Go Back to Chopsticks
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…