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Standing up to China will require not only matching its military might but also economic prowess

Major rationalisation and pruning of subsidies can go a long way in financing a development plan for eastern India as well as the new demands for reinforcing defence in the wake of Chinese aggression.

Written by Ashok Gulati |
Updated: August 3, 2020 8:57:01 am
india-china border, india-china border news, line of actual control, galwan, galwan valley, ladakh border clash, ladakh news, ladakh border news, pangong tso, india china border dispute, indian express To stand up to China, India needs to learn how our neighbour became a superpower.

The way the disengagement of Chinese troops is taking place at the Ladakh border, one thing is clear: India is in for a long haul. The bonhomie between Prime Minister Narendra Modi and Chinese President Xi Jinping seems to be over. While addressing soldiers at the Galwan Valley, PM Modi clearly said that India knows to look in the eyes of the enemy and stand up to safeguard its sovereignty. But how do we do that? Substantial increase in defence expenditure for the next five to 10 years seems inevitable, if India is to match China’s military might. With our limited resources that could be a daunting task.

To stand up to China, India needs to learn how our neighbour became a superpower. It is well-known that China’s per capita income in 1978 was even lower than that of India, but today it is almost five times higher. It is this transformation that has made China the world’s second superpower. Although every country has to find its own ways to achieve economic growth, it is always useful to learn a thing or two from the experiences of others.

China ushered in economic reforms in 1978, starting with major changes in agriculture. It dismantled the commune system in land holdings and established a household responsibility system, and, by and large, freed agricultural prices from controls. This led to an agri-GDP growth of 7.1 per cent between 1978 and 1984. The real income of farmers grew at about double this rate. This created a huge demand for industrial products, creating a demand base for a long-term manufacturing revolution that began with town and village enterprises. Chinese agriculture has grown at 4.5 per cent per annum between 1978 and 2018.

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Focus on agriculture during the initial years of China’s economic reforms has to be viewed against the backdrop of what happened during the “Great Leap Forward” (1958-62) of Mao Zedong. It coincided with a famine that claimed about 30 million lives —perhaps, the greatest human tragedy in history. A somewhat less known fact is that when China initiated reforms, it also introduced a one child policy. The policy that was introduced in 1979 continued till 2015. As a result, China’s average family size, 4.84 in 1971, dropped to 3.96 in 1990, to 3.1 in 2010 and stood at 3.03 in 2017.

In contrast, look at the size of the average Indian household. It was 4.8 as per the 2011 Census, almost the same as that of China in 1971. Uttar Pradesh had the largest average family size of six members. The figures for Bihar (5.5) and Jharkhand (5.3) were also well above the All India figure and of course, much higher than that of China in 2017. No wonder, Bihar, UP and Jharkhand had the lowest per capita incomes amongst the country’s major states in the triennium ending (TE) 2017-18 (at constant 2011-12 prices). Their growth rates during TE 2002-03 to TE 2017-18 remained below the all India annual average (see graph). The largest migration of rural labour to Maharashtra, Gujarat and Delhi takes place from these states — the pandemic has exposed the miserable state of the country’s migrant labour.

The bottom line is that the economic reforms launched in the country in 1991, with changes in trade and industrial policies, had only limited success in these states of Eastern India. This had to do with large family sizes in these states while the agricultural holdings were extremely small. India, being a vibrant democracy, cannot enforce a one-child policy to overcome its population problem. We must remember that Sanjay Gandhi’s forced sterilisation drive was a major reason for his mother losing political power. The only way out for India, therefore, is a massive education drive, especially directed towards the girl child — liberal scholarships should be a key part of this project.

That brings me back to the question of overall resources. The New Education Policy, announced last week, talks of increasing overall expenditure on education as a percentage of GDP, but it’s almost silent on educating people about population control. It also does not mention how the government plans to mobilise resources.

The Prime Minister’s Garib Kalyan Rojgar Yojana focusing on providing 125 days employment to migrant workers in 116 districts is commendable as a short-term relief programme. It has allocated Rs 50,000 crore, spread over 25 activities drawn from various ongoing schemes. But there is no medium to long-term plan for massive infusion of development funds for the laggard states of Bihar, Uttar Pradesh, Jharkhand, Madhya Pradesh, Chhattisgarh, Odisha, West Bengal, Assam and the other north-eastern states. These states lag behind the all India average on developmental indicators. India needs a package for the eastern belt to the tune of at least Rs 15 lakh crore for the next three to five years to improve basic infrastructure of health, education (including population control), housing, roads, power and water. This sustained investment plan will create jobs and development. It has to be steered by public expenditure. The private sector can also be roped in to channel their CSR funds in well-designed schemes.

Financing such a mega investment plan requires changing the culture of doles. There are massive subsidies on food, fertilisers, power sector, and in funding recurrent losses of several public enterprises, both at the Centre and the states. Major rationalisation and pruning of these subsidies can go a long way in financing a development plan for eastern India as well as the new demands for reinforcing defence in the wake of Chinese aggression. Can India do that? Only time will tell.

Gulati is Infosys Chair Professor for Agriculture at ICRIER

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