We can wok it out

It's no more an India vs China story. The two nations may end up as mirror images, writes Pramit Pal Chaudhuri.

Billions of Entrepreneurs
Tarun Khanna
Penguin Viking* RS 595 * PP 353

Tarun Khanna became a chattering class celebrity in 2003 when he co-authored 'Can India overtake China?' In the article, he defied the general view that Beijing was light years ahead of New Delhi.

His argument: India had a potentially long-term advantage in the dynamism of its private entrepreneurs. The article and its responses led him to an "intellectual odyssey" whose final product is this hefty assessment of the manner India and China are transforming themselves.

However, Khanna no longer sees it as an India vs China story In his view, the real tale is that India and China are rising in two distinctly different ways, so different that they are almost "mirror images" of each other.

More optimistically, he sees in these dis ferences the origins of a bilateral relationship in which both sides are able to match one's strength with another's weakness.

He calls this "dance mutualism", after the partnership between two dancers "with a leader and follower alternating roles and both straining to hear music that is by turns tentative and vigorous."

Khanna's description of how the Asian giants decided to take separate paths to development and their consequences is not original. However, he spends more time and care than most in trying to explain the context that led each country to choose the path that they did.

From the beginning India and China, he argues, made "very different choices" when they were young modern States "based on deeply held beliefs about appropriate societal norms".

One resulting Indian strength lies in the free flow of information. The aggressive independence of Tehelka is contrasted with the only Chinese news agency, Xinhua, where party officials provide guidelines about coverage once a week.

The fallout is that corporations in China are dependent on guanxi, networks of relationships, for the kind of basic economic information that firms in India sometimes get in newspapers. This in turn lends itself to a fmancial system in India that is in many ways superior to the State-driven version of China.

It is not merely that capital is more efficiently allocated, but also that Indian firms are forced to be more transparent and better managed as they try to access that money.

A Chinese strength is the ability to build physical infrastructure. The very strength of civil society in India makes certain types of collective activity whether it's the building highways or new cities, prohibitively difficult.

China has a compensation system for people it displaces - though Khanna does a good job narrating how haphazardly it works - but ultimately what the government decides to build gets done. The Indian contrast is the mindless opposition that nearly emasculated the plans of the German retailer Metro in Bangalore or the painfully slow process by which farmers were persuaded to se11their land and pave the way for modern Gurgaon.

On the other hand, Beijing has been miles ahead of India in tapping foreign corporations for investment, technology and money It was quicker to the benefits of tapping overseas diaspora - in part because Maoist extremism had wiped out domestic entrepreneurs.

The Indian State remains "dysfunctional" and is a key reason for the continuing discrepancy in results between the two Asian countries. The Chinese government, in comparison, is a well-oiled machine because it sees helping business essential to its own survival.

Much of this is old hat for those who monitor the cottage industry of 'Chindia' literature. Khanna's strength is the sheer variety and extent of the anecdotes, quotes and examples he provides. K anything, a more disciplined structure would have been useful just to manage the wealth of material.

Having detailed how India and China are succeeding in their own way, Khanna argues that their respective troughs and crests make them a good match. Already Indian and Chinese firms are building those bridges. For example, China sucks in so much stone from India that most foreign stone agents in India are from the Middle Kingdom.

He also reminds us how India's greatest export to China Buddhism - followed early trade links. Curiously, he chooses to showcase how the two countries have sought to project their influence in Burma. While he details this less-than great game, it is not clear why this fits in with the book's primary theme.

Khanna also misses how important Burmese help against the Naga rebellion and unimportant oil and gas were to India's decision to turn its back on Aung San Suu Kyi.

He also repeats a common myth that India believes buying overseas oil and gas reserves is crucial to its energy security New Delhi is careful to insist such purchases are driven purely by profit motives - it provides no money or other subsidies for such assets.

This is a sprawling book about why these two countries are moving in the manner that they are and an important reminder how sophomoric are claims that one country has found a better way than the other.