Whether India is an elephant or a tiger is really a semantic issue and one that need not merit much discussion. However, we Indians should really stick to the tiger analogy as the perceptual connotations are more favourable. Moving on to the second question of whether India is on the move, I think the answer to that question has to be an unequivocal Yes. India has averaged growth of over 6% for the last two decades and the future looks bright. Anything less than 6% is simply unacceptable and any government that does not target and deliver at least 8% should voluntarily step down. Reforms have taken root across the political spectrum and the consensus behind the whole process is quite strong. The momentum is on Indias side now.
Other evidence is available in the way the world is waking up to Indias potential. Ten years ago, India figured in the western press only in terms of what I would call disaster reportingearthquakes, riots, gas leaks, etc. Then, in the mid-90s, the spotlight turned to China and India was banished even further from the public eye. However, a remarkable change has occurred over the last three to four years. As India has opened up, and given its market potential and increasing role in services exports, India has increasingly begun to be mentioned along with China as two potential economic powerhouses. Now it is everywhere China and India where earlier it was only China. Ultimately, this will be reflected in enhanced investments and more trade, leading to faster economic growth.
Is this newly-acquired confidence and the new-found global interest in India beginning to perturb the mandarins in China From all accounts, as yet the answer is No. The reality is that China is miles ahead of India and we are only now showing up as a speck on the competition horizon. Unless we sustain this momentum and even increase it substantially, we will not worry the Chinese unduly. The Chinese are also a somewhat arrogant people they will never formally acknowledge any worry about India as an economic competitor.
In India, growth is taking place despite government rather than because of it
In China, government makes all the major capital allocation decisions
In China, on the other hand, it is the government which has been making the major capital allocation decisions. Whether in the long-term Chinese policymakers prove to be more efficient capital allocators and capital users is difficult to say, but the fact is that almost no other country in history has been able to pull this off over the very long-term. It will be surprising if the Chinese can emerge as the sole exception. Already, the first signs of weaknesses are being seen with vast infrastructure development having taken place but the financial sector being stuck with large amounts of non-performing assets. Whether China is able to manage the difficult task of keeping its financial sector in good shape, while at the same time developing a functioning private sector, removing government subsidies, and managing the aspirations of its people is really the question of the decade.
However, the reality is that China has taken such a large lead over India in terms of economic advancement that we are unlikely to overtake it. Having said that, our growth path, though slower, is less risky with less potential for large-scale disruption. In the context of another analogy, maybe in times to come India might end up being the tortoise to Chinas hare!
The author is president, finance, Aditya Birla group. These are his personal views