‘In China, a municipality can borrow overseas; in India, even a state cannot’

Raghav Bahl: The book, Superpower, is an entirely new exercise. A journalistic look at the India and China across several parameters—say, even comparing their consumers, innate entrepreneural ability and legal evolution—I thought, hadn't been done; perhaps it needs to be done. That's how the idea of the book was born. Also, 2008 was a swivel moment for these two countries. Because up to 2008, the conventional wisdom was that China was way ahead of India in everything. But the crisis of 2008 put a somewhat different light on the realities of the two countries. Economically speaking, India has performed better that China since the crisis of 2008. I don't say this just because the sensex is back to the pre-2008 highs and that China's is at a 50 per cent discount to what it was in 2007. That is just one proof, but there are many to support the fact that India's economy since 2008 has been far more dramatic, robust and resilient compared to China's. China was growing at 13 per cent when the crisis hit and then it came down to 6 per cent, losing 50 per cent of its economic momentum. whereas India was growing at about 9.5 per cent and during the crisis dropped to 6.7 per cent. China came back with a dramatic infusion of debt on their economy. In just the six months of early 2009, China infused over a trillion dollars of straight debt into their economy. To give you a sense of what that means, the entire bank credit outstanding in India is half a trillion dollars. And China is sitting on a mountain of bad debt. That may be a bit of an exaggeration but the fact is that they grew unprecedented amounts of debt and government investments in infrastructure. While India turned around on much smaller amount of debt and reasonably fairly inflation compared to China, which had actually gone into deflation. For about a year, China was deflated. So in nominal GDP terms, India was growing much faster than China through 2009 and early 2010. There are several of these pointers which seem to suggest that India's economy has been far more robust than China's. So that was another thing that interested me. Also, China's consumption has depressed their economy. When you look at their consumer spending, it is nearly 17-18 per cent per annum, which is the fastest. So, the level of consumption is falling not because China is consuming less—it is consuming at the fastest rate in human civilisation—but they are investing in a rate which is faster than any that the human civilisation has ever known. Also, China's investments are not just in hard infrastructure but also in the softer part of the economy, like education and healthcare.

... contd.

ALSO READ

Everyone loves food security

'We don't appreciate each other... When people ask me to quit, do you think it doesn't affect me? And how often do you want me to resign?'

National Interest: BJP's troubled House

No yuan for growth