If China is BASIC’s engine, India is the steam
BASIC: Flash in the Firmament
The progress of large developing countries has fuelled the muse of socio-economic observers for a decade hitherto. The world sotto voce acquiesced to the might of North America and the European Union until China and India jolted this somnambulism. The population of the world is more than six billion, of which less than one billion is in the industrialized countries; more than five billion is in the developing countries and more than 2.5 billion is in Brazil, South Africa, India and China or the BASIC nations (Nayyar, 2008). Thus, 40 per cent of the population in the world and 50 per cent of the population in developing countries lives in BASIC countries accounting for about 10 percent of the world’s GDP and more than 40 percent of that of the developing world (Nayyar, 2008). Rapid growth driven by strong domestic fundamentals in these four emerging economies is already changing power equations in the world economy. The BASIC countries accounted for 50% of the world economy in the early 1800s and although per capita data is far lower than that of the developed nations, it is only a matter of time before the world heads back to its BASICs.
China and India: First among Equals
The economies of India and China have clocked GDP growth rates of 7.09 and 9.0% respectively; while those of South Africa and Brazil are significantly lower at 3.06% and 5.08% respectively (Google – Public Data). Further, if one were to look at qualitative comparisons of the economies, both South Africa and Brazil are mired by debilitating problems which, unlike those of China and India do not have ready fixes. A significant chunk of South Africa’s GDP comes from mineral wealth and other natural resources – a not so reliable source of future growth potential. To complicate matters, South Africa faces a flight of human capital to North America and Europe on a scale which would make India’s “brain drain” theories seem like trivial bouts of paranoia (CIA World Fact Book: South Africa). While Brazil is on a significantly stronger footing, it has its own share of worries – Brazil’s growth comes at the cost of one of the planet’s greatest treasures, the Amazon Eco System. A sclerotic political system coupled with large, violence prone cities only exacerbates matters for the South American nation.
India and China’s growth has not only been far higher than the average world economic growth in the last four quarters (while South Africa and Brazil haven’t bucked the trend seeing massive slowdown commensurate with the down turn) but their growth has come at the back of private enterprise for India explosion and heavy FDI inflow for China. India and China clearly lead the way with sustainable growth fuelled by the demographic dividend of a larger population, lower wage rates and emerging technological capabilities to drive higher productivity. On the face of it, Brazil seems to have the numbers, but GDP growth has been just 2 per cent per annum for the past 25 years. Brazil has the economic size but not the growth rate to drive the world economy (Nayyar, 2008).
India and China are truly first amongst the equals.
China: The Alpha & Omega?
Economists are wont to place their bets on China given its phenomenal success. It is the second largest economy in Purchasing Power Parity (PPP) terms and has supplanted Germany as the largest exporter in the world (India Watch- India China Comparison). It has been the fastest growing economy in the world for over 2 decades now with an average GDP growth of 9.8%. From nuclear technology to the production of rice, their dominance covers a rather wide gamut. North America has reconciled to “Made-in-China” labels dominating consumer purchase. As much as India’s polity would love to thump their chests about India’s presence in the Copenhagen Summit, China’s voice was considered far more significant so much so that the European Union was sidestepped in the brouhaha. These facts and North America’s increasing reliance on China continues to rankle developed nations across Europe. China’s economy is indeed bigger and accelerating considerably faster than the other BASIC economies (weblink: India, Brazil, South Africa aim for free trade, sign seven accords).
These numbers however dispel important underlying truths about China’s evolution and its fragile growth as explicated below. China may not be the Alpha and Omega of BASIC after all.
India: Home-grown & Organic
China and India, though clubbed together as miracle economies, have stark dissimilarities in the paths they have followed. China has made the transition from being a communist nation with state owned enterprises to one that has opened up to private partnerships and FDI inflows with the administration playing the role of strict gatekeepers.
India has not attracted anywhere near the amount of FDI that China has, nor is there parity across a basket of development indices. India’s socialism emerged as an alternative to both communism and capitalism. Our leaders saw a need to mitigate evils in both systems to sketch an ideal middle path. While this saw heavy investment into Public Sector enterprises initially, the promotion of indigenous private enterprise in addition to disinvestment has been much stronger than in China. Our free market reforms have not been as forthcoming or as proactive as China’s given our circumspect approach against a democratic backdrop as opposed to China’s pseudo-dictatorship. However India’s growth is organic and thereby far more formidable as opposed to heavy reliance on foreign capital per se. India is a young and nimble nation on the move – and literally so: India’s median age stands at 25 years compared to China’s 34 years. (Khanna, 2003)
BASIC: A Convenience?
Based on the sheer weight of growth parameters, China and India are rightfully the enablers of a better future by being the duo of a Locomotive (driver) and steam (fuel) of other developing countries, Brazil and South Africa included. Apart from fuelling the economic growth of the developing world, the BASIC countries are also beginning to engage in a plurilateralism. The G-3 or IBSA (India, Brazil and South Africa) strategic alliance and the Outreach-5 (China, India, Brazil and South Africa, together with Mexico) which has been invited to the G-8 summits are cases in point (Nayyar, 2008). Moreover, the BRIC summits in Yekaterinburg for the past two years have focussed on collaboration and collective effort towards improving the current economic situation (Purushotham, 2003).
But not all cooperation is by design. Cooperation has been both ad-hoc and a convenience. India and China have not actively engaged in taking a leadership stand representing the voice of the developing nations and the BASIC in particular. The current trade agreements and international forums reflect the common geopolitical, social and economic issues faced by these countries.
China and India’s presence and motives however self serving have been invaluable for BASIC’s growing stature in international fora nevertheless. These two countries, given their potential superpower status in the future, have indeed been the engine and steam for Brazil and South Africa and will continue to dominate world politics in the future.
India & China: Soothsaying
Evaluating the facts, we are of the view that if China is the engine for BASIC then India is indeed the steam. India’s organic growth further impels us to believe that India could very well be a stronger China of the future that could truly foster growth for smaller developing nations. India could be the next engine for world growth in the next 3 decades given its progress anchored by a strong inclusive democracy. While internal ridges in the form of political instability in multiple states, growing income divides and the threat of terrorism loom large, the country continues to display steady progress. The rate of urbanization, the growth of SMEs and the explosion of consumerism are indicators of growth however febrile or slow. Critics also cite multiple bugbears that could disturb an optimistic future – impediments in the form of high external energy dependence (80% for India) as a moot point. There is some truth in these arguments, no doubt, but they fail to dent an aggressive yet natural growth trajectory that India is set out on.
India’s growth may not be controlled and shaped but it is this latitude that will mould a gradual yet natural evolution into a world power which will cease to play the second fiddle as the steam to the engine that is China.
