China’s West, India’s North
Regional disparities have a different meaning in China than
in India
At
about the same time that a regime change was being orchestrated in Lucknow
last week, the Chinese Prime Minister Wen Jiabao was announcing that
a huge $ 85 billion has been spent over the past three years in China’s
much-talked about western region development programme. This is a massive
investment campaign to deal with growing regional disparities in that
country. China’s populous regions are rich and dynamic. India’s populous
regions are poor and laggard, rich in identity politics but suffering
from appalling governance. Although they are still poor and face formidable
challenges, Rajasthan and Madhya Pradesh are definitely no longer prisoners
of the BIMARU syndrome first identified by the noted demographer Ashish
Bose almost two decades ago to describe the state of affairs in the
Gang of Four-Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. But
Bihar and Uttar Pradesh-home presently to a quarter of India’s population
and between a third and two-fifths of its poor-have become “failed
states”. Regime changes are simply meaningless. What makes matters
more serious is that for the next half a century at least the sheer
demographic momentum will increase the share of the Hindi-belt states
in India’s population from some 40% now to perhaps about 60%.
China’s
western development programme was launched with great fanfare in 2000.
It covers eleven administrative units: the five autonomous regions of
Inner Mongolia, Tibet, Guangxi, Xinjiang and Ningxia, the five provinces
of of Gansu, Guizhou, Shanxi, Sichuan and Yunnan and the Chongqing municipality.
These all together account for something line 70% of the land area of
the country but for less than a third of the population. These provinces
are resource-rich and like the autonomous regions are home to China’s
numerous ethnic minorities. The focus in the programme is infrastructure
and some of the more visible of the projects include the Qinghai-Lhasa
railway and the west-east natural gas pipeline to exploit Xinjiang’s
rich hydrocarbon reserves.
According to an IMF study Centripetal Forces in China’s Economic Take-off
by Anuradha Dayal-Gulati and Aasim Husain published in May 2000 “after
declining in the late 1970s and 1980s, the dispersion of provincial
per capita incomes has increased steadily”. They estimate that
in 1978 real per capita income in the richest province was around nine
times that of the poorest; by 1997 the multiple had risen to over eleven.
When economic reforms were first launched by Deng Xiaoping, barring
perhaps Shanghai the more advanced provinces of China were in its northeast,
the region much like our own eastern region that received significant
doses of public sector investment in coal and steel-based industries
in the 1950s and the 1960s. But in two decades time, China’s coastal
provinces of Shandong, Guangdong, Fujian, Jiangsu, Zhejiang and Hainan
along with the city-province of Shanghai surged ahead on the backs of
foreign investment (largely from near-by Hong Kong and Taiwan), exports
and the growth of township and village enterprises (TVEs) that ensured
diffusion of prosperity within the regions. In India, when we talk about
China we automatically think of foreign investment and foreign trade.
But the role of the TVEs has been equally crucial and they contrast
with our own failed subsidy-based, protection-driven, scale-hampered,
investment-starved rural industrialization efforts carried out in a
romantic Gandhian framework.
Regional
disparities in India take on a different meaning. In China, even in
the poor regions, real per capita incomes have increased by 5-7% compound
per year over the past twenty years as compared to between 1-2% in states
like Assam, Bihar, Orissa and UP. While regional disparities persisted
during 1950-1990 in the heyday of the planning era and in some cases,
paradoxically, even increased, the dispersion of real per capita incomes
went up in the 1990s. The decade of the nineties brought them into sharper
focus and in some cases accentuated them. But the normal perception
that poor states became poorer and rich states became richer is not
entirely true. This conclusion has to be nuanced somewhat. Punjab’s
compound annual growth rate decelerated from 5.7% in the 1980s to 4.9%
in the 1990s. Haryana took an even steeper fall from 6.1% to 4.7%. Among
the poorer states, Madhya Pradesh improved its performance from 4.2%
to 5.4%. In India, the real per capita income of the richest state is
about six times that of the poorest state. That is because there is
really no state in India that can match China’s growth performance.
Even
after accounting for exaggeration, real per capita incomes in the coastal
provinces of China have increased by anywhere between 7-8% per year
for 20 years which means a quadrupling. In India, by contrast, real
per capita income in Gujarat and Maharashtra, our two most dynamic states,
have increased by 4-5% per year. Goa is perhaps the only state to have
Chinese-type growth numbers in the 1990s but it hardly conveys the image
of a booming region. Relative rankings have been more stable in India
than in China although West Bengal’s rank has come down sharply much
like China’s northeast and Tamil Nadu, Andhra Pradesh and Karnataka
have all improved their positions, Tamil Nadu most dramatically from
number 11 three decades back to number five now. But even here, you
don’t get a feel of a boom-perhaps because urban renewal does not take
place as spectacularly in this country as in China. The national bird
of any booming economy, it is said, is a crane. But construction technology
in this country is such tbhat cranes are hardly visible in our cities!
China’s
western development programme is of more than academic interest to India.
Historically, this region of China was traversed by the famous Silk
Route that led to enormous cultural, economic and technological cross-fertilisation
between the Indic and Sinic civilizations in which, it is largely forgotten
that Kashmir has played a crucial role. But more than history, the improvement
of connectivity to provinces like Tibet, Yunnan and Sichuan will boost
Sino-Indian trade. The Chinese have also been pushing the so-called
“Kunming Initiative” named after the Yunnanese capital. This
envisages investment and trade cooperation between Yunnan, Bangladesh,
Myanmar and India’s northeast. This initiative has meandered along for
two-three years not the least because of lukewarm support from the Indian
establishment suspicious of Chinese motives. What is unusual about this
move is the keen interest being evinced by the province of Yunnan.
What
will happen if sub-regional cooperation is fostered? India’s northeast
cannot develop except in a regional context. Even Bihar and UP need
much closer cooperation with Nepal on water management. Three years
ago, India too came up with its grand Ganga-Mekong project to promote
a broad range of cooperation in that region involving India, Myanmar,
Thailand, Laos, Cambodia and Vietnam. How this will work leaving out
China through which the Mekong runs and Bangladesh where the Ganges
ends is a separate issue. But lofty announcements have to be backed
by money allocations and expenditures on specific projects particularly
in infrastructure like roads and highways. This has yet to materialize.
The
Chinese central government has taken on a direct role in developing
its backward regions. We had such an approach in the 1950s but lost
it along the way. It is time to rediscover that Nehruvian vision. Transferring
more money to poorer states through the Finance Commission is no solution,
nor is panchayati raj.
