Chinese advantage

Sebi must push through electronic funds transfer and margin trading

Parliamentarians must be either naive or hypocritical to interrogate Arun Shourie about why India managed a measly $17 billion in foreign direct investment over the last decade, when China attracted 20 times as much. Shourie did well to tell them a few home truths — they needed to be reminded. It is their negative and obstructionist attitude that is responsible, although Shourie might have added to the list of culprits his own government over which the shadow of the Sangh Parivar looms large. Members of the Rajya Sabha had no answer when he asked for a commitment to support reform in labour laws — today’s laws privilege a unionised worker aristocracy which constitutes 8 per cent of the country’s workforce, at the expense of job generation. But the Chinese government, as Shourie says, is market-savvy. Shunning socialist orthodoxy, it works on the principle that if industrialists are free to shed excess labour they are not afraid to hire new labour. Thus China laid off 20 million workers who were redeployed elsewhere. The same feature emerges if one looks at the United States vis-a-vis Europe: workers enjoy greater social protection in continental Europe than in the US. As a result percentage unemployment in the US tends to be in the low single digits, while continental Europe goes up to double digits. India does not have to go to the Chinese extreme, where labour is regimented and unions banned. But there is no reason why every time an enterprise employing more than a hundred workers wants to fire an employee for non-performance, it has to go to the government. That the government is in no position to judge only makes matters worse.

The Chinese government has halved the strength of its civil servants from 8 million, in just 2 years. This is inconceivable in India where babus and unionised workers form an almighty political bloc; they have Parliamentarians’ ears almost exclusively. Those charged with corruption in China are tried in just two weeks, and many of them are liable to be shot. In India, a civil servant found to be honest and thus holding up the chain of corruption is liable to be transferred by his political masters. Perhaps most importantly, China has managed to build world-class infrastructure; in India, quite often, the minimum in terms of power, roads, water, an educated and healthy labour force is not available. In telling the Rajya Sabha that Chinese goods are cheap because their actual cost of production is low, instead of citing the usual hand-me-down about dumping by the Chinese, Shourie has exhibited a characteristic forthrightness which, in general, is foreign to India’s parliamentarians.

Editorial from The Statesman.