When India and China were advancing at a spanking 8% plus GDP growth rate, it was believed by many that a ‘power-shift’ was taking place from the developed West to the developing East. The earlier wealth generated by Japan and South Korea never prompted this belief for a variety of reasons. (Now, Japan is an established giant, but with creaking joints as its population ages.) In the past two decades when the US was on a spending binge, China made the most of it, building massive foreign exchange reserves and investing in long term infrastructure projects. It permitted unhindered growth in every sphere except wages, knowing fully well that this was at the core of its export strength. Basically, it made hay while the sun shone; even to the extent of ignoring environmental concerns, based probably on the belief that poverty was an even greater threat.
India, on the other hand, did not take the required advantage and basically made do with what washed up by itself on its shores. Its leaders neither recognised what was happening, nor did they make the strategic decisions to take advantage. The Indian growth story, though spectacular, was nothing compared to the Chinese one. Now that the world economy is going rapidly downhill, China is much better placed to take advantage of the opportunities and counter the threats.
Significantly, China is just as riddled with corruption as India, and while it is taking action, it is not adopting an anti-entrepreneur and self-defeating policy. It has worked hard to create an environment for business growth and rewards risk-takers well beyond its restrictive political system. On the other hand, in India, businessmen are the first to be put in the dock for whatever ails the country. The word businessman is almost synonymous with ‘thief’ in the popular and political lexicon. As such, the very section of society required to pull India out of the present doldrums is increasingly under unwarranted pressure.
Anything a government does during boom time seems to work. Mistakes are not immediately noticed. The quality of a government’s economics becomes known only in times of challenge. The lack of decisiveness in UPA-II has left the nation unprepared for the coming troubles, and it does not need a Standard and Poor downgrade to understand that. That things are going to become worse before they get better is clear from the results of the elections in Europe. The very future of the European Union is under threat from reckless piling up of debt and just a few economies being expected to carry the rest. While one part of Europe cannot abandon the other, impractical welfarism and populism will wreak mayhem and rack up a bill that the entire global economy might have to pay. India’s poor will suffer the consequences of the Europeans (and Americans) being unable to make the necessary lifestyle and skill changes to become viable again.
States like Uttarakhand, which are already under immense pressure to provide employment to their burgeoning youth population, will have to learn their lessons and rejig systems so as not to repeat mistakes made by countries like Spain, Portugal and Greece (which are like states of a united Europe). Aspirations and expectations should not be encouraged to unrealistic levels. A culture that encourages entrepreneurship should not only be put into place, but also promoted as the ‘only way’. A high cost lifestyle and poor employment opportunities are demoralising the youth. There may be little hope for Greece, etc., in the present situation, but Uttarakhand still has the opportunity to chart a successful course for the coming decade if it learns from the European crisis. There is no need to wait for directions from the High Command to adopt an aggressive approach on economic issues.