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India - News Keynotes The Economist, Feb 1997 - Economic Reforms of India Reuters Magazine, July 1997 - Indian Elephant stalks the Chinese Dragon The Economist, February 22, 1997 "Without a doubt, India's economic reforms of 1991-93 marked a new departure in the country's economic history. This was no mere mid-course correction, of which India has had a few since 1947. Many tariffs were cut, the import-licensing system was liberalized, the rupee was devalued and made convertible for trade, and inward foreign investment was encouraged.... In 1991 the domestic economic policy was given a thorough shake-up. The government curbed its borrowing, simplified the tax system, and partially liberalized the domestic financial system. The main instruments of a regime that had tried to combine a large measure of private ownership with a Soviet-inspired system of industrial micro planning began to be set aside.... The past few years' reforms have already vastly improved India's economic prospects. The country has visibly changed- in big cities, strikingly so; in its villages, in smaller but no less telling ways. As for the figures, though it is too soon to be precise, they seem to point the same way. Exports and imports are up. India is joining the world economy. And since 1994 the economy has been growing by roughly 7 percent a year."
They have been called Asia's non-identical twins. One is likened to a dragon, the other to an elephant. India promises similar frustrations and opportunities as China, but investors who equate the two are courting disaster, Nelson Graves reports from Delhi. Some experts feel that while India lags behind China, in the long run it will outperform its neighbour. India initiated free-market reforms in 1991 13 years later than China and after four decades of socialist controls. Despite differences India is the most populous democracy, China a communist regime many cannot resist comparisons. Policymakers in New Delhi complain that India attracts only a fraction of the foreign direct investment (FDI) flowing into China. In 1996, China took in some $40 billion 20 times more than India. "We must learn from the pragmatic nationalism of China," the Indian government said in a recent report. When it broke with the past, India faced similar challenges to China's: the need to rip down barriers to investment and trade, curb central controls and overhaul infrastructure. The consequences may be as stunning as Japan's postwar advances. By 2010, China and India are widely expected to be the second- and fourth-largest economies in the world, with the US first and Japan third. But there are important differences. As Dominique Turcq of consultants McKinsey and Co said in a 1995 report: "Treating India and China as similar entities with shared opportunities and pitfalls is a recipe for disaster. No generalisation about them both would be valid except that no company in any industry should neglect either of them." China has enjoyed stronger economic growth than India, mobilising resources in special economic zones. But it has been less successful letting entrepreneurs emerge. Much of India's market structure is in place with 23 bourses and 7,000 companies, compared to a handful of exchanges in China and some 1,000 firms. India has well-developed banking and legal systems. "India is more user friendly, has the rule of the law and is democratic," said Linda Spedding, a London-based international legal adviser and author of Trade and Investment in India. "I think China later on will have more difficulties," she said, citing economically autonomous provinces in China. "Once infrastructure is in place, investment in India will be sound, safe and strong even though China will be the world's leading economy." Turcq agreed. "In 30 years, India will have advanced more than China, with no serious crises and a single market. India has greater problems with its infrastructure, but its industrial base is much healthier and probably will be more profitable because it does not have the same political uncertainty," he said. Turcq said China remains a good destination for the investor wanting to score quick profits, and India demands patience. |
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