'India can overtake China as economic power'

PTI[ SUNDAY, JULY 13, 2003 10:52:25 AM ]

NEW DELHI: India can overtake China as an economic power despite
losing on foreign investment front as New Delhi's reliance on its
own resources will ensure more sustainable progress to enable it to
surpass Beijing, says a study.

"India is not outperforming China overall, but it is doing better in
certain key areas and that success may enable it to catch up with
and perhaps even overtake China," Yasheng Huang, associate professor
at Sloan School of Management at Massachusetts Institute of
Technology, and Tarun Khanna, professor at Harvard Business School
have said in a study in the recent issue of Foreign Policy.

"Indeed, by relying primarily on organic growth, India is making a
fuller use of its resources and has chosen a path that may well
deliver more sustainable progress than China's FDI-driven approach,"
they said.

"Can India surpass China is no longer a silly question," they said,
adding "if it turns out that India has indeed made a wiser bet, the
implications for China's future growth and for how policy experts
think about economic development generally could be enormous".

Noting that the Chinese FDI was more its diaspora generated, they
said "in the process, India has managed to spawn a number of
companies that now compete internationally with Europe and the US".

Drawing a comparison between the two Chinese provinces of Zhejiang
and Jiangsu, which were at similar levels of economic development,
they said while Zhejiang laid more emphasis on indigenous
entrepreneurs and organic development, Jiangsu relied largely on
FDI. The former was more prosperous after 20 years.

Stating that India might soon have the best of both worlds, they
said it looked poised to reap significantly more FDI in the coming
years than it has attracted to date.

Terming China's success in attracting FDI a "historical accident",
they said billions of dollars that came of Hong Kong, Macao and
Taiwan might have inadvertently helped Beijing postpone politically
difficult internal reforms.

They said that the Indian diaspora had accounted for less than 10
per cent of foreign money flowing into the country and with the
welcome mat now being laid out, direct investment from non-resident
Indians was likely to increase.

While the Indian diaspora may not be able to match the Chinese
diaspora as 'hard' capital goes, Indians abroad have substantially
more intellectual capital to contribute than their Chinese
counterparts.

"With the help of its diaspora, China has won the race to be the
world's factory. With the help of its diaspora, India could become
the world's technology lab," they observed.

In a recent survey of Far Eastern Economic Review, India registered
a higher average score than any other country in the region,
including China, they noted and said that the two Chinese firms
which made it to the top 10 had significant state involvement as
compared to all Indian firms, which were private initiatives.

"Not only is entrepreneurship thriving in India, entrepreneurs have
become folk heroes. These success stories would never have happened
if India lacked the infrastructure needed to support Narayana Murthy
and other would-be moguls. But democracy, a tradition of
entrepreneurship, and a decent legal system have given India the
underpinning necessary for free enterprise to flourish," they noted.