In the early years of the new millennium, it seemed that India had finally made a transition into a high-growth economy. Along with macroeconomic stability and a world class presence in software, savings and investment rates had increased to the point where sustained double-digit growth seemed to be attainable. But the vagaries of the global economy, especially the financial crisis of 2008-09, created imbalances in India’s own economic management, including the problems with bad loans that continue to be a drag on investment and growth. Meanwhile, struggles over ideology and political power have diverted attention from long-term economic strategy and implementation. The pandemic occurred when the economy was already struggling.

One example of lack of progress is the Sagarmala (garland of the sea) Programme, which was originally proposed by the NDA government in 2003, when India seemed to be starting on a high-growth path. But it took a dozen years and a return of the NDA after a decade out of power for the programme to be approved. It was launched in 2016, but implementation has continued to be slow. I have argued that the programme is too diffuse, in terms of sectoral coverage and outcomes, and even more so in terms of locations. Sagarmala includes hundreds of projects spread over 14 locations, and, like many Indian government plans, seems to have a little bit of everything. A more focused approach and greater strategic intent might have already put India into a better position to take advantage of pandemic-induced global production network disruptions, along with increased concerns about relying too much on China in those networks.

Meanwhile, China has done much better with its own garland, the String of Pearls strategy, which was given that name in 2004, about the time that Sagarmala was first mooted. The String of Pearls has a broad geographic reach and its international character and military aspects make it different from Sagarmala. But the projects that have been implemented have been large, focused and strategic. In the Indian Ocean, the Gwadar Port in Pakistan is already a major development, and the state-owned China Overseas Port Holding Company now controls its operations. The Sri Lankan port of Hambantota is now also under Chinese control, after the government could not handle the debt owed to Chinese firms. Again, a state-owned Chinese company is running things, with a 99-year lease in this case.

Sagarmala is supposed to take advantage of India’s 7,500 km of coastline, but China is already consolidating its presence in Sri Lanka with the new Colombo Port City, which will also host an offshore international financial centre. As in other cases, in order to secure investment, a Chinese company has been given a 99-year lease. While China’s military presence in the seas off its eastern coast has been explicit, here it seems unnecessary. The desperate countries of South Asia, none of whom views India as much of a friend or partner, have welcomed China’s money and expertise. This is not to say India should have been competing with China in Sri Lanka, but its failure to make Sagarmala a significant presence for its own economy has left it falling further behind in its race to catch up.

What is the weak link that explains India’s relative failure in its own garland of the sea versus China’s string of pearls? Certainly, India’s government has tended to lack leadership capable of strategic intent on the economic front. Its own state-owned enterprises also seem to lack management capable of the kind of big push on major projects seen from China’s giants, though this may also reflect a lack of strategic coordination at the governmental level. But perhaps the real culprit is lack of adequate financing. Certainly, China’s state-owned firms have been known to be inefficient. But China’s government has been better at raising tax resources, and at supporting economic development to the point where it has generated surpluses that can support buying US Treasury bonds as well as 99-year leases in Sri Lanka.

Meanwhile, India’s government has struggled to raise tax revenue, focusing on harassing a few firms to the point that it lost international arbitration cases and has damaged an industry vital for future growth, namely, telecoms. The tax base remains narrow, and there is a chicken-and-egg problem with respect to tax revenue, since the economy has not been growing at rates that would provide buoyancy to tax collection. Despite these issues, it is striking that policymakers have not been able to come up with mechanisms to channel funds into infrastructure projects that would give growth a boost. To some extent, this weakness in infrastructure financing and contract design has persisted since the infamous Enron power plant deal in 1992. Instead of improvement on this front, India had the debacle of IL&FS. The Sagarmala programme involved paying large sums to consulting firms to conceptualise its giant set of diffuse schemes, but nothing comparable to that effort for devising a strategic financing plan. Strategic focus in design and implementation, along with well-structured financial plans, are vital for India’s infrastructure needs, including cities, telecoms, transport and more, as well as garlands.

The author is Professor of economics, University of California, Santa Cruz