China and India Not So Different After All

Whether the economic tumult in China in recent weeks represents an overdue market correction or a more significant inflection point is a matter of debate.  But one clear message is just how profoundly wrong is the long-running argument that China enjoys a decisive “autocratic advantage” while India is excessively burdened by a “democratic disadvantage.”

The most basic lesson of the Chinese and Indian cases does not turn on the differences between political systems.  Rather, it is about the common difficulty of enacting systemic reforms in large, complex countries outside the crucible of intense crisis.

Indeed, the danger now in Delhi is that the current growth pickup will permit official hubris to crowd out good policy intentions.  One detects more than a whiff of overconfidence when Jayant Sinha, the minister of state for finance, declares that “It is India’s moment” or boasts about India being on the verge of leaving “China behind as far as growth and development matter.”  These statements are not only at odds with the more somber sentiments of the Indian business community, but are all too redolent of the easy talk about the coming “Indian Century” that the Singh era specialized in.

Read the full essay at Asia Sentinel’s website.

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Reform is a Dirty Word in India

India’s difficulty in advancing serious economic reforms is ultimately due to the lack of a home-grown intellectual tradition that can underpin them.  The Congress Party, long a bastion of statist thinking, is proof of this proposition.  But fresh evidence comes courtesy of the Aam Aadmi (“Common Man”) party, the rising anti-establishment movement that oddly combines an emphasis on clean government with backward economic views.

In far too many quarters, the reforms adopted during the 1991 economic calamity are regarded as the modern equivalent of the British East India Company, something imposed on the country by overwhelming external forces.  Thus, no political leader of any note embraces reform as a concept and when it occurs nonetheless, it is usually the product of technocratic subterfuge.  As business leader turned public intellectual Gurcharan Das noted the other week, India is bereft of “a liberal party that openly trusts markets and focuses on economic and institutional reform.”

Read the rest of the article in The Diplomat.

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India Needs to Revisit 1991

Let’s hope that the specter of 1991 lingers around long enough to galvanize New Delhi elites – especially Congress Party leaders who are now in populist election mode – with the courage to implement game-changing reforms.  Taking a cue from the ADB, they can start with dismantling the anarchic laws governing labor markets and the acquisition of land for industrial projects which have stifled the growth of labor-intensive manufacturing.  This should be a huge comparative advantage though worrying signs are emerging of Indian manufacturers shifting to other countries.  But until some hard measures are enacted, all of New Delhi’s talk about building the country into a global manufacturing hub will continue to ring hollow.

Read the rest of the article at The Diplomat.

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Glimmers of Hope in Pakistan

Pakistan’s prospects careen from bad to worse, but there is still some possibility that it will one day evolve in a more liberal and moderate direction

Events over the last few weeks have amply demonstrated the growing decrepitude of the Pakistani state, providing fresh justification for its perennial ranking at the top of the world’s failed-state indices.  Yet out of the gathering gloom, several flickers of light can be detected.

First, though, there can be no doubt about the country’s cloudy prospects.  The massive energy crisis, which has resulted in prolonged black-outs, has crippled the already weak industrial base.  With the national government defaulting last month on its loan guarantees to power producers, some experts warn that the energy crunch is more of a threat to stability than is terrorism. Continue reading