Treatise 2010

The International Thought Challenge

If China is BASIC’s engine, India is the steam

Posted by Team Manfest On January - 9 - 2010

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.

Topic 2
10 COMMENTS
You can leave a response, or trackback from your own site.

10 Responses

  1. Cartoons Says:

    * What is BASIC? Is there A BASIC? For countries to form groups even loose ones they need to have something in common. In so called BASIC we have India, SA and Brazil who may have things in common, but what do these countries have in common with China? What does India have in common with China other than the fact that these are all developing countries? Do we not need any other common ideology to form a group? China does not have anything in common with these countries be it the political structure or be it it’s stance on topics as varying as trade to terrorism. Then how do we even think or in a more optimistic manner rather believe that this BASIC is going to survive post climate negotiations of Copenhagen. When India and China are so at loggerheads with each other and don’t see an eye to an eye then how does the team feel that the concept of BASIC can really become a reality? When the involving parties are mired in conflicts like India and china are then how can the steam provide the fuel to the engine?

    * When countries involved do not have any BASIC ideologies in common then what is the future of this BASIC? Was it just a stunt to gain advantages or is it a real call of working together and for common goods? And if they really want to work together then what could be the reason for the fact that no initiative has been taken by any of the involved countries in the direction of the same other than on climate change in the 20 days post the summit. Maybe the reason for the above can be attributed to the fact that BASIC was just a convenient way of bargaining with the developed world. Maybe it was nothing more than that and its meant to be nothing more than that.

    * What does basic represent? Does it comprise of all the developing countries of the world? Or only the countries which have the privilege of finding a place in the acronym? If it is about all of the G77 then how successful has it been in voicing the concerns they have and how much trust do G-77 have on BASIC. And if it is just about these 4 countries then isn’t it very self-serving? These are all completely different countries with varied differences in everything. How do we expect them to work in commonality?

    * The two main countries of BASIC, India and China may individually be very strong but can they ever walk together? Do they have this much trust for each other?

    * Another question which I would like to raise to the team is that why do they consider South Africa’s income from mineral wealth and other natural resources – a not so reliable source of future growth potential

    * Well isn’t china a model of dictatorship rather than pseudo dictatorship.

    * Considering the completely different models of development of India and China, their completely different social setups can they ever move forward in the same direction?

    BASIC could really be very strong and a force to reckon with if the countries involved made it a point to work for the common good. Until and unless these giants understand and decide that despite of their differences be it in ideologies or practicalities their goals are common and they are striving for the common good of their citizens as well as of the world as a whole their can be no BASIC. Only when the basics of BASIC are strong will that day come when the two biggest and the fastest growing economies of the world will start moving in the same direction, both guiding and facilitating the movement of the other.

    Posted on January 12th, 2010 at 12:58 am

  2. Gotama's Men Says:

    The defense goes down to list the impressive economic performance of India and China in the past two decades to make a case for their roles as the engine and steam of BASIC countries respectively. While the astonishing growth figures of China and India, together with their increasing role in International Commerce have paved way for the larger roles they play currently in International forums and the ensuing geo-political negotiations, there is very little to suggest that they operate as natural allies working for a common agenda that would benefit all the BASIC countries. In fact, the tension between china and India on a wide gamut of issues both within and outside the immediate geography surrounding their boundaries are a case in point. The Chinese efforts to secure energy imports, one of the most important components of the supply chain fuelling their economic growth, have resulted in a projection of their military power in the Indian Ocean. The result has been a burgeoning naval arms race with India. The Chinese establishment of naval listening posts in Burma, new airbases and force deployments in Tibet and southern China, a deepwater port in Gwadar, Pakistan, and finally another port at Hambantota, Sri Lanka are increasingly seen as a ploy to develop a string of pressure points to be utilized in case of a future conflict with India. These strategic assets have attracted the attention of geo-political commentators so much so that they have been collectively named “the string of pearls”.

    With Chinese oil imports accounting for one-third of their energy consumption while it is 2/3rd in the case of India, both the countries have embarked on ambitious projects and trans-national deals. However, with several West African countries including Nigeria rejecting Indian bids for their oil fields in favour of China, the competition for partnership with the energy-rich nations of Africa has only intensified. With china outdoing India in granting aids and building infrastructure, the Chinese aggression has led to deep-seated resentment within the Indian establishment.

    The assertion that the disinvestment process is stronger in India when compared to China also does not hold water in light of the fact that China has attracted a far greater amount of FDI than India and had privatized its small and medium enterprises more and far earlier than India. During the early days of Communism in China, while political repression was endemic, a great emphasis was placed on improving public health and providing education for all. This enabled a large chunk of the Chinese population to benefit from the opportunities that economic liberalization later presented. This is in contrast to India, which with its large illiterate population (in fact, the highest in the world) that is deprived of basic civic amenities hasn’t been able to cope with the liberalization process, as indicated by incidents such as the suicides of cotton farmers in Vidharba.
    As for the strategic advantage of possessing a young population: Werner Schultink, chief of child development and nutrition for UNICEF in India, said that the country’s failure to address malnourishment and other health problems compromised the world’s ability to reach the millennium development goals of halving global poverty and hunger by 2015. It also threatened to wipe out the “demographic dividend” of having a relatively young population by creating a generation of underdeveloped and, in some cases, mentally retarded workers, he said.
    Also, the very assertion that India could fuel BASIC finds no strong support in the defense. With the lowest HDI among all BASIC countries and a poverty figure it should be ashamed of, India also has huge stakes in the outcomes of the negotiations it engages in on behalf of BASIC. More than Brazil’s Amazon eco system which has not seen a greater destruction of biodiversity than that happened in Europe in the past two centuries, it is India which is nearing an environmental disaster. The destruction of bio-diversity in India post-independence is unparalleled in human history and coupled with its perennial land and water management problems, poses grave threats for its survival in the next century.

    Moreover, apart from international negotiations on trade and climate change, the countries within BASIC are split by their geographies and don’t tie their destinies entirely to this group. The geo-politics in their immediate neighborhood engages them more than a play with other BASIC countries. The engagement of Brazil with other Latin American countries in their efforts to establish a common South-American central bank, its regional trade agreements with them and it solidarity with its neighbours in matters ranging from American hegemony in the region to nationalization of key strategic assets talk not only about its emerging role as a key player in the Atlantic rim but also about its wider global outlook beyond BASIC.
    Regarding crime in Brazil, while it is true that Brazilian cities have one of the highest homicide rates in the world, India leads the world in other forms of crime such as violence against women, caste-related and religious violence and is one of the worst terrorism-affected countries. Hence, India doesn’t necessarily have an edge over other BASIC countries on this count.

    One necessary requirement for India to be the future engine fostering the economic growth of smaller developing countries is the emergence of a domestic industry that can create demand for products from these countries as well as utilize work force from these countries. While China has started showing signs of doing both, India paints a sorry picture. Recent incidents such as the rift between BASIC countries and other developing nations over the climate change issue show that these countries increasingly perceive India to be one of the “biggies”. This is seriously undermining India’s soft-power and denting the role India can play in multilateral negotiations for BASIC. With such developments, India can hardly claim to be the steam that drives BASIC in the future.

    Posted on January 12th, 2010 at 1:04 am

  3. India Says:

    “Let us accept truth, even when it surprises us and alters our views.”

    George Sand’s statement echoes in our mental realm when neither reason nor logic but emotions guide our discussion. There is much talk of the dragon and the elephant giving sleepless nights to their erstwhile masters. But is there any substance to it?

    The topic received much food for thought with the publication of Goldman Sachs report about the BRIC countries. But as is the case with much of the products of our times a conditions apply clause was also there. Many seem to have missed the fine print. “Key assumption underlying our projections is that the BRICs maintain policies and develop institutions that are supportive of growth.” The assumptions as envisaged by the author are already in conflict with real scenarios.

    This article brings a counterpoint to the clichéd idea of the rising might of the two Asian giants.

    Environment- Neglect and its Cost

    Team 2 points out that Brazil’s growth has come at the cost of Amazon forests. They seem to have overlooked the environmental mess that China has created. Desertification has swept over 30% of the land area. “Every year, this area increases by about 2,460 km2.” The overall loss to the economy was in the range of 54 billion yuan (US$6. 5 billion) in 2001. China faces the problem of floods owing to massive deforestation. This has been due to commercial lumbering on a wanton scale. Projects like the Three Gorges dam have caused “massive destruction of ecosystem and uprooted huge populations.”

    China is also going to be the biggest emitter of green house gases overtaking US. Much of the energy production takes place using coal which is heavily polluting.

    Human costs have been manifold. “Pollution has made cancer China’s leading cause of death, the Ministry of Health says. Ambient air pollution alone is blamed for hundreds of thousands of deaths each year.”

    Political Space- a Chimera in Case of China

    Team 2 calls the political system ‘sclerotic’ in case of Brazil. The Brazilian political space is definitely more liberal than the Chinese communist regime. Trampling of human rights, be it Tibet or Xinjiang province is an open secret. The team also talks about political violence in Brazil. China again takes the cake when we refer to Tibet.

    Political Space—- No Space for the Have-Not in Case of India

    The team also talks about the ‘strong inclusive democracy’ of India. In India democracy is anything but inclusive. The Indian hinterland is literally on the boil. Naxalism has emerged as the biggest threat to the very idea of India as a nation. Violence has become normal in places such as West Bengal and Chhattisgarh. A deadly concoction of religion and politics has taken its toll on the social and economic life of the nation.

    Thus the violence level argument does not hold much water.

    Corruption Index

    India and China are more corrupt than other BASIC countries. India ranks 84, China 79, Brazil 75 and South Africa 55. In societies where corruption levels are high, transactions are relationship based rather than market based. Guanxi networks in case of China are much difficult to penetrate. Corruption not only adds to the costs but raises uncertainty as well. Rent seeking seems to dominate as opposed to wealth creation. Bribe Paying Index also adds to the argument. China is the worst of the lot at 21 followed by India(19), Brazil(17) and South Africa(14).

    Hunger Index

    China does well to rank 5 but Brazil does even better. India is worst of the lot at 65 while South Africa is at 14. It means that even though Brazil has lesser growth rate but still it has been able to deal with poverty better than India and China. Chinese and Indian growth story seems to deny many the fruits of development as can be seen in the rising of inequality levels.

    Human Development Index

    HDI is taken as a more holistic measure of development as against the usual GDP. Brazil is better of the lot at 75. China is at 79, South Africa at 129 and again India is at the bottom at 134. These rankings again take the sheen off the two giants. To add, India has the shameful distinction of having the worst infant mortality rate and maternity mortality rate in poorest areas which are even worse than the sub Saharan region.

    Doing Business Reports

    South Africa(34) is at the top followed by China at 89, Brazil at 129 and the usual laggard India at 133.While it takes just 6 days to start a business in South Africa , the number is 13 in case of India, 14 for China and 16 for Brazil.

    The Reality Behind Growth

    India might be taking pride in the temporary phase of outsourcing boom fuelled by skilled workforce at low labour cost. However, what has been ignored all the while are the systemic inefficiencies and the hurdles that the growth in an economy encounters due to inefficient bureaucratic management. The advantage of low cost labour can be easily superseded by the transaction costs and delays due to unresponsive and high cost administration. The advantage of low cost labour cannot be leveraged upon for long because of the fact that with the development of any economy wages begin to rise.

    India and China have the comparative advantage in labour but the same could turn to disadvantage if the population is not gainfully employed. Food inflation is at an all time high in case of India but surprisingly it has not changed the life of the Indian farmer. People near the poverty line are bearing the brunt of this price rise. Chronic poverty is a reality for many Indians.

    Conclusion

    As Guha remarks, “Rather than seek to dominate or tower above other nations, the Republic of India must seek to be less discontented and less divided within”. The same holds true for China as well.

    Posted on January 12th, 2010 at 1:13 am

  4. Kurukshetra Says:

    INTRODUCTION

    BASIC (Brazil, South Africa, India, China) is a very recent grouping in the international stage. Its forerunners are the much hyped IBSA (India, Brazil, South Africa) and BRIC (Brazil, Russia, India, China). Currently, the only major international issue where BASIC has played a prominent role is the Copenhagen Summit on Climate Change. Right now, BASIC as a powerful future entity seems to be media concocted image rather than being based on economic and political rationale.

    While there definitely are economic commonalities between the four countries, a strong BASIC would require these nations to cooperate strongly with each other on many issues. It is also clear that without India and China seeing face to face on issues, BASIC will break down. We opine that Team 2 in their argument has not even considered this important issue of whether China and India will cooperate sufficiently and whether BASIC would actually play an important role in the future. On the contrary, the team’s arguments have been concentrated on seeing which among (or if both) India and China would dominate the group.

    INDIA AND CHINA

    A sustainable working of BASIC would require cooperation between China and India. But once the common concerns in the areas of climate change, response to the financial crisis, and trade are sorted out, a whole host of differences can be expected to prop up. These differences lie in the areas of defense, search for energy resources, and exports.

    POLITICAL ISSUES

    The 1950s saw many Indian delegations at the ministerial and the Planning Commission levels visiting China to learn and adopt their development methods for rapid growth of the nation. In fact, the Indian second five year plan stressing cooperative development of villages was heavily influenced by Chinese attempts at growth and redistribution (Frankel, 2005). The two countries then went to war in 1962. This experience created a huge mistrust of China in India which has not worn off still. Border issues both in Kashmir and Arunachal Pradesh continue to fester the relationship between the countries. The recent situation when China expressed regret over Prime Minister Manmohan Singh’s visit to Arunachal Pradesh is a case in point. The issue of Tibet and the Dalai Lama living in India also keeps coming up. The hostile diplomatic row over visas in the last year also poses a threat to cooperation between the countries (Peer, 2010). China has also consistently opposed India’s efforts to becoming a permanent member of the UN Security Council (Chaulia, 2008).

    ECONOMIC ISSUES

    In the economic sphere as well, there are many areas where the two nations compete rather than cooperate. For example, India filed a record 42 anti-dumping cases against China in the second half of 2008 at the World Trade Organization. There have also been clamors particularly from the Indian industry for raising the import tariffs on specific Chinese products. The Chinese have decried these as protectionist attempts by India (Murthy, 2009). Also, the Arunachal Pradesh border issue is further complicated by news that China is building dams across the Brahmaputra and that it plans to divert water from the river to other regions of the country (Samanta, 2009). However, the biggest issue between the two countries is regarding energy security, specifically oil security. As both the countries continue to grow, they need a higher supply of oil for which they are making deals with Asian, African, and Latin American countries. This quest for energy has intensified in the last four years with Indian and Chinese companies directly competing against each other for developing reserves. This battle is only expected to intensify in the near future (Sanchez, 2007) (Oil Price Editorial, 2009).

    “ENGINE AND STEAM” – REALLY?

    Considering all the differences discussed above, we strongly opine that there are simply too many areas where India and China compete rather than cooperate. This, in our opinion would reduce the potency of BASIC in international negotiations. Even the much touted cooperation of the BASIC countries in Copenhagen has not been uniformly hailed as a success, with the Indian government being accused of bailing out China (Chellaney, 2010), the climate change activists saying that nothing concrete has emerged out of the talks, and the criticism of the smaller nations in G-77 that their opinions are not being taken into account by neither the BASIC countries nor the developed nations.

    CRITIQUE OF METHOD

    In addition to our criticism of the stand taken by Team 2, we would also like to critique the method of some of the arguments presented.

    While comparing India’s and Chinese reform histories, the authors say that the promotion of disinvestment has been much stronger in India than in China. But right in the next sentence, they argue that India’s free market reforms are not as proactive as China’s given India’s circumspect approach. Not only is this contradiction of the authors’ own assertions, but the assertion itself is flawed. Disinvestment in India was taken up keenly only during the NDA regime from 1999-2004. The Congress-led government that has been in power since 2004 that has actually done away with the ministry set up for disinvestment by the earlier government and has made it a department under the Finance Ministry (Kumar, 2004). Also, disinvestment in India has primarily been about raising money to meet the government’s fiscal deficit rather than an attempt to make the PSUs more accountable and make the industry competitive.

    CONCLUSION

    As of now, BASIC has not accomplished anything substantial over a sufficient period of time to be considered a proven vehicle. Even if it can be thought to be one, the engine of China and the steam of India (even if it is the other way round) have too many differences to work with each other on a sustained basis. The current scenario, we believe, points to a situation in which the engine and the oil attempt to move the vehicle in different directions resulting in the vehicle moving awkwardly or braking to a stop.

    Posted on January 12th, 2010 at 1:17 am

  5. Team Me, Myself & Chotu Says:

    It is India that is the engine and not China

    India set to top China’s Growth

    According to chief economic advisor in the finance ministry Kaushik Basu, the Indian economy could surpass China’s growth rate sooner than expected and that too most probably by 2014. The economy would bounce back to show a GDP growth rate of 9% the next fiscal year, according to the finance ministry. These estimates show that India is the engine and not China.

    India’s relatively large young population will help raise its savings rate to over 40% of GDP from 38%. The high savings rate is expected to trigger a period of sustained economic expansion. Savings rates (are) unlike stock market indices. “Once you are there, you don’t fluctuate”. Hence a sustainable growth driver exists.

    China lags behind in social factors

    Though China has led India in economic parameters, it is the social parameters in which India wins the game. Be it the freedom of speech, press or above all a legacy of 50 years of democracy India’s social standing among the BASIC nations is by far the most revered. The concept of Chinese dragon is hyped, when you can’t protest against the misdeeds of government officials and the common public is brutally suppressed to protect the so called party policy. Let it be reminded that growth is simply not just economic, it has a social aspect as well. With India showing remarkable progress on both fronts, be it the Right to Information Act or legalizing homosexual relationships, the engine of growth is in this country alone. We are not the steam, we are the engine itself.

    Organic growth of India

    India’s organic growth story is here to stay. But the same cannot be said about China where FDI is the sole driver.

    Posted on January 12th, 2010 at 1:20 am

  6. XLent_warriors Says:

    India will remain as the steam of BASIC’s engine

    Introduction

    The article says that India has will cease to play the second fiddle to China (actually this is stated in the last line of the article and not substantiated enough with pros and cons). The article has left many questions hanging about the validity of this statement. Though both countries got independence at around the same time, China has gone several notches past India. Though India is growing at 9% for the past few years it will not be able to overtake China which has consistently grown at 10% for decades.

    India’s reverse growth

    The article fails to do in-depth analysis of India and China’s growth. India has been doing well in efficiency and innovation parameters whereas it is faring badly in basic requirements like health and primary education, macroeconomic stability etc. This has created “Two Indias” as our Prime Minister refers to. This has ever widened the gap between the rich and the poor. Improvements in the basic requirements will help India out of poverty which at 42 percent (people living on less than $1.25 a day) is more than twice China’s equivalent figure. India cannot expect to lead BASIC with such a level of poverty.

    Global warming will affect India more than China

    The article says India can be proud about Copenhagen. However, it is prudent to note that India reversed its previous stance of not reducing emissions mainly due to pressure from developed countries and China’s decision to reduce. The reduction will no doubt affect India more than China because China has relatively developed well. To fuel growth, India will need to inevitably increase greenhouse gas emissions. India’s per capita emissions are one of the lowest and even in terms of total emissions it is far lesser than US’s. Now the cap on emissions will limit its already slow growth vis-à-vis China’s. The scope to improve with green technologies is lesser for India as R&D is not up to the levels of developed countries.

    Energy dependence

    The article mentions India’s humongous dependence on energy. Both India and China needs huge reserves of energy for their exploding growth. India has signed Nuclear energy deal with US. However such a deal was signed by China far before and China has been quick to grab energy reserves in Africa and South America. India has been slow in acquiring such reserves which will decide who will drive BASIC in the future.

    Manufacturing driven economy

    The article has not delved about the manufacturing orientation of Chinese economy. The manufacturing sector of China forms 48.1% of its GDP, while it contributes to only 28% of India’s GDP. Consequently the unemployment rate in India is 9.1% while that of China is just 4%. India cannot maintain its position among BASIC nations let alone overtake China if it continues to concentrate on agriculture sector.

    Pace of growth

    The article does not mention the relative pace of growth. Industrialization policies in China began in during early 1960s, while the Indian economic liberalization reforms began only in 1991. Chinese liberalization policies aimed at generating not just employment but also giving an opportunity for the people to choose a job they want. This was the driving force behind the rapid development of their economy.

    Governance Structure

    The articles talks about organic nature of Indian economy. However, it is plagued by problems like corruption, red-tapism, cronyism, opposition by political parties and budgetary spending priorities. The single party communist nature of Chinese government ensures that there is no opposition, and the state is in absolute control of taking decisions. Such a form of governance also enables taking long term decisions. The grand success of Beijing Olympics is a testimony to it.

    Military

    The article does not talk about military might of China.With a total number of 2.3 million active troops, the People’s liberation Army of China is the world’s biggest military force. However, India has around 1.4 total military force including Indian Air force, army and navy. India stands third behind China in times of size. The defence budget of China stands at $70 billion, while that of India around $33 billion. This clearly shows that China has a much commanding position in terms of defence and thus, more influential in global forums.

    Impact of Terrorism

    The article mentions only briefly about terrorism. China unlike India is relatively free from the vices of terrorism, regionalism, casteism and naxalism. Increasing number of terrorist activities in India shatters investor confidence. An instance is the stock market response to the terrorist attacks of Taj Blasting in Mumbai in 2008, or the parliament attacks in 2001. They also adversely affect particular industries like the slowdown that aviation industry experienced post 9/11 attacks on WTC. They also have long term impact like political instability. The assassinations of Indira Gandhi and Rajiv Gandhi have affected the growth of Indian economy at large.

    India’s troublesome Neighbours

    The article is silent about the neighbors of India and China. Barring Taiwan and India, China has neighbors with whom it has good relationships. On the other hand, the continuous attacks from Pakistan, the refugee problem of Bangladesh, the tensions with China on eastern borders, unfriendly military establishment in Myanmar, the never-ending problems of Tamil militants with Sri Lanka have harmed India’s growth. China has been building its military bases in the neighboring countries further threatening India. This implies that India will not be able to trump China.

    Conclusion

    India has a long way to go to catch up with China. If India has to lead BASIC’s growth, it needs to show the aggression that China is exhibiting globally. It is still in Stage 1(based on factors of production) of growth as measured by the GCI while South Africa, China and Brazil have advanced to Stage 2(based on efficiency). This shows that India has a long way to go if it has to be called the engine of BASIC’s growth.

    Posted on January 12th, 2010 at 1:28 am

  7. Swati Says:

    The comparison of the periods of rapid economic growth in China & India shows different patterns of development and structural change. However, both countries experienced some advantages of “relative economic backwardness” and some aspects of the “fordist model of growth”.

    China had an anticipated and deeper structural change, spurred mainly by economic reforms and the growth of the internal market in the 1980s, and, since the mid-1990s, by a very rapid penetration of its industrial products in the world market.

    However, a substantial part of China’s exports in medium and high tech sectors are due to joint-ventures with foreign multinationals.

    India had a more balanced structural change and a slower insertion in the world market, although some sectors, such as software, steel, automotive and pharmaceuticals are recently increasing their share in the world markets. Owing to the huge number of micro-enterprises and the great size of the informal sector, India benefited much less than China from the economies of scale and from the third wave of the “fordist model of growth”.

    Both countries, but in particular China, experienced negative externalities of this recent phase of rapid growth, such as higher inequalities, pollution and urban congestion.

    Posted on January 17th, 2010 at 2:01 am

  8. Team Manfest Says:

    Threadbare

    The rebuttals from the attacking teams seem to hinge on a prominent thread – China and India are very different and have nothing in the way of similarity for them to constitute an engine and steam pair. Teams have also argued that this coalition comprises countries that have little commonality and ergo constitute a meaningless combination. The metaphor of engine and steam has been dismissed as a myth.

    These arguments seem to be oblivious to the contention in our opening argument “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 forums nevertheless”

    We stated this upfront to present a holistic picture of our stance instead of vetoing facts imprudently. No country is similar and neither is similarity a precursor for a coalition. Every country competes with another on different fronts but it would be baseless to use this difference alone as a reason to reject a coalition or an alliance because there are multiple strategic objectives for two countries to collaborate.

    On closer inspection

    International Politics makes for strange bedfellows. When the world was in the throes of the greatest war in human history, the unlikeliest of allies formed a coalition against Germany. It is circumstances and a common vision for the future in the face of those circumstances that binds nations into groups. BASIC’s goal is to further a common cause to prevent the rich nations from force feeding terms and conditions. BRIC is another coalition which intends to balance the power. BRIC’s presence hasn’t made BASIC redundant and if so, it did not show in the Copenhagen summit.

    The engine and steam metaphor does not and cannot connote two closely knit countries growing congruently. This would be an absurd interpretation and a mockery of reality that we are cognizant of in our opening argument – “China and India, though clubbed together as miracle economies, have stark dissimilarities in the paths they have followed”. On the other hand, the metaphor alludes to the strength of these two nations and their potential amongst a group of countries who have come together to further a case. It is reasonable to ask why we have interpreted the topic this way.

    Our interpretation rests on empirical data where coalitions such as the G20 were established to bring together important industrialized and developing economies to discuss key issues in the global economy (What is the G-20). Economies constituting the G20 (India, China, Japan amongst others) are aggressive competitors but it hasn’t stopped them from accomplishing a common objective as a group. G20 is widely perceived as being dominated by Japan, India and China. To quote a snippet from the official G20 website “it (G20) committed to implement the unprecedented and most coordinated expansionary macroeconomic policies, including the fiscal expansion of US$5 trillion and the unconventional monetary policy instruments; significantly enhance the financial regulations, notably by the establishment of the Financial Stability Board(FSB); and substantially strengthen the International Financial Institutions(IFIs), including the expansion of resources and the improvement of precautionary lending facilities of the IFIs” (What is the G-20).

    The metaphor “engine” and “steam” are thus allusions to a balance of power. Our interpretation is based on empirical facts and observations where powerful nations within a group constitute the group’s ambassadors.

    India and China: Energetic hatred?

    There are other rebuttals that focus on a bleak future between India and China based on the predicted energy crises. No doubt that energy will constitute an important leverage in the Indian and Chinese diplomacy but will this lead to inevitable hatred? We don’t believe so. It’s too early to throw in the towel.

    India and China share common ground on key matters like climate change, the financial crisis and WTO negotiations. China is now India’s largest trading partner (Planning Commission, 2006). India recently supported a proposal by China seeking more representation in the WTO secretariat (Budget Finance and Administration Committee) in Geneva. India and China are also pushing for reforms and greater representation for the developing countries in forums like the International Monetary Fund and the World Bank. Mutual investment is growing as are links in financial matters, civil aviation, customs cooperation, agriculture and tourism (IMF, 2006). Leaders of India and China now meet regularly either on mutual state visits or at international summits. However, to expect these countries to shake hands on all matters sundry is crying for the moon.

    The rebutting teams have painted a dismal scenario where all these partnerships will crumble and no diplomatic solution will be conceivable. Even in the most pessimistic of predictions, this seems ridiculous.

    India: Elephant of today and Mammoth of the Future

    Some of the teams seem to have rejected the notion that India can be ever be the steam for BASIC’s growth. To rue over the shortcomings of India whilst turning a blind eye to India’s progress is a clichéd and shallow stance. To take one such stance, teams have complained of high corruption in India. Without going into pure numbers, we want to cite a simple example as a counter. Two decades ago, a telephone connection used to be godsend to most households with bureaucracy ruling the Indian telecommunications industry. What is the status of the telecommunication in India now? Corruption cannot be wished away in a jiffy. Corruption has many facets and is indeed high in India but the fact that we have grown in spite of this handicap is laudable.

    India has only opened up its economy to reforms since 1991. It is a force to be reckoned with purely because it has momentum on its side. India has clocked the 2nd highest economic growth rate on aggregate for the last decade. According to a Goldman Sachs report, India’s economy will be larger than all but the US and China in 30 years and India will eventually end up overtaking the US (Goldman Sachs BRIC Report). Moreover, Indian economic fundamentals are amongst the strongest in the world – organic growth fuelled by enterprise and the private sector, efficient capital markets and fairly effective legal systems. The Indian story is backed by technological innovation and a strong services sector. Some of our opponents argue that the services sector would not be able to drive inclusive growth in India. Empirical Evidence points to the fact that the services sector has been fostering growth at the grassroots in states like Bihar, Madhya Pradesh and Rajasthan (Financial Express, 2010).

    The overall trend of the proportion of populace below poverty line has been normalizing downward for the increase in population (India, Press Information Bureau, March, 2007). Over the next 20 years, India’s middle class will constitute the fifth largest consumer market occupying 40% of the populace (McKinsey Quarterly, 2007). The McKinsey quarterly states that India will see further reduction in poverty and witness a tenfold increase in the size of the middle class. The focus of India’s household budgets is expected to shift to discretionary items from basic necessities. We are baffled that our opponents have chosen to ignore these startling facts in their argument. For a country of 1 billion housing the most diverse of socioeconomic groups, it is absurd to expect an ideal growth progress bereft of economic and social nightmares. To write off the country based on this expectation is a one sided argument.

    BASICally…..

    Our focus through the argument has indeed been on India and China as one team chose to complain. We chose to put in our notions of the future because we don’t want to close a debate shut without considering contingencies (criticized by a team as being flawed in methodology)

    We stand by our argument on India and China.

    If China is like mature fermented red wine in a cellar then India is like the sparkling champagne in a stirred bottle waiting to be uncorked. Both countries have their distinct flavour and appeal leading to their individual success stories – China’s crafted by the state while India’s written in black and white by its toiling millions. The powerful red dragon with its all its sinew is definitely the current engine of the four BASIC nations, but the white elephant is steadily taking giant strides and gathering steam to beat the dragon at its own game.

    Posted on January 25th, 2010 at 2:58 pm

  9. tower 200 Says:

    I adore this product! Will there be anything else in the line coming out soon?

    Posted on March 6th, 2010 at 2:41 am

  10. ronaldsnk Says:

    на самом дне фильм…

    state of play фильм
    …

    Posted on June 3rd, 2010 at 6:14 pm

Leave a Reply