PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

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Country Briefing: India
“China’s approach is top-down—the government decides. From a business point of view that’s a more
efficient model, since the decisions get made fast and you are dealing with less uncertainty. India, on
the other hand, is a more chaotic bottom-up model—the entrepreneur is the change agent here while
the top is slow and bureaucratic, but that’s also a good thing because even though the change is slow it
is deeply ingrained and hence more sustainable in the long-run.”
Vinod Dham, NEA Indo-U.S. Ventures
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ny discussion of India’s dramatic economic rise during the past 15 years invites comparisons
with China. With cultures dating back more than 5,000 years, India and China are the world’s
two most populous nations and have emerged in recent years as leaders in the world economy.
The two countries’ recent histories show certain parallels, beginning with India’s independence in
1947, and the replacement of China’s Kuomintang government with communist rule in 1949. In
the decades that followed, both India and China followed economic paths that emphasized central
planning in pursuit of social objectives. Both have had deeply-held suspicions of Western
free-market models—India as a non-aligned democracy dominated by a single political party,
China as a Marxist-Leninist state.
Both eventually reversed course, adopting extensive economic policy and market reforms. China’s
reforms began in the 1980s, culminating in membership in the World Trade Organization in 2001.
India’s shift began later, in 1991, in response to a reform program imposed by the International
Monetary Fund. Reform has benefited both countries, attracting investment, opening markets and
unleashing energy and entrepreneurship that have created economic growth and new wealth.
However, these parallels go only so far in describing the patterns of China’s and India economic
growth: cultural and political differences between the two countries have led to distinctive economic
models and unique business environments.
Despite market reforms, China’s government remains highly centralized, with political power
vested in the Communist Party and minimal public discourse. In this respect, the contrast with
India, the world’s largest democracy, is striking. Policy decisions in India are hotly debated, internally
and in public, with strong partisan and interest group pressures brought to bear. Add to
this a vocal press, regional and linguistic differences, and a culture geared more toward individual
than collective action, and the differences become even sharper.
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