Hindi Chini, Buy Buy

The first is the author’s intimate knowledge of the inner workings of the Chinese and Indian economies. Nearly five years ago, Khanna and Yasheng Huang from the Sloan School of Management at the Massachusetts Institute of Technology triggered a huge controversy by challenging the conventional wisdom on the economic performance of China and India.

Looking beyond the aggregate growth figures and the flows of foreign direct investment, Khanna and Huang argued that many micro-economic indices pointed to India’s long-term advantages over China. Their emphasis on the Indian corporate sector’s capacity to better utilise capital and the larger political and financial environment in India that nurtures entrepreneurship are now part of conventional wisdom.

Second, Khanna combines the professional economist’s insights with a passion for the extraordinary transformation that is unfolding in China and India. Empathy for the two great civilisational states allows Khanna to boldly imagine their future global impact. Khanna’s economic story is enriched by the political context he brings to bear upon it.

Third, unlike most economists who find it difficult to communicate with ordinary folks, Khanna’s tale flows easily. For a professor of economics, he has the instincts of a good reporter. This allows him to pick up and integrate rich details into his grand narrative and make the remarkable story of Asia’s rise more accessible and credible.

Khanna’s volume is divided into three parts: the first is about the different foundations of the political economy in China and India; the second explores enterprises that are shaping the current economic growth in the two nations; it ends with a speculation on how businesses in China and India might redefine the geopolitics of the world.
The book is aimed at western businessmen who want to know whether they can make money in China and India, and should be hugely successful in educating generations of Americans and Europeans who have had no reason, until recently, to pay attention to the two Asian giants.

Khanna’s thesis on the inevitable rise of China and India will ring familiar to the nationalists in the two countries. They might, however, turn rather profitably to Khanna’s volume to find some supporting evidence to what until now has been simply a matter of faith. One of the main arguments of Billions of Entrepreneurs is about the extraordinary prospect for cooperation between China and India. The idea that China and India will together transform the world has been articulated before, most notably by Tagore, Nehru and Deng. The dramatic expansion of Sino-Indian trade — which has risen from a billion dollars a year to nearly $38 billion in 2007 — seems to prove those convictions right. Khanna is right in suggesting that this is just the beginning of an expansive economic Sino-Indian engagement.

There is also reason to believe that expanding commerce will end the massive mutual ignorance of the two societies. The real contact between the peoples of China and India has only begun. As they rediscover each other, there will be a lot more things the two nations will be doing together. But the big proposition that China and India could become political rivals in Asia and beyond, remains a nagging one. After all, the romance in Sino-Indian relations in the 1950s quickly turned into hostility that endured for many decades.

Even as China and India celebrate their new levels of mutual interdependence, there is no guarantee they will be able to avoid future conflict. Forget their intractable boundary dispute for a moment. As they rise, China and India are already locked in new modes of political contestation.

Even at the modest levels of per capita income they now enjoy, China and India bump into each other in different parts of the world,whether it is in search of energy and mineral resources or political and military influence. India worries about China’s growing profile in South Asia and Beijing in turn wonders what India is up to in East Asia.

We must hope with Khanna that the billions of the world’s new entrepreneurs — organised under two very ambitious nation-states with an unshakeable faith in their own destinies — will choose cooperation rather than rivalry. We cannot, however, be complacent. The challenge is to get Beijing and New Delhi to see the potential risk of a confrontation and take conscious steps to minimise it.