Walk the talk

Prime Minister Manmohan Singh's call to Indian CEOs to emulate the Chinese model, made at a summit last week, should raise some eyebrows amongst those who have been observing the striking contrasts between the performance of the two economies over the last couple of decades.

For, any reasonable assessment would squarely pin the responsibility for the widening gap between the two, as between India's own potential and actual achievement, on the Indian government itself.

The glaring divergence in India between the increasing availability and affordability of goods and services produced by the private sector and the deterioration in public services (including infrastructure) is one important manifestation of government failure in India.

More to the point of the Prime Minister's remarks is the failure of government, after more than a decade of being "reformist", to create the kind of policy framework and investment climate that China has succeeded in doing.

All said and done, Indian industry has been through a brutal struggle since the reforms of 1991 took effect. The combination of free domestic entry, the increasing range of activities into which foreign investment has been allowed, and the opening up on the trade front have all made the domestic market intensively competitive.

To add to this, the lack of complementary reforms on the exit and restructuring front made the adjustment doubly difficult for domestic producers. Many of them fell victim, but equally, many not only have survived, they have thrived.

New products, larger scales of production, relentless cost-cutting, new technologies, including the widespread assimilation of IT""all of these characterise the successful Indian corporation at the end of a decade-and-a-half of reforms. It has reached the point that many people are expressing fond hopes about India's emergence as the next manufacturing powerhouse!

And what has the government done in the meantime? Fifteen years after the first stirrings of hope of private investment in infrastructure, the country is still grappling with the nuances of an appropriate regulatory and developmental framework in most sectors.

These will, inevitably, become a roadblock to accelerating growth. Labour market flexibility, something that China first implemented in its special economic zones and then extended to the rest of the country, remains a distant dream for large-scale manufacturing in India.

Dr Singh's government has, of course, ruled out completely the necessary amendments. And uncertainty, right from the highest echelons of policymaking down to the ground-level decisions of local authorities, continues to dog the investment scenario.

Against this record, Dr Singh's assurances of providing a conducive environment don't sound entirely convincing. The Prime Minister may well take the high ground and ask industrialists to be inspired by their Chinese counterparts.

But it is more appropriate for domestic industry to face up to the government and parties supporting it from outside and say: we have proved ourselves capable of doing whatever it takes. As far as emulating China is concerned, the shoes are most definitely on your feet.