­sive that In­dia has re­cently over­taken China’s growth, we may have signed up for the wrong marathon event. As Shar­maji ka beta would have said with ir­ri­tat­ing self­ef­fi­cacy when pestered about how he man­aged to seam­lessly ace exam af­ter exam: don’t study think­ing about the marks. First get the ba­sics right.

Be­fore try­ing this at home…

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