Recent reports from varied sources such as the Reserve Bank of India (RBI), International Monetary Fund (IMF) and several rating agencies and merchant banks that the Indian economy is poised to register a growth rate that could be as high as 7 percent have given rise to a self-laudatory mood. A recent article "Can India overtake China?", in the prestigious US journal Foreign Policy, co-authored by Yasheng Huang and Tarun Khanna accounts for a good bit of the gloss on it. Both come with impressive credentials. Huang is an associate professor at MIT's Sloan School of Management, and Khanna is a professor at the Harvard Business School. But it is Huang who, by virtue of being an ethnic Chinese, gives the article its special credibility. While 7 percent is good, evidence suggests that the underlying basics of the Indian economy remain unchanged. Nothing makes this more explicit than a comparison with the economic and social indicators of China after the economic reforms. Far from catching up with China, India seems to be falling well behind.
We must not forget that 7 percent comes after a year of 4.6 percent, preceded by performances of 5.7 percent and 3.9 percent, which shows the average growth rate to still be in a low trajectory. But even if we accept that India is indeed 'shining', how good is that shine? Is it a burnish that reveals the quality of the metal beneath or is it a thin coat of varnish that just puts a superficial gloss? To understand that we must go into how good the years after the so-called reforms have been. Very simply, the decade after the launch of the so-called reforms has not been very much better than the decade before it. Gross National Product (GNP) growth for the post-reform period (1992-01) crept up by a mere 0.2 percent to 5.9 percent. With a performance like that it would be extremely difficult to make a case that the economic reforms or liberalisation, call it what you will, have made much of an impact on the nation as a whole.
Of course some have benefited. As Sushma Swaraj, currently health and family welfare minister, famously told the lower house of the Indian parliament recently, there are no more queues for telephone and gas connections. But with India's teledensity a mere 3.2 per 100, and with just 58 million of the 180 million households with gas connections, clearly suggesting that most households with an annual income of less than INR 80, 000 are without cheap and subsidised energy, the country seems quite some way off from a satisfactory distribution of benefits. Nevertheless, no queues for phones, gas, and even for Maruti cars and Bajaj scooters and motorcycles is still good news. But certainly not enough to warrant an outpouring of self-congratulations for it is indices for infant mortality (69 per 1000), life expectancy (63 years), literacy (65 percent), as well as energy sufficiency (527 billion kilowatt hours) and energy consumption (a mere 379 kilowatt hours per capita) that make the living reality of India. Additionally, however well it might have done, the country has fallen well behind China and it will take some effort to catch up. (Tables 1(a), 1(b), 1(c) and 1(d)).
A comparison of the first ten years of the economic performances of India and China after reforms (from 1992 for India and from 1979 for China) is instructive. China entered the first decade of reforms as a fast developing and modernising country with an average decadal growth rate of 5.5 percent. But more important than this was the performance by 1980 of reducing infant mortality to 42 per 1000, elevating life expectancy to 67 years, and raising adult literacy to 66 percent. India by contrast had a better growth rate of 5.7 percent in the 1980s but came burdened with an infant mortality of 119 per 1000, life expectancy of 59.2 years, and adult literacy of 48.41 percent (Table 2). Many reasons have been advanced for China's stupendous performance. Few are as valid as what Amartya Sen wrote: "China's relative advantage over India is a product of its pre-reform (pre-1979) groundwork rather than its post-reform redirection".