'How can India be a competitor to China?'

'China need not worry about a 'resurgent India'.'
'It's not going to happen.'
Illustration: Dominic Xavier/Rediff.com

On May 9, 2006, Business Standard published this Shankar Acharya column which made certain forecasts that have proved correct 14 years later.

A fictitious, recent, conversation with China's master strategist in his twilight years:

Thank you for agreeing to see me again, especially with your failing health. You have advised the Chinese leadership on strategy towards India for more than 50 years. What's your assessment of that strategy?

Well, the strategy was good, but it has worked out even better than I expected, thanks to a lot of unwitting help from your countrymen, especially the politico-administrative leadership.

How so? What was the strategy? And how did we help you 'unwittingly'?

Well, I will need a little time to explain.

And please don't interrupt... you Indians are very bad at listening.

Your incessant chatter gets in the way of your thinking.

It causes confusion. I shouldn't complain... your strategic confusion has helped us a lot over the last five decades.

Way back in the mid-1950s, in the years of 'Hindi-Chini bhai-bhai', I advised Mao and Zhou that in the long run India was the only serious potential challenger to China's inevitable hegemony over Asia... and perhaps the world.

Therefore we had to work to keep India weak. I had some difficulty getting their attention.

They were so preoccupied with America's aggressive containment policy and our early frictions with the Soviet Union.

But they listened and understood and by the late 1950s our strategy was in place.

Zhou sweet-talked Nehru, while we built an all-weather strategic road across the Aksai Chin, moved our forces into Tibet and reinforced our positions along the McMahon Line.

Your Mr Nehru was a good man, but he was too soft and a poor judge of people.

Look how much he trusted Krishna Menon. Anyway, Nehru was no match for Mao and Zhou.

At first, we hadn't planned on a war with India.

But Menon's stupid 'forward policy' gave us too good an opportunity in 1962.

Through that sharp, short border conflict we achieved many things: We won a decisive military victory (a rout really) and demoralised the Indian Army; we showed the world, especially Asian countries, who was the real power in Asia; we derailed your Third 5-Year Plan and sapped the momentum of your economic development; and we tightened our stranglehold on Tibet.

With our unilateral ceasefire and withdrawal in the north east, we demonstrated our maturity in global affairs.

Right from the late 1950s we cultivated Pakistan with economic and military assistance and ensured continuous pressure on India's western borders.

Our goal was to tie India down in a low-level equilibrium of incipient and debilitating conflict with Pakistan.

It was quite an effective strategy and we successfully co-opted the Americans, especially Nixon-Kissinger.

But then Yahya Khan and Bhutto blundered and presented Indira Gandhi with a golden chance to dismember Pakistan and help create Bangladesh.

She was one tough lady, with rare strategic and tactical sense.

I tell you, she was the only 'man' in your Cabinet.

She made a huge mistake though, in freeing 93,000 Pak prisoners of war without securing final agreement on the Kashmir ceasefire line as the international border, in exchange.

That allowed us to continue playing the 'Pakistan card' for containing India, including through transfer of nuclear and missile technology.

And, contrary to our expectations, she failed to follow through with weaponization after showing great courage and initiative with Pokhran I.

Fortunately for us (unluckily for you), neither Indira Gandhi nor her Kashmiri Pandit advisers understood economics.

Her 'Socialism' of populist slogans, nationalisations and intricate, energy-sapping controls of Indian industry, trade and investment kept your country poor and weak for 15 years.

Her policies wrecked your textiles and other labour-using industries.

It didn't even provide the mass education and healthcare that Mao had achieved for China.

Our own leadership woke up to the developmental power of enterprise and markets by the late 1970s.

It took your lot another dozen years.

But by then we had left you far behind. Even in the 1990s your approach to world trade and investment was so tentative.

The brute fact is that in the last 15 years our per capita growth rate has been double yours and our annual increase in exports is more than your total exports! And almost half of India's children are malnourished (only a tenth in China).

How can India be a competitor to China? We are in different leagues now.

Aren't you exaggerating the disparities? What about our 8 per cent growth in the last three years? What about our great advances in IT and pharma? What about our burgeoning labour force? Every one talks about India's superior demographics.

(thoughtfully)... Interesting.

My politburo has been asking the same questions these last couple of years.

But I told them not to worry.

I gave them four big reasons why India will never rise to compete effectively with China.

First, all this IT stuff is a sideshow; significant, but a sideshow nevertheless.

Actually, IT usage and penetration in China is far more than in India.

Even in IT exports, India's lead is temporary.

Just compare after five years. Second, this "superior demographics" argument is nonsense.

It ignores India's huge failure to generate decent jobs.

All those millions of new workers won't get real jobs; not as long as India persists with Indira Gandhi's inflexible labour laws.

And India's illiterate (in economics) Left parties will block labour reforms for many more years.

They can be relied upon to perpetuate casualisation and immiserisation of India's working class!

Third, India will never find either the resources or the will to build large-scale, quality infrastructure.

Their politicians, babus and Pay Commissions will always spend the bulk of public money on pay hikes for their tribe.

And even if they found the money, their politico-administrative system has become so rickety, it simply lacks the capacity to decide and implement big projects successfully.

Sloth, incompetence, political competition and corruption combine so effectively to block successful project execution.

I showed my politburo the latest reports of your ministry of programme implementation, which demonstrate the huge time and cost overruns on public projects.

Finally, I told them to watch how the quota/reservation debates and policies unfold.

I predicted that this thoroughly bad approach to genuine problems of backwardness and inequity will spread in India, perhaps even to the private sector.

And no society, which devalues merit and competence, can succeed in the modern world.

Not to mention the massive social strife this policy will generate.

The 8 per cent growth is only a temporary spurt. China need not worry about a truly 'resurgent India'. It's not going to happen.

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Shankar Acharya, former chief economic adviser to the Government of India, is honorary professor at ICRIER.

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Feature Presentation: Aslam Hunani/Rediff.com