In the early 1980s, India and China stood at almost identical economic and developmental levels. Both nations had comparable per capita incomes, and their economic trajectories seemed poised for similar outcomes. However, in the ensuing decades, China has left India far behind across multiple parameters of growth and development. This divergence has been the subject of extensive research and discussion. Professor Santosh Mehrotra, a leading international economist, recently provided a detailed analysis of this phenomenon in his lecture at Cambridge University. His insights offer a profound understanding of the factors that propelled China’s rise and India’s relative stagnation.
Historical Context: Parallel Beginnings, Divergent Futures
The 1980s marked a pivotal decade for both India and China. At that time, their economies were of similar size, and their per capita incomes were nearly identical. However, while China undertook bold reforms focusing on healthcare, education, and economic liberalization, India lagged in implementing structural changes.
One of the critical differentiators was the prioritization of human capital. China’s leadership invested heavily in universal education and basic healthcare. By contrast, India focused disproportionately on higher education, neglecting foundational areas such as primary literacy and rural healthcare. As a result, in 1991, India’s literacy rate stood at a mere 51%, while China had already achieved 75%. This disparity in human capital development laid the groundwork for the vast economic and social differences that followed.
Core Areas of Divergence
- Healthcare and Education:
- China: Early in its development journey, China made substantial investments in public health and education. The government implemented policies to ensure universal primary education and affordable healthcare for all citizens. This created a skilled and healthy workforce, capable of supporting rapid industrialization.
- India: In contrast, India’s focus remained skewed towards higher education and urban healthcare. Universal primary education became a national priority only in the 1990s, decades after China had achieved near-total literacy. Similarly, India’s healthcare infrastructure remains underfunded and unevenly distributed, leaving vast sections of the population without access to basic services.
- Economic Reforms:
- China: Initiated transformative reforms in agriculture during the late 1970s and early 1980s. The de-collectivization of farms and redistribution of land boosted agricultural productivity and rural incomes. These measures reduced rural poverty and laid the foundation for industrial growth.
- India: While India abolished the zamindari system, its land reforms were poorly implemented. Land ownership remained concentrated among a few, perpetuating rural inequality. Agricultural productivity stagnated, and the sector continues to employ a disproportionate share of the workforce while contributing minimally to GDP.
- Industrialization and Employment:
- China: Focused on labour-intensive manufacturing, which created millions of jobs. The government actively courted foreign direct investment (FDI), leveraging its educated workforce and improving infrastructure to attract multinational corporations.
- India: Relied on capital-intensive industries, which are less effective at generating employment. This misalignment has resulted in high unemployment rates, particularly among youth, and a failure to harness the potential of India’s demographic dividend.
- Governance and Decentralization:
- China: Implemented a decentralized governance model, giving local governments significant autonomy. Approximately 55% of public spending in China is managed at the local level, fostering competition among provinces and encouraging region-specific development.
- India: Retains a highly centralized fiscal structure, with nearly 65% of tax revenues controlled by the central government. Local governments in India lack the financial autonomy to address community-specific issues effectively. This centralization has stifled innovation and slowed development in many regions.
- Infrastructure Development:
- China: Made massive investments in infrastructure, including high-speed rail, renewable energy, and internet connectivity. Today, China boasts the world’s largest high-speed rail network and significant renewable energy capacity.
- India: Infrastructure development has been inconsistent and underfunded. Overcrowded trains, poor road connectivity in rural areas, and limited access to reliable internet continue to hinder India’s progress.
Social and Cultural Factors
India’s deep-seated caste system and social inequalities have been significant impediments to progress. Historically marginalized communities, including Dalits and tribal populations, face systemic barriers to education and employment. In contrast, China’s policies have consistently aimed to reduce rural and urban disparities, promoting equality across social strata.
Population Dynamics and Its Impact
In 1950, China’s population was approximately 550 million, compared to India’s 350 million. Over the years, China’s stringent population control measures, including the one-child policy, stabilized its growth. Meanwhile, India’s population has surpassed China’s, primarily due to higher fertility rates and inadequate investment in women’s education and healthcare.
Economic Metrics: A Stark Contrast
China surpasses India in almost every key economic indicator:
- Energy Consumption: Reflecting its industrial strength, China’s per capita electricity consumption is significantly higher than India’s.
- Human Development Index (HDI): China consistently ranks higher, with better access to education, healthcare, and living standards.
- Income Inequality: While income inequality exists in both nations, India’s top 10% control 57% of the nation’s income, compared to 43% in China.
- Per Capita Income: On a purchasing power parity (PPP) basis, China’s per capita income is nearly 2.5 times that of India.
Lessons for India: Bridging the Gap
India can learn several critical lessons from China’s development trajectory:
- Invest in Human Capital:
- Prioritize universal primary education and vocational training.
- Increase healthcare spending to ensure equitable access.
- Promote Labour-Intensive Industries:
- Develop policies to support labour-intensive manufacturing.
- Create a conducive environment for FDI by improving infrastructure and reducing bureaucratic hurdles.
- Strengthen Decentralization:
- Empower local governments with financial autonomy.
- Foster competition among states to encourage innovation and growth.
- Address Social Inequalities:
- Implement policies to tackle caste-based discrimination and systemic barriers.
- Ensure effective execution of affirmative action programs.
- Control Population Growth:
- Focus on women’s education and healthcare to reduce fertility rates naturally.
China’s meteoric rise serves as a case study in the power of strategic planning and governance. Despite being a democracy, India has struggled with inefficiency, corruption, and inconsistent policy implementation. Addressing these systemic issues requires bold reforms, long-term vision, and a commitment to equitable development. By learning from China’s successes and avoiding its pitfalls, India can chart a path toward becoming a global economic leader.
