China’s and India’s different goals (2007)
New Delhi, India — China and India are the world’s largest countries in terms of population. Both are enjoying a high rate of economic growth. But that is where the similarity ends. Very farsightedly, China is planning for the next 50 or 100 years, while India is busy savoring the moment.China exports goods worth US$700 billion every year, giving it a whopping trade surplus of US$100 billion. China is no longer interested in merely being the United States’ sweatshop, however. It has developed geopolitical ambitions and has the wherewithal to achieve them. Not being a democracy is a great help. The transition cost is low. China is fond of giving the analogy of social suffering in England when it made the transition from a traditional to industrial economy — and China has the advantage of not having a Charles Dickens around. If its totalitarianism can hold, China will achieve its goals.
A few years ago the Chinese deputy minister of science visited India’s National Institute of Science, Technology and Development Studies, of which I was then the director. During conversations on low wages in China he made a significant point, to the effect that, since China was not in a position to compete with the West on technologies of today, it was making money from technologies of yesterday to invest in those of the future.
In contrast, India is happy playing a marginal role in the West’s technologies of today. While China is manufacturing goods at low cost and selling them at a profit to the West, India is training its top-class manpower at high cost and supplying it to the West at low cost. The most significant aspect of its flaunted software-driven services sector is its underemployment. A large number of young men and women are working beneath their intellect, training and skills for the sake of a lowly monthly salary of a few hundred dollars, which translates into a neat rupee packet.
Although India likes to imagine it has become an IT hub, facts and figures do not support this claim. India has 15 percent of the world’s population. It is only in poverty-related indices that India’s share is higher than 15 percent. In all indices related to education, industry or technology, India does not have a share larger than 2-3 percent.
In 2006, India earned a gross amount of US$22 billion from software-related exports. This is a small figure. First, it is a gross figure. From this we should deduct the amount spent on importing computer hardware and branded software to arrive at the net figure – which is not known, but could be as low as half the gross figure. (My guess is that India’s computer-related imports in all sectors are more than its exports.)
In contrast to this US$22 billion, India earned US$24 billion from money sent home by Indians living and working abroad — two-thirds of which came from the United States and the Gulf countries. This would constitute most of the earnings of semi-skilled or unskilled workers abroad and a part of what Indian professionals earn in the United States.
China earned about US$50 billion from exporting low-tech stuff like toys and sports goods to the United States. The point here is that India’s highly skilled persons are doing low-tech work at salaries that are low by international standards.
India seems to be saying: “You have a lovely house here. Please permit me to stay in the outhouse.”