'China's attitude to India's rise is unclear'

OPINION: P Chidambaram

Despite large scale liberalisation, a grudging acceptance of globalisation and extreme caution on privatisation, our entire approach was, and still is, marked by gradualism. Some justify gradualism by pointing to the high growth witnessed in recent years. The argument goes like this: if we can achieve and sustain a growth rate of over 8 per cent for a period of five years, and are likely to go forward on the same plane for the next five to ten years, why should we press the accelerator or force the pace of change?

The question I would like to throw back is: why not? The bias in favour of gradualism is deep-seated and is holding back progress in several key sectors. Obvious examples are the financial sector, the mining and minerals sector, and even sectors as mundane as sugar and fertilisers. Some not-so-obvious examples are atomic energy and defence production. Are we not missing the opportunity of emerging as a global leader in select sectors because of our gradualist approach? Are not millions of people trapped in abject poverty because of our reluctance to create new markets in land and labour?

The high growth rate witnessed in recent years — the average for the last four years has been 8.9 per cent — should not induce us to believe that this growth rate is “sufficient”. Whether the growth rate is sufficient or not is a question that can be answered only by reference to outcomes. Despite eighteen years on the reforms path, the benefits of higher growth have not trickled down to those at the bottom of the pyramid.

The trickle-down theory itself has come under severe attack. The gini coefficient of household consumption in 2004-05 was 0.30 for rural areas and 0.37 for urban areas. A household survey in that year indicated that the top 20 per cent of the population accounted for between 40 to 45 per cent of total consumption while the share of the bottom 20 per cent was between 7 to 9 per cent. The poor may now have a little more income than before; many may have acquired some rudimentary assets; and the poor may not have become poorer, but there is abundant evidence that several millions lead a sub-human existence marked by low and uncertain income, malnutrition, disease, poor quality of water and sanitation, and virtually no access to good education and medical care. If the human development indicators of the bottom 20 per cent of the Indian population are separately calculated, it will present a sad picture of destitution and neglect.

[H]ow does emerging India propose to face the challenge of development and security for those at the bottom of the pyramid? The issue of economic transformation to sustain high growth, and aim for a higher growth rate, is intricately related to India’s place in the geo-politics of the region. Within the subcontinent, India is in a troubled neighbourhood. The security of India consists of many elements: food security, energy security, financial stability, border security and cross-border security. Each one of these elements is impacted by events in the neighbourhood.

The ethnic strife in Sri Lanka has pushed thousands of refugees across the Palk Straits into India. The near failure of the State in Bangladesh triggered massive migration to India — which still continues to a significant degree — altering the demographic profile of many districts in West Bengal and Assam, and putting an enormous strain on India’s financial, food and physical resources. Myanmar, while overtly friendly, continues to give shelter to insurgent groups that threaten the sovereignty and territorial integrity of India.

Pakistan is implacably opposed to India: while Kashmir appears to be the central issue of contention, Pakistan has taken its hostility beyond Kashmir and supports terrorist activities and communal conflagrations in other parts of India. Nepal remains an enigma: it is difficult to predict at this stage the future of India-Nepal relations under a Maoist-led coalition government in Nepal, but our desire is to have a special and strategic relationship with that country.

Across the subcontinent, we face the unarticulated challenge from an equal — and perhaps stronger — rival, namely, China. China has resolved all its boundary disputes with its neighbours, save with India. From time to time, China takes unpredictable positions that raise a number of questions about its attitude towards the rise of India. The most recent example is the negative stance adopted by China in the meeting of the Nuclear Suppliers Group (NSG). Yet, trade between India and China is growing at a blistering pace. There is expectation of greater investments from one country into the other. There are also isolated, nevertheless important, instances of cooperation and coordinated action between India and China in several fora. However, the nagging doubt is whether China will regard India as an equal or as an upstart and what will China’s attitude to India be if India’s economic strength begins to equal that of China.

(Excerpts from the Field Marshal Cariappa Memorial Lecture, delivered by Finance Minister P Chidambaram on September 18, 2008, in New Delhi)