1. Column: India and China among the G-20

Column: India and China among the G-20

The motivations for the two countries behind wooing their G-20 peers or the G-7 nations are very different

By: | Updated: November 12, 2015 9:13 AM
india china g20

The motivations for India and China behind wooing their G-20 peers or the G-7 nations are very different. (Reuters)

When he gets to the G-20 summit in Turkey (on November 15-16), Narendra Modi would be that rare person attending who has practically visited all the other 19 countries in the twenty months since he became prime minister of India. His predecessor, Manmohan Singh, used to enjoy an exalted status at G-20 meetings as a wise, elder statesman who knew more economics than anyone else at these meetings. His own economy began to under-perform soon after he began his second-term. But given that developed economies were in the doldrums then, Singh was able to hold his head high.

Modi has been energetic in travelling to many countries and inviting the leaders of many countries to India. For one thing, he wanted to acquaint himself to the world, and vice versa. He also made the India brand better-known. He harnessed the diaspora wherever they were present in large numbers. No other prime minister has done as much to fly the flag around the world as he has done.

The travels of the Chinese president, Xi Jinping, have, on the other hand, been confined to the bigger economies of the G-7 . Indeed, he and Modi followed each other to the US in their two visits there, and Modi is about to land in the UK soon, just weeks after Xi visited the country. The status of the two economies is, however, different. The UK has tried hard to please China, asking it to fix its nuclear power facility for a large fee. The City of London is bidding for the forex business as the yuan becomes a key currency .

China is running out of steam in its old growth strategy of export-oriented activity, topped up by capital-intensive infrastructure investment. It needs to shift its export from low-tech to high-tech products and to begin exporting capital to seek a better return. China has exported $500 billion this year. It needs to internationalise its economy if it is to guarantee citizens first, a decent, and then a rising, standard of living. This is why Xi is concentrating on the richer nations.

India is in a different state. Its per capita income is barely a third of China’s. It is a capital importer rather than exporter. It has no high-tech manufacturing exports to speak of, except in pharmaceuticals. It has a small manufacturing sector. The country is not hungry for raw materials; it exports more than it imports in that sphere, except for oil.

India is, however, a major exporter of labour, both skilled and unskilled. Its unskilled labour goes to the oil-exporting economies of the Middle East. Its skilled labour goes to the G-7 countries. This has been so for a long time in the case of unskilled labour—at least, since mid-19th century. India used to export labour to the plantation economies around the world—the Caribbean, Africa and South East Asia. After Independence, the country invested more in higher education than in primary education or for achieving universal literacy. Soon, it became an exporter of skilled labour to developed countries. When the IT revolution came, it gained both by exporting skilled labour and attracting back-office business from foreign shores.

The needs of a country that must export labour and import capital are well understood by Modi. This is why he woos the diaspora as much in Dubai, where there is unskilled labour from India, or in Silicon Valley, where the skilled labour and young entrepreneurial talent from India hang out. Wherever he goes, Modi speaks of Make-in-India, which means attracting FDI as much as the latest technology from the G-7.

This world is, however, about to fall apart. The oil-exporting countries are beginning to feel the squeeze, thanks to the collapse in oil price. Saudi Arabia is running a deficit and borrowing on the bond market for the first time in many decades. India’s remittance receipts will shrink. During the war that followed Iraq’s invasion of Kuwait, remittances dried up while India faced its biggest economic crisis, leading to the Manmohan Singh reforms of 1991. This time India has better reserves, but the return of low-skilled workers to Kerala and elsewhere will cause some adverse waves. This is especially so as many of these workers are Muslim.

The situation is no better for skilled labour. There is a growth slowdown among the rich countries as well as an anti-immigration mood. The global demand for skilled labour from India will shrink. This will exacerbate middle-class dissatisfaction.

The answer lies in speeding up reforms, eliminating the rigidities inherited from the past, especially in the PSUs, seriously investing in health and education and reinforcing private market so that the young entrepreneurs can thrive. It is not enough to be the fastest-growing economy, at 7%. India needs to grow much faster just to keep up with the needs of its people. May be, the PM will now spend more time at home.

The author is a prominent economist and Labour peer

  1. D
    Nov 12, 2015 at 8:54 am
    India's growth is more about hype...
    1. Hemen Parekh
      Nov 14, 2015 at 12:16 pm
      NETWORK OF CURRENCY NOTES ? ( A Mobile App called " BLACK-MAIL " ) While inaugurating the International Conference on " Networking the Networks " on Nov 2 , our FM Shri Jaitleyji said : " Tax evasion and money laundering will become extremely difficult in the next 1-2 years, with the global automatic exchange of information system coming into effect on a real time basis " To speed up this process and make it truly automatic / real time , I suggest resorting to the following technologies : # Internet of Things ( IoT ) As each currency note of Rs 500 / 1000 , is getting printed , embed it with microscopic RFID chips Besides communicating with each other , these chips will also transmit their existence location , through internet , to cloud-based servers of Income Tax Department This will form a " NETWORK OF CURRENCY NOTES ( NoC ) " You may like to call this Internet of Currency ( IoC ) , a sub-set of IoT ! # Internet Protocol Address System ( IP V 6.0 ) Each Rs 500 / 1000 currency note must be igned ( at the time of printing ) , its own unique Internet Address , using IP V 6.0 This IP address should be linked with the unique Serial Number printed on each note. Since IP V 6.0 , will be capable of igning " 2 * 10 to the power of 128 ", no of IP addresses , there is no danger of running out of addresses , even if we decide to extend this idea to Rs 100 currency notes ! This reform will enable the Central Government / Income Tax Department , to : * Continuously trace the movement of each of these higher denomination currency notes * Instantly locate any place ( using Google Map based GPS ) , where there is an aculation of more than Rs 1 Crore worth of currency notes Such aculation will be made to appear as a TAG CLOUD on the web site of IT Dept, like thousands of balloons floating on a map of India , capable of being drilled down to within 1 Sq Meter ! On each balloon , will appear a number announcing , " Amount of Cash here - Rs " ! This will vastly simplify the task of Anti Corruption Dept / Enforcement Dept etc But then such transparency might lead to break-down of social order / chaos It may be a better / safer / saner solution for such balloons / tag clouds to appear , on a secret Mobile App , available only to the officers of Enforcement Department ( ED ) You may want to call this app , " BLACK-MAIL " ! Of course , my suggestions may become outdated with the arrival of mobile wallets based CASHLESS SOCIETY , by 2030 In the meantime , should Shri Arun Jaitleyji and Shri Ravi Shankar Prasadji , want this implemented , it can be done in 6 months , at one tenth the cost of MoM ( Mars Orbital Mission ) , ie approx Rs 43 Crores All they have to do , is to tell the bureaucracy : " Since we need not depend upon Opposition parties to p a bill in Rajya Sabha , please go ahead and implement this - in less than 6 months " -------------------------------------------------------------------------------------------------- hemen parekh 06 Nov 2015 B2BmessageBlaster

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