January 06, 2006

Saffron-colored future?

Ozblogger James Waterton has some interesting observations on the relative prospects of India and China. I find they are pretty much in synch with what we've been saying here. Very crudely put, the best way to make up for a Chinese economic stumble is to encourage India to modernize faster. Both India and China have such large amounts of "low hanging fruit" in terms of potential benefits of political and economic reform that either could substantially accelerate the development of their internal markets. But India is much better poised to actually implement such reforms.

Posted by James C. Bennett at January 6, 2006 11:17 PM

Inda ought to be pretty embarrased by the way they have been left behind by China over the last twenty five years. The only thing keeping hundreds of millions of Indians in poverty is corruption and inefficient regulations. India doesn't have the excuse of a peasant revolution and communism to blame for it's backwardness. The Indians know exactly what would allow them to have the same type of economic success as China. Well, China might not be the best example because of the potential for banking collapse, historic predisposition to instability etc. but consider countries like South Korea or Japan. The ingredients for prosperity are known and out in the open. What is India's excuse? Bad Government. Is it the legacy of having a been a bureaucrat-ocracy or a corporate-ocracy? A colony run for profit by the empire rather where loyalty to the empire is admired rather than than a free society where initiative and individualism is rewarded?

Posted by: anonymous at January 7, 2006 11:01 AM

Much of India's "Permit Raj" only dates back to World War Two, when the British enacted the same emergency wartime controls they did in the UK. But the new Indian government kept them in place.

Although corruption is endemic in many sectors of society, the judiciary is generally admitted to be uncorrput, and the media is genuinely free. This puts India light-years ahead.

Every other successful East Asian economy is much smaller than India, and it was easier to accomplish reforms for that reason. And every one was a former member of either the British or Japanese empire, and inherited substantial physical and administrative infrastructure from them. And most of them benefited from substantial American or British subsidies in the postwar era.

India has come a long way. It has a long way to go. This is a problem, but it is also an opportunity. And unlike China, we can be reasonably certain that we have an accurate assessment of what is happening in India.

China is not down and out by any means, but it is more of a crap shoot than many people realize. India is not a slam-dunk, but it's more of a likely thing than people realize either.

Posted by: Jim Bennett at January 7, 2006 12:24 PM

India certainly has the opportunity and the resources to advance rapidly, but it was discouraging to see her performance in the Economic Freedom Report referred to in the prior post. India was 121 of the 157 nations ranked, just above Russia and well below Pakistan at 110. Much remains to be done if India is to reach its potential.

Posted by: Richard Heddleson at January 7, 2006 04:14 PM

India, like China. is a rather large country.

Economic development is never even accross the board.

SE India is doing quite well. NE India is some of the worst in the third would. In China it is the coastal regions vs the interior.

I rather suspect that India has greater potential than China. The heritage of the CP in China still needs to be competly overcome or it will drag China down.

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