Friday, December 29, 2006

India and China: Were they ever equal?

The predominant comparison discussed everywhere in the world of economics and politics is India & China. People bring all sort of things to table how these are similiar and how India is the lame dog compared to Chinese tiger, etc. They also point out that India and China grew from similiar position. This blog has two threads: Were Indian and China from equal backgrounds and whether China is a model for India.

First, irrespective of what a lot of people think, India and China didnt start equals 30 years ago.
China was protected by Pacific Ocean to the east, Siberia to the north, Tibet to the south and Central Asia to the west and had no trouble of invaders except mongols. India was instead invaded by everyone from Greeks, Afgans, Persians, Huns to Arabs & Europeans. While China never was a full-fledged colony of anybody, India had 8 centuries of occupation when it entered 20th century. While China became a permanent member of UN security council and a recognized nuclear power, India was a pariah of World's elite clubs 30 years ago.

China was also a leader in manufacturing and innovation since eternity and was way ahead of India in the ancient history, from producing silk & tea to umberalla, gas pipes, etc. Indians were leaders in finance, religion, trade, arts (dance, painting, architecture, literature), Mathematics, etc. A perfect service sector. The comparative differences in the religion from a materialistic & pragmatic Chinese Confusianism to abstract & colorful Hinduism, are also point of interest here.

Chinese leadership also approached more pragmatically (however worse they were, they focused on fundamentals) and built its agricultural sector, rural health, roadways as major priorities even at an early age, while India is yet to reform the fundamentals even now. Dictatorship also helped them to get around with their reforms.

Thus, China and India were never similiar anypoint in their 5000 year history. Now to the second question: Is China a Model for India?

As they were never similiar and have different strengths & potentials simple comparisons dont do any justice. Just because India doesnt have a few things compared to China, doesnt make it worse. After all, just because the Tiger doesnt have fins, doesnt make it inferior compared to Fish. While it is definitely advantageous to learn from successful neighbors it is also better to keep originality as the tiger can and need never become a fish. The problem is especially found in investors, who just blindly compare return ratios (P/E) for India and Chinese stock exchanges and just say that China is more attractive. They just dont realize that Chinese exchange is heavily weighed by banking stocks, in which China doesnt have healthy position, and manufacturing that cannot have a higher P/E compared to India's Telecom & IT stocks. Just an example to show, how blind the comparisons are.

The next article focuses on a better model and comparison for India: America !!!

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1 comment:

Anonymous said...

Dude, you're a genius, I'm a CA and a lot into global economics, but you..... hats off!!!!!!!!
Keep it up man