Founder, controlling shareholder,and director of Network 18, India's largest television and business network, Raghav Bahl, was kind enough to take the time to answer a few questions about his incisive and thought provoking book Superpower? The Amazing Race Between China's Hare and India's Tortoise.
Raghav Bahl describes the challenges facing the rapidly expanding economies of both India and China, and provides important insights into the future growth of the the two Asian giants on the global stage.
Thanks to Raghav Bahl for his time, and for his intriguing and comprehensive responses to the questions. They are greatly appreciated.
What was the background to writing this book Superpower? The Amazing Race Between China's Hare and India's Tortoise?
Raghav Bahl: I began thinking about writing this book in April 2009 when the world was getting back on its feet after the economic recession that had crippled it. The lull in business activity allowed me to get back to my old love, i.e. journalism. When looking for themes, one story that fascinated me both as an entrepreneur and as a business journalist was the relentless rise of China. I was intrigued that when Deng Xiaoping put China on the path of reform, its economy was smaller than India’s.
Even more critically, 32 years ago the Cultural Revolution had virtually decimated China’s economic institutions. It did not have a central bank or a stock market. The universities had been emptied out. There was virtually no judiciary, as the entire lawyer community had been annihilated. Economically and institutionally China was a very weak State in 1978. Yet today, its economy is four times that of India. It was a compelling story.
You describe India as a tortoise and China as the hare in this vast race for preeminence. What do you mean by the tortoise and the hare?
Raghav Bahl: I do not claim intellectual property rights to this analogy! The fable of the hare and the tortoise is well known. In that story the tortoise steals a march over the complacent hare, which was much ahead in the race. India and China are also compared to the elephant and the dragon. Whatever the animal, the subcontinent is not associated with speed. By their very nature, democracies are slow. Taking everybody on board takes time. But I believe that nations should be capable not only of bursts of energy but also of consistent performance.
China’s post-Revolutionary history has been marred by sharp discontinuities though Mr. Deng and his successors have shown extraordinary sagacity in steering the country. An enlightened and decisive leadership can sustain India’s recent high growth momentum and lift its people quickly out of poverty. But wisdom is not assured!
Raghav Bahl (photo left)
Many pundits and observers have already conceded 21st century leadership to China. You make a strong case for India as well. Why is India such a powerful rival for China?
Raghav Bahl: China’s economy is four times that of India. Size tells one story. Time taken to achieve it tells another. At the turn of the century, China was a one trillion dollar economy. That is where India is now. So one can say that India is just 10 years behind China. That is not too big a gap. India has everything going for it: a huge population, pent up demand, entrepreneurial people, strong economic institutions, the rule of law, an ability to (messily) resolve social conflicts and a culture of religious tolerance (occasionally interrupted).
Unlike China’s imbalanced economy, India’s is based on domestic consumption, lean capital, and frugal use of resources. President Obama’s economic adviser, Larry Summers, who was recently in India, calls this “people-centered growth,” the “Mumbai Consensus”. Of course, one should not be carried away. India has huge inequities. But India’s size makes it a natural rival to China. For strategic reasons too, it cannot afford to fall behind.
China invests heavily in infrastructure, while India has lagged in the infrastructure spending. Do you see a change in this scenario in the future?
Raghav Bahl: China’s infrastructure investment has been made entirely by the state or by state enterprises, with their easy access to cheap bank finance made possible by financial repression. The Indian state does not have the money to invest, because it squanders much of its resources on wasteful subsidies in order to appease various constituencies of voters. So it has been forced to take the route of public private partnership. This is a costlier way of financing infrastructure, but this disadvantage is offset by the Indian private sector’s superior execution capability. The past decade was spent in getting the policy and templates for contracts right. Bankers see a spurt in infrastructure spending during this decade. But there are areas of darkness still, like the Railways, where a leadership deficit has translated into an infrastructure deficit.
India and China both recovered quickly from the 2008 economic meltdown, but you describe their recoveries as taking different forms. How did the two countries emerge from the economic crisis differently?
Raghav Bahl: China, which had aggressively built infrastructure before the meltdown, went on an infrastructure-spending binge to pull itself out of the slump. India could have spent a lot more on infrastructure but did not for various reasons: a conduct code for political parties before the general elections that prohibited new spending and the lack of a ready shelf of projects that banks were willing to finance. Instead the Indian government cut taxes to put more money in people’s wallets and spur domestic consumption.
Companies producing cars, buses and home appliances saw a big spurt in sales. Though India is less dependent on exports, the loss of exports was keenly felt because export industries are also the most labor intensive. Those put out of jobs suffered a double blow in the form of high inflation, stoked partly by the fiscal deficit which had more than doubled. The pain was acute but short-lived. India is once again staring at growth rates seen just before the meltdown.
In relations between India, China, and the United States, there are some differences and some real challenges. How does the geo-political sphere look for the coming decades?
Raghav Bahl: India and the United States have a lot in common. They are natural allies. But the scramble for resources could bring China and India into conflict. It is a relationship that has to be smartly managed. China has been keen to reassure the world that its rise is not threatening, but of late has been quite aggressive in its dealings with the US, India and Japan. India will have to grow faster to keep China in check.
Demographics regarding population age are very different in India than in China. How is the age distribution a factor in the future of both countries?
Raghav Bahl: China will grow older before it grows richer. Because of the one-child policy it will have more people dependent on its workers, though the disadvantage could be partially offset by a better-educated population. India’s larger proportion of a younger population could be an asset. But there are studies which show that the so-called demographic dividend is not assured. For young people to be productive workers they must be healthy and educated. India also faces another challenge that China has already addressed: getting more of its women to work outside the house.
India is often seen as a leader in entrepreneurship. Is this trend a growing difference between India and China?
Raghav Bahl: The Chinese are good at business. They have flourished in countries like Singapore, Malaysia and Taiwan. But Communism under Mao destroyed native enterprise. What one now sees is state capitalism. The one thing that distinguishes India from present-day China is the quality of its entrepreneurs. I have George Soros’s word for it. India’s turnaround story since the 1990s has been scripted by its private enterprise. If only the government did not get in the way!
Both countries face increasing challenges with urbanization, infrastructure and the environment. Are India and China addressing these enormous problems in different ways?
Raghav Bahl: China is urbanizing faster than India. Its urban spaces are much more livable. This is partly because of the internal passport system that restricted migration to cities. Indian cities are choked with people relocating for jobs. Their governance is paralyzed by multiple authorities that do not work as a team. Municipal agencies are poorly funded, lack capable leadership and are racked by corruption. As for the environment, India’s is less devastated than China’s because of a noisy press and a strong environmental movement but that is little consolation. Whatever pollution there is in India is bad enough.
The agricultural base of India and China are very different. How can these two nations feed their vast populations successfully in the future?
Raghav Bahl: China has less cultivable land than India, and fewer restraints on alienating it for non-agricultural purposes, because land is state owned. China is also a meat-eating nation, unlike India, and will be dependent on imports (of soybean) to feed its large and growing poultry industry. Chinese reforms began in the countryside. Its farms are much more productive and fewer people are dependent on them.
Indian food production is stagnating. The amount of cereals available per person is decreasing. Agriculture is not a paying proposition. India will have to revamp its subsidies to ensure that farming is not groundwater depleting. It will have to improve governance and infrastructure in water-rich areas to unleash their agricultural potential. And it should allow foreign retailers like Wal-Mart to sell directly to Indian consumers, so that they can in turn tell farmers what to grow for the market and how to grow it.
What is the current status of the race between the tortoise and the hare?
Raghav Bahl: India should do what it is now doing, but much more vigorously, with the Indian State taking bigger risks and bolder actions; it is China that needs a political course correction, the evidence for which is not too encouraging.
What is next for Raghav Bahl?
Raghav Bahl: I am known as a serial entrepreneur, not a serial writer! But I have enjoyed writing this book …
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My book review of Superpower? The Amazing Race Between China's Hare and India's Tortoise by Raghav Bahl.
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