Book launch for Growth, Sustainability and India’s Economic Reforms |

Book launch for Growth, Sustainability and India’s Economic Reforms

The panelists (from left): Prof Kanti Bajpai, His Excellency T C A Raghavan, Dean Prof Kishore Mahbubani and Prof T N Srinivasan

The panelists (from left): Prof Kanti Bajpai, His Excellency T C A Raghavan, Dean Prof Kishore Mahbubani and Prof T N Srinivasan

On 2 November 2011, the LKY School held a launch of Growth, Sustainability and India’s Economic Reforms, a book authored by Professor T.N. Srinivasan, Yong Pung How Chair Professor. His Excellency Dr T C A Raghavan, India’s High Commissioner to Singapore, was Guest-of-Honour for the event. Prof. Srinivasan spoke on “Future Prospects of India and China in the Global Economy and Political Influence”, after which Dean Kishore Mahbubani moderated a panel discussion that included Dr Raghavan, Prof Srinivasan, and Prof Kanti Bajpai, Visiting Professor at the LKY School.

In his book, Srinivasan highlights the forces that drove India’s economic reforms, assesses policies that could help alleviate poverty in the country, as well as examines the impact of the global financial crisis. His book evaluates the factors behind successful and failed economic policies in both countries, drawing comparisons between them. 

At the start of his talk, Srinivasan said: “It is natural to compare India and China, considering both nations’ ancient civilisations dating back to several millennia, physical size and rapid economic development.” He pointed out that India and China were the global economic giants of the 1820s, accounted for close to 50 per cent of global GDP. However, by the 1970s, their combined share dropped to under 10 per cent. Taking an optimistic view of both countries’ economies, Srinivasan said that if they manage to maintain their current growth rates, “they will have over 50 per cent share in the world’s GDP by 2040 and take back their rightful place.”

Srinivasan described the 1870s as the “first wave of globalisation” with the British takeover of India. Under British rule, India experienced steady growth, while its counterpart, China, weighed down by internal and external destabilising forces was in a chaotic state, he noted. By and large, the first part of the 20th century, Srinivasan said, “was an unstable era, coupled with world depression, fierce currency wars and international conflicts”. The period also saw the rise to power of Mao Zedong, under whom China “merely kept catching up with India”. Deng Xiaoping, however, changed everything, opening up the country to the much-needed free market reforms. By comparison, India undertook insignificant minor reforms until 1991, instead of introducing systemic changes, he said. Under Deng, whom Srinivasan described as “the paramount leader and market-oriented reformist”, China surpassed India economically.

Comparing China and India’s development strategies in the 20th century, Srinivasan said: “Both nations began implementing major economic policies in the 1950s by adopting the Soviet-style command economy.” The rapid success of Soviet industrialisation had a demonstrable effect on both countries since they were substantially underdeveloped by comparison. But as industrialisation failed to produce expected outcomes, Mao opted for alternative and more costly policies in terms of human and material resources, noted Srinivasan. While Mao entirely collectivised the agricultural sector, only to be reformed under Deng, in India, the sector was spared from collectivisation and remained in private hands, he added.

In his book, Srinivasan argues that both nations experienced substantial growth only after carrying out market-oriented reforms. The key distinction to bear in mind, Srinivasan said, was that while China’s industrialisation was aimed at catching up with the developed world, in India “it was always driven by the poverty-alleviation intention.” In retrospect, following its independence, the primary concern of Indian leaders was to tackle rampant poverty. That same issue was perceived to be associated with the major reforms initiated in 1991, said Srinivasan.

Turning to the global financial crisis, Srinivasan said both nations have been relatively successful in dealing with it. Traditionally there has been strong internal consumption in India, and in China, consumers have tended to save more than consume, he noted. With the onset of the crisis, Srinivasan said the Chinese government’s stimulus package substantially helped to increase private consumption, thereby lessening the impact of the crisis. He said that in the aftermath of the crisis, China still attracts a substantial amount of FDI and exports more goods than India. Speaking about the countries’ future prospects, he believes that labour reforms are needed in India, while the difficulties associated with the movement of workers from rural areas to cities in China should also be addressed. With rapid development, social inequality has substantially increased in both countries, posing difficult policy challenges to the respective governments, he said.

“The book offers valuable material to study India’s development,” said Dr Raghavan, and Singapore, given its role as a major financial hub, provided fertile ground to discuss trends in emerging countries. He also highlighted Singapore’s strong think-tanks, where important debates and research are conducted about these countries. He said the rapid growth of China and India need not be viewed as a “zero-sum game” but should instead be welcomed as both contributed to stabilising the world economy. Lastly, the High Commissioner expressed his hopes that both countries will not repeat the economic mistakes of the West.

Professor Kanti Bajpai saidthe growing economic power of China and India “will inevitably translate to military power” and they could be expected to become more ambitious international players down the road”. On relations between the two powers, Bajpai said that despite border disputes and somewhat divergent security policies, the two nations realise they have much at stake and have been active in diplomatic engagements. Their political ties are also being straightened by growing bilateral trade, which in the course of less than a decade has increased from $200 million to $60 billion, he noted. 

Turning to a question from a member of the audience on ways to reduce income inequality in India, the speakers responded by saying that India could focus on developing its manufacturing sector while also commercialising its agricultural industry, which needed major reform. Srinivasan also underlined the importance of “fairness” and not inequality per se”. There is no evidence, he said, “that in India the system has become more unfair than before, while in China it seems to be the case.” Answering a question on democracy in China, Srinivasan said: “Once people become wealthier, their demand for greater political participation will certainly increase.” As to whether China will transition to becoming a democracy – what he termed a “trillion-dollar question” – Srinivasan said: “An important point to note is, even if a leader is market-oriented, it does not mean he is prone to and receptive of democracy.”

 

By Uran Bolush, a first-year Master of Public Policy student at the LKY School.

 
Speaker(s):

Professor T.N. Srinivasan, Yong Pung How Chair Professor

Date:
Wednesday, 02 November 2011

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