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Why is democratic India lagging behind China in economic development
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Why is India lagging behind China in economic development when India is a democracy and china isn't?
To be honest India is lagging behind China in every parameter because of democracy.
India has not been able to bridge the infrastructure gap with China even after 20 years of opening up its economy is one of the most staggering failures of a country that wishes to become the next manufacturing superpower. This question has intrigued me since the time I started studying economics and the answer is not as simple as'land acquisition is difficult' that most people answer when asked this question. Pranab Bardhan has an entire chapter dedicated to this question in his book Awakening Giants Feet of Clay : Assessing The Economic Rise of India and China.
Bardhan writes that from the beginning of Chinese economic reforms till the early 1990's,
India was ahead of China in terms of the standard indexes of many of the infrastructural facilities. For example, at the beginning of the 1990s India’s highway and railway infrastructure was ahead of that in China in terms of route kilometers. [1]
That China can leap past ahead an India well intentioned to develop infrastructure shows both a glaring mismatch between national priorities and a difference in national cultures in India and China with China's national culture heavily skewed towards what it takes to build infrastructure projects despite its short term drawbacks.
A simple comparison of India's Geert Hofstede national culture with China and South Korea, two of this century's biggest infrastructure led growth stories makes the glaring distinction clear.
India scores the lowest among the three in long term cultural orientation which reflects in the way India is governed and what drives policymaking.[2] It is intuitive, India is the only major economy to de facto democratize before becoming rich on a per capita basis.
'Democracy with Indian characteristics'** comes with the need to think short term. In India where winning elections is prioritized, steps that appease the largest possible number of the electorate is prioritized, things like subsidies take precedence over large infrastructure projects that will take years to build and to break even and generate profit. Only when the need to build a highway is glaringly obvious and is covered by the media ad nauseum and that the general public start to complain about the lack of certain infrastructure is when an election prioritizing regime thinks it is safe enough to build or start building the project.
Projects such as the Delhi metro were not started because the government felt the need to do so, if that were the case, the government would have started them in 1990, they were started when the capital was overrun with cars and it was obvious (and hence safe) to build the metro. The present NDA government led by Narendra Modi is the only government that has a different outlook and it investing in infrastructure, possibly because the stories of India's disastrous infrastructure are covered widely by the international media and it is clear than China has taken a lead which is near impossible to bridge if we do not start soon.
India's approach to infrastructure and its drawbacks
The Indian approach to infrastructure is criticized to an extent thatThe Economic Times (newspaper) a few years back had a slide show titled How China built these and why India never does with photographs of large infrastructure projects in China. The most common differences between the Chinese and Indian approach to infrastructure and why India has lagged behind are:
1.Government's Spending Priorities: China has aggressively invested its infrastructure so that infrastructure is never a bottleneck for business. It's high savings rate has helped it in the process which the government has channeled to infrastructure by policy measures. Consequently, China's spending on infrastructure as a percentage of GDP, a clear indicator of government's spending priorities is the highest in the...
From Capitalism and Democracy
Lester Thurow writes that "democracy and capitalism have very different beliefs about the proper distribution of power. One believes in a completely equal distribution of political power, 'one man [sic] one vote,' while the other believes that it is the duty of the economically fit to drive the unfit out of business and into extinction. 'Survival of the fittest' and inequalities in purchasing power are what capitalist efficiency is all about. Individual profit comes first and firms become efficient to be rich. To put it in its starkest form, capitalism is perfectly compatible with slavery. Democracy is not."
Take infrastructure, for example. In a totalitarian government, where all decisions are made from the top down, capital can be immediately shifted to the economic sector that would most benefit. Infrastructure is built without restriction or argument. Democracy is messy and slow, every expenditure is passed through layers of bureaucracy. This is extremely important to developing economies.
Now, why does India lag behind China? Here's one perspective:
From Why Does India Lag Behind China?
India’s experience differs from that of China in at least three important respects. First, while India has seen the share of agriculture in the GDP decline, it has not experienced perceptible rise in the share of manufactures. Second, exports out of and direct foreign investment (DFI) into India have not seen the same rapid expansion as that seen in the case of China. Finally, fast-growing exports from India have been either capital-intensive or skilled-labour intensive. The shift in favour of unskilled-labour-intensive products traditionally observed in response to the adoption of outward-oriented polices has not happened in India.
The most dramatic difference between India and China lies in the magnitude of international economic engagement. One measure of this difference is that the annual expansion in China’s trade has been larger than India’s total annual trade during last several years.
I think one of the key points here is the difference between growth sectors. China's growth has been largely due to manufacturing which requires little specialization and education and is limited mostly by the industrial inputs. Whereas India's largest growth sectors have been in specialized field like technology and finance, which are limited by the education level of the labor force.
Ultimately, there are all kinds of reasons India lags behind China. Some could be historic, geographic and social. The most important thing to take away from this question is the false assumption that democracies are better for developing economies than other forms of government. In fact, it would be better to think of capitalism as opposed to democracy.
In short, India being "behind China" in most measures is the simply historically how things have ALWAYS BEEN, but for short periods.
Please consult this link:
Page on nyu.edu
Comin, Diego, William Easterly, and Erick Gong. 2010. "Was the Wealth of Nations Determined in 1000 BC?" American Economic Journal: Macroeconomics, 2(3): 65-97.
DOI: 10.1257/mac.2.3.65
We assemble a dataset on technology adoption in 1000 bc, 0 ad, and 1500 AD for the predecessors to today's nation states. Technological differences are surprisingly persistent over long periods of time. Our most interesting, strong, and robust results are for the association of 1500 AD technology with per capita income and technology adoption today. We also find robust and significant technological persistence from 1000 BC to 0 AD, and from 0 AD to 1500 AD. The evidence is consistent with a model where the cost of adopting new technologies declines sufficiently with the current level of adoption.
Further:
In 1000 BC, the Middle Eastern empires and China have an overall technology adoption level of 0.95 and 0.9, respectively, while in India and Western Europe the average adoption levels are 0.67 and 0.65, respectively. In 0 AD, India and Western Europe catch up with China and the Middle Eastern empires. In 1500 AD, Western Europe has completed the transition and is the most advanced of the four great civilizations with an average overall adoption level of 0.94. China remains ahead of most countries with an overall adoption level of 0.88. The Indian and the Middle Eastern empires have fallen behind to 0.7.
I think the India Subcontinent region was always good as theorizing, hence the numerous religion and philosophies that came out of the region, but as far as the creation and adoption of actual technology, political and social innovation...uhm, NOT SO MUCH.
Between the two was not necessarily associated.
Although China's political situation is bad.To tell the truth, China's economic development is still good.
Can India catch up with China?
