INSUBCONTINENT EXCLUSIVE:
By Ruchir SharmaWhen Narendra Modi became prime minister in 2014 one hope was that he would do for India what he had done as chief minister
in the state of Gujarat: build a fast-growing economy like China’s, with an efficient bureaucracy and advanced factories attracting
billions in investment from multinational corporations.
Five years later, with Modi seeking a second term in India’s general elections,
it’s clear that he won’t make India the next China, because it’s not possible.
Comparing these two giants is a popular thought
experiment, but they have nothing in common other than populations of a billion plus
China is a one-party autocracy that mobilised its homogeneous Han and Mandarin-speaking majorities behind a decades-long campaign of radical
India is a diverse multi-party democracy that will always struggle to rally its hundreds of ethnic and linguistic minorities behind any
single goal.
What Modi proved in Gujarat was that a strong leader can command change in India, but only one state at a time
In Modi’s first-term as chief minister between 2002 and 2007, Gujarat’s economy grew at a nearly 12 per cent a year pace, the fastest
rate ever recorded in any major Indian state, under any chief minister.
As prime minister, Modi has been unable to generate the same kind of
performance for the Indian economy as a whole; it has rumbled along at a rate of 6 to 7 per cent — far below the double-digit pace
recorded by China in the 1990s, when it was at the same level of development as India today.
Fed up with the stagnation and chaos China
suffered under Mao, its communist bosses began loosening their control over the economy in the late 1970s
They freed rural Chinese to till their own land or leave the interior provinces in search of work
They created economic zones free of heavy bureaucratic control in coastal cities, where new jobs flourished
The authorities also closed thousands of rusting state factories, which threw tens of millions out of work
With no social safety net, many were forced to find new livelihoods in the burgeoning private sector, which was responsible for the
subsequent decades of double-digit growth.
India has never risked anything like mass firings and large-scale migration to promote growth, in
large part because its democratic leaders fear voters would punish them for the short-term upheaval and pain
As a result, India has seen a much more gradual shift from rural to urban, farm to factory, state to private sector, than China has
Most Indians still live and work on the farm
The population is 70 per cent rural
Booming new cities are as rare in India as they are common in China
Many business sectors remain largely owned and operated by the inefficient state.
India has tinkered with free-market reforms, but only
under pressure from economic crises, not as a steady long-term strategy like China
In his first term as prime minister, Modi continued on a path of gradual change, acceptable to the countless communities in India’s
He has for example pushed no broad privatisation, not even in the bloated state banks, which are a major obstacle to faster growth.
Already,
one outcome of the 2019 election is entirely predictable, based on the party manifestos recently released by Modi and the main opposition
It will not lead to the easing of land acquisition laws or labour market rules, or the downsizing of state companies — the kinds of
reforms that unleashed years of miracle growth in China, and in Korea, Japan and Taiwan before it
Instead, the manifestos offer dole-outs that will leave the overburdened state less money to invest in roads, ports and electricity
plants.
The world’s most populous nations are evolving along very different paths – China toward freemarket communism, India toward
state-dependent democracy
The contrast can be quite striking.
Consider how China created a cashless society by freeing its tech giants to create the software
platforms that made it possible; within the last few years cash has virtually disappeared as a medium of exchange in big cities like
Modi tried to promote the same goal by state fiat; suddenly withdrawing all big bills overnight in late 2016
The result was not a sudden shift to digital forms of currency; it was a shortage of the old kind that is still weighing on the economy
today.
Does this suggest that India would have been better off under an autocratic government Not at all
For every authoritarian success story, like China, there are multiple failures like Cuba, Venezuela or North Korea
China got lucky with good leadership
It is an exceptional case, not a model for India and other developing economies to copy.
More importantly, strong, centralised rule is
particularly ill-suited to India, where many of the 29 states see themselves almost as separate countries
Whenever the prime ministers try to centralise more power in Delhi, as Indira Gandhi did in the 1970s, they have triggered a backlash, often
led by state leaders.
India is more a continent than a country, its states more varied in language, culture and ethnicity than the nations
Its economy is best-managed one state at a time, by a democratic leader close to local conditions, not by an authoritarian regime at the
Centre.
As recently as five years ago, the hope for China was that economic freedom would lead to political freedom, but that dream has been
dashed by the tightening of the communist party rule under President Xi Jinping
The hope for India, which became a democracy when it was still very poor, was that political freedom would lead to economic freedom, but
that dream has been undermined by a long line of statist prime ministers.
There is still reason to believe in India’s economic prospects,
but hope won’t come from prime ministers in Delhi, it will come from dynamic chief ministers in state capitals
These figures often double as leaders of their own regional parties
Right now the conventional wisdom is that Modi and his party are likely to return to power but with fewer seats in the Parliament, which
would leave him more dependent on regional leaders.
That would not be a bad outcome
India is better off accepting its exuberantly diverse and democratic nature, and giving its state leaders more authority to govern
themselves, than trying to be the next China.
(Writer is the author of the new book: Democracy on the Road: A 25-Year Journey through India)
