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August, 2013

  • We always knew a time would come when the world could tell whether the China model of over zealous, doctrine led growth would prove as a better developing economic model or India’s democratic, slow and steady pace would prove to be a better launch pad into the developed world.

    Well, maybe this is the time when economists, analysts and sooth sayers alike need to step in and assess the situation. Today India’s economy is in the doldrums, forex reserves are abysmally low, the Indian rupee is highly depreciated and the current account deficit is highly low. China on the other hand, continues to maintain one of the highest forex reserves in Asia, has maintained trade targets with an appreciated yuan and continues to achieve her projected GDP growth.

    When both nations face the same external economic threats and yet see diverging growth numbers, optimism in investment sentiments and influence on foreign relations, its time to assess the growth models and finally conclude which is the better one. While the study can be a never-ending assessment of the two nations, Inchin Closer feels 30 years post economic libralisation is a good barometer from where to take cognizance of our two countries nation building.

    While China’s economy did have a headstart of a decade, opening up to the west in the 1980’s, libralising her policies and ushering in foreign investments, India quickly caught up in the 1990’s with her own libralisation policies. For India and China watchers, the two nations have played an interesting game over the past few decades, with various groups commenting on the pros and cons of each nations race towards a more developed country. Below we take you on a journey over the mega differences.

  • Neighbours, trade titans and sweet and sour siblings, China and India have upped the number of bilateral meetings in the recent past. Following the high level trade delegation led by Premier Li Keqiang earlier this year, foreign secretaries of the two nations have also been meeting to iron out both bilateral and multilateral issues.

    During the first week in August, India and China met in Beijing for their first ever dialogue on Central Asia. Today (August 20), Indian foreign secretary Sujatha Singh will meet her counterpart, Chinese vice foreign minister Liu Zhen Min, in New Delhi to hold the fifth high-level strategic dialogue since November, 2010. Later this month, a high level Indian military delegation will travel to China to work out details of joint naval and air force exercises. The move is part of a larger effort to quell tensions over disputed territories. All these meetings will culminate in Indian Prime Minister Dr. Manmohan Singh’s visit to Beijing in October.

    As Indian national elections are due in 2014, Dr. Singh’s Beijing visit might be one of his last foreign trips as prime minister of India, a significant sign off to Chinese Premier Li Keqiang’s first trip as Chinese premier to India.

    The increasing frequency of meetings is proof that both nations are attempting to quell differences between the neighbours. With China taking a more aggressive resolution to smooth over relations, India might be encouraged to dampen disagreements considering the Indian economy is floundering and support from her largest trading partner can protect her.

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  • Chinese companies high on softly wooing the booming Indian telecom and technology space are finding a profitable niche for themselves. In 2002 it was handset maker Huawei that stormed the Indian telecom space, more recently instant messenger service Wechat broke ground by introducing India to voice chats – a league above the popular incumbent whatsapp and now, Chinese mobile browser UC Browser claims to have powered 29.9 percent or every 1 in 3 of total Internet traffic on phones.

    While the Indian government remains apprehensive and often takes a stand against such software’s surreptitiously entering the Indian marketspace, UCWeb has big plans for India. In addition to hiring local talent, the Chinese browser which is available on most Nokia Symbian and Google Android devices is also looking at tying up with local Indian handset makers to increase its presence. Further, its increased market share (60 times growth within India alone in the last three years) is also due to the company extending its global partnership with Samsung and LG to the Indian market.

    India continues to remain one of the worlds fastest growing telecom markets, which makes her an attractive playing ground for many mobile software and hardware producers.  Additionally, with both neighbours facing similar last mile issues, technologies developed for specific problems in both economies tend to excel. Analysts assuage UC Browsers success in India to its features as a modern, easy to user interface. Especially, its ability to cach video for offline viewing, This they say is itself is a great feature in India, as not all mobile users have access to fast downloads, either because of their network, data plan, or device itself.

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  • manufacturingThe time for Indian manufacturing to bask in the sunlight has come, however shrouded in archaic laws and regulations, dimmed by a weakening economy and lack of government support, manufacturing in India might remain away from the limelight.

    Explaining how India could have been a China by exploiting her comparative advantage, Shankar Acharya, former economic adviser to the Indian government told the Financial Times “Over the past four decades, India, like China before, should have become a big producer and exporter of clothing, shoes and toys. Instead, highly restrictive and old-fashioned labour laws have undermined the advantages of India’s low nominal wage costs and discouraged formal employment, driving employers to hire casual labour and keep their firms as small as possible.

    Add to that a recent survey conducted by PwC and FICCI titled — “India Manufacturing Barometer”, which finds that the major growth barriers to Indian manufacturing are higher interest rates, lack of domestic demand and other concerns like pressure for increased wages, legislative or regulatory pressures, decreasing profitability and increased competition from foreign markets.

    Compound this with India’s notorious bureaucracy, poor transport and electricity infrastructure, and the occasional imposition of retrospective taxes and you have a recipe for driving away both Indian and foreign prospective investors.

    Yet, what persuades companies to set up factories in India?

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