When will India dare to be rich and powerful?

India has lagged behind China since the latter’s economic opening in the 1990s. Recent socio-economic trends are not promising. However, a recent lecture by Kishore Mahbubani, Singapore’s former United Nations ambassador and premier public intellectual, has made a convincing case for India to match China, if not exceeding it economically. That is, of course, on the understanding that the country would finally bite the bullet, and reform and open its economy like everyone else in Southeast Asia, and China, in the last half-century.

The best guarantee for security and prosperity in Asia is through a balancing of interests and power among its key nations. This means Asians taking care of their own business. But that will not happen so long as the United States imposes itself militarily as the region’s hegemonic power. Today, it is posing a threat to regional stability, both economic and military, by forcing Asian states to take sides in its new cold war against China.

However, contrary to many Chinese, I doubt China will ever, on its own, force the US out of the region, despite its growing military and economic muscles. On the other hand, two superpowers in Asia – India and China – that can achieve some kind of entente cordiale would leave no room for the US in the region. This can be coupled and reinforced by a rich, pragmatic and non-ideological Association of Southeast Asian Nations (Asean). Washington may yet rue the day when it expanded its military focus from “Asia-Pacific” to “Indo-Pacific”, for a powerful and rich India will be able to pursue a regional and foreign policy independent of Uncle Sam.

Despite the ups and downs of Indian-Chinese relations in the past few decades and the recent hostilities, the two countries have more reasons to be friendly than hostile. Indeed, during the early premiership of Jawaharlal Nehru, their relations were close, not just friendly.

China tells India we’re partners not rivals but ties ‘still at low point’

It’s worth recalling Nehru’s personal notes dated November 1954 on his visit to Beijing. “I received an extraordinarily cordial welcome everywhere in China,” he wrote.

“This was not only an official welcome but a popular welcome also in which millions joined. I was greatly impressed by it. It was clear to me that this welcome represented something more than political exigency. It was almost an emotional upheaval representing the basic urges of the people for friendship with India. I have no doubt at all that the Government and people of China desire peace and want to concentrate on building up their country during the next decade or two.”

Nehru then elaborated on the common problems both nations then faced, and their mutual friendship, despite differences.

“These talks both with Chairman Mao and Premier Chou [En-lai] were frank and friendly,” he went on. “We did not discuss the theories or ideology underlying our respective political and economic structures. We knew that they were different and yet there was much in common in the work of both the countries and many of our problems were similar.

“We entirely agreed that we should respect each other’s viewpoints and without interference cooperate in dealing with our problems. More especially we should cooperate in the maintenance of peace in Asia and the world at large. Essentially our problems were alike, that is vast countries and populations, chiefly agricultural with low standards of living, and the necessity to raise these standards by industrialisation and agricultural reform. Even in regard to floods, we had similar problems.

“Our approach to the solution of these problems was not the same and yet there was much in common with it and we could profit by each other’s experience, provided always there was a friendly approach and no interference with each other.”

The two countries should remember their formerly close friendship. To be sure, India today faces formidable challenges. As Mahbubani said in his lecture: “When the British arrived, India’s share of Global GNP (nominal) was 23 per cent. When they left in 1947, the share fell to around 3 per cent. Today, India’s share remains at about 3 per cent.”

China’s share of world GDP is now almost 19 per cent. In 1980, the size of the Chinese economy (US$191 billion) and the Indian economy (US$186 billion) were roughly the same, he observed. Today, the Chinese economy is worth US$15 trillion, compared to the Indian economy at US$2.6 trillion.

I may add this outperformance is by no means exceptional. In 1961, South Korea’s income per capita (US$82) was less than half of Ghana’s (US$179); today, they are respectively US$43,520 and US$5,530.

The Chinese economy is also much more sophisticated, in terms of technology, varieties and supply chains than India’s. Economic development requires the accumulation of productive knowledge and its use in more complex industries. Harvard University’s Growth Lab runs a massive database on countries to rank their current productive knowledge, through its Economic Complexity Index (ECI). Countries improve their ECI standing by increasing the number and complexity of the products they successfully export.

China leapfrogged from 39 in 2000 to 16 in 2019; India barely moved from 42 to 43 during the same period, while the US dropped from 6 to 11.

China’s total trade with the world (US$4.5 trillion) is more than five times that of India (US$800 billion). It is the largest trading nation and also the largest recipient of foreign direct investment.

But, as Mahbubani argues, the fact that India’s economy has remained closed or highly protectionist means opening trade with the world and allowing in foreign investment would expand it at a phenomenal rate in a short time. A closed economy does not protect the poor; rather it impoverishes more people. China’s successful poverty eradication programme is worth emulating.

Mahbubani said: “India can overtake both China and the US and become the number one economy in 20 or 30 years. It should open up its economy, trade more with the rest of the world and, as a result, allow more creative destruction to take place at its inefficient sectors.

“It will not take rocket science to make India’s economy the largest in the world and larger than even that of China and the US. It will only take simple common sense. There’s no need to invent anything new. All India has to do is to copy and learn from Southeast Asian countries who have had close relations with India for 2,000 years.”