Of late, economists of all hues have been unanimously proclaiming the emergence of India and China as economic superpowers in the not-too-distant future. The international media have covered the upswing of the two economies, and books have been written along the same lines. In his book, Three Billion New Capitalists ? The Great Shift of Wealth and Power to the East, Clyde Prestowitz states that the Chinese economy would overtake Japan?s, currently the second largest, by 2016 and would be as big as that of the United States of America by 2025 in purchasing power parity terms, and by 2040 in dollar terms. In predicting India?s long-term growth prospects, Prestowitz feels that by 2030, India will overtake Japan in absolute dollar terms, not PPP, and in the second half of this century will be the largest economy. The really long-term miracle in India, he feels, will come about because of demographics. China?s one-child policy will ultimately result in a reduced, and ageing, workforce.

Is this hype justified? How does our progress measure up with China?s? Has India?s impressive growth rate translated into a better quality of life for its citizens? Contrary to popular belief, China under Mao Zedong did not take giant strides on the economic front. It was only in 1992, when Deng Xiaoping, after consolidating sufficient power, decided to open China to competition and foreign investment on a significant scale that spectacular growth rates followed. In a remarkable coincidence, India too took the first halting steps of liberalizing the economy in 1991, only because it would ensure a bailout from the IMF.

In 1984, the two economies were similar on many fronts. Both were large, predominantly agrarian countries with GDPs of less than $1 trillion and per capita incomes of around $300. Both were insulated from the outside world with high tariffs for imports and were not exporters of note. Today, China?s economy is more than twice as large as India?s and the gap keeps widening, with China consistently posting average annual growth rates of 9 per cent to 10 per cent against India?s 6 per cent to 7 per cent. Per capita income in China is now more than double that of India. China ropes in 12 times as much in annual foreign direct investment as India, and it exports around six times as much each year. There are clearly some things which China has done differently from India which has paid off handsomely.

Investment in infrastructure stands out. China has 1,400,000 kms of highway network against India?s 200,000 kms. Even allowing for India?s smaller land area, the figure is highly inadequate. Moreover, most of India?s highway network is basic two-lane ones, unfit for carrying heavy freight traffic. India?s national electricity grid is so poorly managed that 40 per cent of the electricity generated is ?lost? in transmission. Add to this, the free power doled out to farmers and you have industrial electric power being twice as costly as China?s. Poor infrastructure is also largely responsible for extremely poor human capital development in India. With an edge of less than 20 per cent in population, China has more than five times India?s mobile subscribers, four times households with television sets and four-and-a-half times households with personal computers. But perhaps the most distressing of all comparable statistics is that in India, 31 per cent still live on less than a dollar a day against China?s 13 per cent and India?s poverty shows no sign of coming down from 30 per cent. Add to this that another 30 per cent of India?s working population earn less than $2 a day and you know how two-thirds of our population live.

Other related trends are not encouraging. In China, manufacturing as a percentage of GDP has risen from 37 per cent to 43 per cent over the last 20 years, while the corresponding figures for India are 18 per cent to 16 per cent. Indian labour laws, unlike China?s, are not conducive to large-scale employment. Without doubt, Indian software companies have moved up the value chain and are competing for global tenders. And the picture hereon will keep on improving. India?s IT revenue is slated to cross $ 100 billion by 2010. But for all its spectacular growth, the entire industry accounts for at most a million jobs ? less than one-quarter of one per cent of the Indian workforce. Moreover, this industry can never create jobs for the unskilled, barely literate and illiterate majority of the workforce.

Most economists agree that currently India needs massive doses of investment in infrastructure and in the social sector. The disagreement arises on where such large funds would come from. One answer could be FDIs in these sectors. But the restrictions imposed by the left make these unattractive to foreign investors. The second source, which appeared for a time to be the answer, was the selling of minority stake in profitable public sector companies in such a manner that the government continued to retain its majority holding. With the national common minimum programme of the Congress-led government virtually ruling out this option, nothing of note has taken place since the sale of 5.25 per cent stake in the National Thermal Power Corporation.

The tendency of policy-makers in India is to make democracy the scapegoat whenever in trouble. But red tape and corruption, reluctance to let go of non-performing PSUs, archaic labour laws, and lack of leadership and foresight to invest in social and infrastructure sectors need not have anything to do with democracy. India?s consumption pattern reveals that the top 10 per cent of Indians account for approximately 40 per cent of the total income. Mostly urban, they are largely responsible for the boom in sophisticated durable and consumer products. The next 10 per cent or so are set to own some of the premium products like cell phones, colour TVs and two-wheelers in the next five years. This would account for a paltry one-fourth of the population at best.

The task for policy-makers is to bring the majority three-fourth into the mainstream, to provide them the means to participate in the economic growth and ensure that India ceases to be an unhealthy bipolar development model comprising wealth and squalor.