As long as the US remains adventurous in the Yellow Sea, China will keep playing Pyongyang card to its merit

IIPM Mumbai Campus

A Ship In My Backyard

We will never allow others to keep snoring beside our beds," Chairman Mao Zedong famously quipped years ago when he was asked to define the strategy to contain the hostile nations in the vicinity. Half a century later, with the United States' 7th fleet breathing down their necks in the backyard, the comrades appear as cool as cucumber. There is no confusion it seems. None was allowed to snore then; none, it appears, will be allowed now.

During the last weekend, China proposed emergency consultations among participants to the Six-Party Talks next month amidst growing hostility on the Korean Peninsula.
"After careful deliberations, China proposes emergency consultations, among the heads of delegations to the Six-Party Talks, in early December in Beijing," said Wu Dawei, Chinese special representative for Korean Peninsula affairs. It was China's latest decision following the exchange of artillery fire last week between the Democratic People's Republic of Korea (DPRK) and the Republic of Korea (ROK).

It was deliberated as the ROK and the United States started a four-day joint naval exercise in waters west of the Korean Peninsula, with the US aircraft carrier USS George Washington spearheading the exercise.

However, sources close to TSI have maintained that no live-fire drills were planned at the US' 7th Fleet. Officials would not provide the immediate site for the exercise but sources said it was being conducted at about 160 kilometres south of Yeonpyeong Island, the scene of last week's artillery exchange.

Let's look into the reason behind the current spike in hostilities. The basic rationale behind this showdown is the long-term inter-Korean mutual military deterrence. In the run up to the latest exchange of artillery fire, tensions were still lingering on the Korean Peninsula following the sinking of the Cheonan. The situation was made complex because of the refusal of the US and the ROK to engage in dialogue with Pyongyang while indulging in a series of joint military exercises.
To worsen the situation, in response to the hard-line policy of the US and the ROK, the DPRK took an even pugnacious formulation and threatened to wage war against the ROK saying that if the latter's force infringe on even one inch of its territorial sea, it will come all guns blazing.

More perturbing, Pyongyang unveiled its new uranium enrichment plant to an American scientist while the ROK's hawkish defence minister has hinted that Seoul might weigh asking the US to redeploy nuclear weapons, which were withdrawn from the peninsula following the collapse of Soviet Union.

It is expected that Beijing will try to induce Pyongyang to exercise restraint and stop its military dealings, and will talk Seoul into stopping military determent and showdown. However, under the menace of predominant large-scale US-ROK military exercises, it is hard to conceive of that Pyongyang will evaluate Beijing's proposal.
Recently, China's leaders marked the 60th anniversary of its entry into the Korean War and the "friendship established in battle" with the North. However, experts have started to believe that its neighbour and ally is more often a source of frustration than sympathy these days.

"Of course our statesmen are peeved. But they don't express it in public,” said Shi Yinhong, an expert on Peninsula hostilities at Renmin University in Beijing. “For us it has become increasingly difficult to balance our relationship with the North and the South.”

Experts also warn that Beijing's forbearance would run out if the North continued to act incendiary. Indeed, Beijing's cagy reaction to the artillery attack – refusing to impute blame and calling on all sides to show restraint – should not be mistaken for blessing.

China has, in the past, snubbed the North in public, however, it can not afford to damage its relationship. Pyongyang is already bitter about Beijing's maximising ties with Seoul – financial dealings between China and Seoul reached $140 bn last year; in relation, that with Pyongyang was worth less than $3bn the previous year.

However, America's continued adventures off China's coast has made Beijing prioritise its responses. The situation is made complex by China’s inquisitive attempts to liken economic waters, which commonly extend about 200 nautical miles off a nation's coast, with territorial waters, which normally reach about 12 nautical miles off the same. But experts seem to have answer for that.

"During the Cuban Missile Crisis in 1962, when the Soviet Union constituted nuclear missile bases on the island, the US objected to the close propinquity of the Soviet weapons system even though they travelled only through international waters to reach Cuba, and the US set up a encirclement to stop them being positioned," points out Shen Dingli, director of the Center for American Studies at Fudan University, while talking to TSI. "When the US ponders the idea of positioning its nuclear aircraft carrier in the Yellow Sea, very next to China, shouldn't China have the aforesaid notion as the US did when the Soviet Union deployed missiles in Cuba?" Point Taken.

China may not have the militaristic forte to forcefully forestall such drills now, but it may do so in consequence to such provocative acts in the futurity. Also in terms of geopolitical scheme, the Yellow Sea is the entryway to China's capital area and a critical transit to the heartland of Beijing and Tianjin. The exercise location chosen by the United States and South Korea is only 500 kilometres off Beijing. Naturally, China will be mindful of the security imperativeness from military drills conducted so close to China's heartland.

Major General Luo Yuan, a military expert at the PLA Academy of Military Sciences, says, “7th Fleet has a combat radius of 600 kilometres and its fighters have that of 1,000 kilometres. The drills present a direct security menace to China's hinterland and the Bohai Rim Economic Circle.”

Under the circumstances, China will continue to play the Pyongyang card – a potent card in its hand as a regional and global player. However, there are terminus ad quem to its use as it will not risk regional imbalance, the North's collapse, a deluge of refugees along its extended border with the North and possibly a unified peninsula. As one Chinese diplomat quipped famously, “North Korea is our East Germany. We wont let it die. Remember what happened when East collapsed? Soviet Union collapsed too.” That says it all.

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Heavy inflows of FII money, falling exports due to rising rupee, and widening current account deficit!

India is now walking on the same lane that once brought in the Asian financial crisis.

In July 1997 the South East Asian stock markets, especially South Korea, Malaysia, Thailand and Philippines, which till then were on rampage, not only came to a screeching halt, but also entered into a prolonged phase of nightmare – better known as the Asian financial crisis. Foreign Institutional Investors (FIIs), which poured in a whopping $19.1 billion into the countries’ markets in 1996 and drove these markets to record highs, flew away overnight ruining the countries’ stock markets and economic stability. So much so that while the Thai stock market lost 75% of its value, the PSE Composite in Philippines fell by around 66%.

The scenario was more or less the same in January 2008, when the Indian benchmark index Sensex after scaling a historic high of 21,206 on January 10, dwindled down to 15,322 by January 22. This time the same FIIs, who from January 1 till January 16 had infused Rs 30.59 billion into the Indian stock markets, pulled out a nerve-wracking Rs 44.65 billion in just two days, January 17 and 18. And now, the Indian stock market has again become the purple cow for the FII group. As per the Securities and Exchange Board of India (SEBI), net investments made by FIIs in the country’s equity markets has already gone past a mind-boggling Rs 1 trillion ($22 billion), pushing the market to the 21,000 level. What is most noticeable here is the way the FIIs have got hold of the nerve of the Indian market since the beginning of September 2010. Since then, while they have infused $17.3 billion, the Sensex has soared 16.5%. While industry mouthpieces like C. B. Bhave, Chairman SEBI, might not be overly worried about the situation, what cannot be ignored is the fact that while in 1996-97, India was fairly insulated from the global economy and even FII hot money vagaries, the situation is quite different currently. While the reasons for the sudden fall in the stock markets might be quite clear to industry players, a majority of global investors would fail to undertake a deeper analysis and could arbitrarily decrease the sovereign ratings for the nation – resulting in much collateral damage, international loan interest rates inclusive.

In fact, due to the increasing inflow of external capital and surging demand for the rupee, value of the domestic currency has risen sharply in terms of real effective exchange rate hurting the country’s exports. As for records, the rupee, which was trading at 47.08 against the greenback on August 31, surged almost 6% to 44.26 (as on November 8) on the back of heavy buying by the FIIs. Moreover, the strengthening of the rupee has allowed imports to surge 35.7% y-o-y in the second quarter as against a 21.7% y-o-y decline last year, pushing India’s trade deficit to rise by 33.5% to $34.2 billion in Q2FY’10 from $25.6 billion in the same quarter last fiscal. Though the exporters are now lobbying with the central bank to put a check on the rate hikes to somehow protect their competitiveness (a drop in the interest rate can put a pause to the capital inflow by reducing the difference between the prevailing near zero interest rates of the developed countries and the high interest rate of India), the Reserve Bank itself is in a helpless situation in its fight against inflation.

The RBI is currently increasing its base rates by around 25 to 50 basis points in almost every fiscal policy meeting to absorb the excess liquidity that was injected by the government to the economy earlier to lift the country’s GDP growth rate to over 8%. But in the process, it is drawing a higher inflow of foreign funds to the country’s economic system. As of now, the spread between India’s 10-year bonds and the US 10-year treasuries is standing at a record high of 5.7%, making India a hot destination for the overseas investors. In fact, considering the fact that RBI is still to reach to a peak in terms of interest rate hikes, India even stands as a better destination for FIIs as compared to other developing Asian markets where inflation is well under control and hence chances of rate hike is lesser than India.

On the other hand, such a rush of FIIs to invest in the Indian market has created another hassle for the apex bank. As Bodhi Ganguli, Economist, Moody’s Economy points out, “All foreign-currency purchases by the RBI will have to be fully sterilised now to prevent from adding excess liquidity to the domestic economy.” But then, considering that India’s foreign currency reserve has grown over 5% from $256 billion to $269 billion between August 27 and October 29, the job in the hands of RBI does not seem to be an easy one. And if the country’s Broad Money (M3) is an indicator to be considered, then RBI is certainly struggling on this front as India’s M3 has grown by nearly 4.1% during that period to Rs 60.68 trillion (October 22) from Rs 58.30 trillion (August 27).

However, for the time being, the country can be in solace as the Planning Commission is still confident that these inflows can be absorbed by the country’s huge current account deficit. But, for a long term benefit of the country’s economy, today, Indian regulators must let go of the short term market benefits and put a check on the hot money flow. Else, sooner or later, India will end up being the epicentre of yet another Asian financial crisis.

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Cut-price nation: In India, a land that is forever in festival mode, discount sales are a round-the-year affair that finds takers without fail

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Another bumper sale is underway at a superstore in the friendly neighbourhood shopping mall. The offer is tempting: buy a sofa set, get a cupboard free. Enticed? Go grab the furniture before it is too late.

But hang on. In India, it is never too late. Stock clearances and factory seconds sales on garments, home décor products, electronic appliances and etc are a round-the-year affair in one of the world's fastest growing economies.

So take it easy. This "bumper sale" isn’t going away in a hurry. Even if it does, rest assured it will be back soon enough, beckoning you to make that big purchase that might not be all that essential. But why resist? A good deal is a good deal whether you need it or not.

The consumer base is impressively vast and vibrant in contemporary India. But we remain a land where the ethos of the good old village mela holds sway. When business is conducted in the informal, laid-back ambience of a rural fair, cheap isn’t necessarily bad. For the seller, the principle is pretty simple: give the buyer a bargain that he cannot refuse. It is an age-old compact that is valid to this day.

India has changed beyond recognition in the past two decades and the urge to splurge has multiplied manifold among a thriving segment of its populace. But, for an average Indian buyer, value for money is still of utmost importance. Doesn’t that explain why a discount sale never fails to catch the imagination of this country's burgeoning post-liberalisation middle class?

Sreekant Jain, a leading retailer of branded costumes in Kolkata's Burrabazar, says: "The offers run throughout the year basically in order to sell items that have remained unsold or have gone out of vogue. To accommodate the new fashion, we are compelled to sell the older ones at lower prices. But there's no denying that sales go up appreciably when we offer discounts. A 25 per cent price reduction pushes up sales by at least 35 per cent."

In the retail business arena, the average Indian consumer heartily embraces the tried and tested. Familiarity does not breed contempt here. If anything, it generates an air of comfort. So we head for big-brand outlets that give us the right prices and the right vibes.

Shopping malls are cavernous, impersonal and anonymous spaces where the consumer is by and large on his own although he is surrounded by streams of similarly meandering and gawky-eyed people. In these new temples of consumerist glitz and gloss, aspirations are sky high, and the inducements are countless.

The consumer strolls around the place, sometimes with intent, often quite aimlessly. When he finally strays into a shop that sells designer objects of desire, the products are often well beyond his budget. So, he occasionally ends up picking up stuff not because it has caught his fancy but because it turns out that he can afford it.

What probably creates an even bigger gulf between the buyer and the ‘faceless’ departmental store is that the former has to deal with constantly changing faces at the billing till. A transaction devoid of emotional connect does not lead to long-term allegiances. No wonder the retail supermarkets today go out of their way to develop relationships with their customers by handing out loyalty cards that guarantee special discounts and redeemable points every time a purchase is made.

"Discount sales target the middle class in particular. The idea is not just to attract them. We give them these benefits because we want to take them into confidence and engender in them a sense of being valued as customers," says Nadeem, proprietor of Zyclone Shop, a menswear store near the Kochi International Airport.

What comes in handy in this marketing strategy is the fact that India is a land of festivals, religious and otherwise, and an array of national celebrations. One simply needs an occasion – Diwali, Dussehra, Christmas, Eid, Guru Nanak Jayanti, Gandhi Jayanti, Independence Day, Raksha Bandhan, et al – to unleash "the biggest sale of the season".

In recent years, Father’s Day, Mother’s Day and, most importantly, Valentine’s Day, among sundry other diurnal ideas borrowed from the West, have been added to that never-ending list of pretexts to woo consumers with sales that promise the earth and the moon in one go.

Bargain sales and stock clearances are certainly not peculiar to the Indian context. But in which other country of the world do retailers have the sheer diversity of valid reasons to pull out the stops and inveigle buyers with slashed prices?

In this country of a billion-plus people, not a month passes without a festival or anniversary of national significance impacting the retail scenario. Add to that the "end-of-season" sales that take place when winter and summer draw to a close, there isn’t a week when branded products aren’t up for grabs at eye-popping prices.

Says Ganpatbhai Kothari, owner of Kothari Electronics in Ahmedabad: "The festival season, a period of three to four months, is extremely crucial for us. People are on a shopping binge and in order to attract them we give them discounts that make a difference."

The festival season in India stretches for months – in Kerala it begins with Onam, in Gujarat with Navratri, in Bengal with Durga Puja, and in Maharashtra with Ganesh Chaturthi. Nowhere in India do people withdraw from their celebration mode until they have ushered in the New Year with a binge to put all other binges in the shade.

"The craze for discount sales is fuelled principally by India’s huge youth population that goes out looking for its favourite brands but often prefers to wait until the time they are available at reduced prices. Says 28-year-old Ahmedabad resident Yogendu Joshi: "I always prefer to shop during Navratri because of the benefits that are available in the festival season.

Yes, quality is important, so when big brands offer hefty discounts why shouldn’t we grab it?"

But shops that offer year-round discounts – sometimes as high as 80 per cent – often face scepticism from consumers. How do they manage to make profits? Is quality a casualty? Says Prakash Dhamija, a young sales boy at an outlet in a Delhi NCR shopping mall: "The year-round sale is our USP. We thrive on volumes. We have a steady and committed clientele. Once a consumer is convinced of the quality of our garments, he or she keeps returning."

He asserts that the low prices are indeed the biggest draw. He points to the red jacket hanging in the shop window. "Doesn’t it look good enough to be worth Rs 5000? The "50 per cent off" tag makes it a steal. When the price seems far lower than the perceived worth of a product, the equation works perfectly for both buyer and seller," adds Prakash.

The buyer’s perspective isn’t different at all. "Discount sales are a huge boon," says A.P. Sasidharan Nair, a retired school teacher in Angamaly, Kerala. "Most of my branded household appliances were brought during the Onam season sales. I purchased my refrigerator, television set and washing machine when they were on discounts."

The question to be asked is: do we ever ask our physician, interior designer or hairstylist for discounts? The answer is no. Neither do we ever walk into a builder’s site office and demand a cut in the price of a property we are planning to buy. Certain transactions are outside the purview of bargaining procedures.

Contrast that with the scene in Dilli Haat, where craftsmen from around the country sell their wares. Here, haggling over prices is the norm. So the stalls, which sell anything from decorative knick-knacks and ethnic jewellery to furniture and carpets, do not offer any discounts. They don't have to.

But do we ever approach the floor manager of a shopping mall superstore and ask for reductions? We don't. So concessions are granted without the consumers having to ask for them. It is an integral part of the business. Dangle the carrot and draw people into the store and then hope they pick up the high-priced "new arrivals" as well while they look for the bargains.

Jiban Roy, Kolkata-based market analyst, says: "We love to bargain. We cough up Rs 100 for a cup of coffee but we get into a flap if an autorickshaw guy charges us a rupee extra. It is a mindset. That is why offers from the big brands turn us on." In a price-obsessed nation, that is par for the course.


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Can India ever match China

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Even horses that have been flogged to death by pundits can be resurrected if you express a point of view that is factual and yet startling. The India-China horse has been flogged many times to death. But new insights or a new way of presenting old and buried facts keep reviving this great debate of the 21st century. Put quite simply, academics, nationalists, strategists, CEOs, politicians, media professionals, think tanks and sundry others keep asking that one question: Can India ever match China? Recent news about China 'officially' overtaking Japan as the second largest economy in the world will once again convulse, confound and titillate all those who have a passion for comparing India with China.

Let us start with a fact that most Indians are either unaware of, or prefer to ignore since our sense of history is as strong as our performance at the Olympic Games. Professor Emeritus of London School of Economics Meghnad Desai has written a new book called The Rediscovery of India. Right at the beginning, this is how Desai tries to put the India-China comparison in perspective in his own words: ' India, unlike China, was never a unitary or even a single federal state through much of its history. In his fascinating one volume history of India, John Keay has a diagram showing how much of India's territory was controlled , over the last three millennia, by any ruling dynasty. The contrast with China is striking. For China, once you leave a turbulent period during 300-200 BC, there is a continuity in state formation. For India, the reverse is true. After the Maurya period of 400-300 BC, you have to fast forward (almost 2,000 years) to the Mughal rule which controlled a similar percentage of territory'India is at once a young polity and a very old culture.'

Says Shi Yinhong, professor of international relations and director of Centre on American Studies at Renmin University of China, 'China's current leaders and, through them, the majority of the Chinese people have a strong belief in Chineseness and its overwhelming importance to national reform and development. This belief in Chineseness is not like the traditional Confucian one, which treated it as a universally applicable value. It is more particular, not assuming that what is best for China is necessarily best for the world.' Can India ever match China ? Quite clearly, that will raise the hackles of ultra and pseudo nationalists who keep telling us that India was the defining and leading nation state of the world throughout much of history. But the fact is that China has always been bigger than India and will arguably remain bigger even in the future. A large number of analysts and pundits commit the cardinal sin of presuming that India was bigger or superior in some numerically measurable way than China. It never was. Once you acquire that perspective, it leads to much less hand wringing and self-flagellation about how China has raced ahead of India in the last three decades and how it is already an economic superpower even as Indians quibble and argue about the number of citizens still living below the poverty line.

In any case, it would be obscene to be obsessed with facile India-China comparisons when more than 600 million Indians earn less than $ 2 a day and when more than 500 million Indians cannot even write their own name in any language. It would be instructive for Indians who obsess with China to learn a few lessons from the trajectory taken by Pakistan as a nation state in the last 60 odd years. Ever since it became a nation state, Pakistan has defined itself against India and remains obsessed with it. And look where the obsession has taken and is still taking Pakistan. And yet, comparisons - facile or serious - have been the staple of academics, the media and even the world at large. You keep listening to, watching or reading endless debates whether Ricky Ponting is a better batsman than Sachin Tendulkar and whether Rafael Nadal will become a greater tennis player than Roger Federer.

Shorn of the hype, a comparison between India and China serves at least two key purposes. First, it helps us focus more effectively on what needs to be done to even match and catch up with China; forget about racing ahead of it. Second, it helps us seek and identify national strategies that will enable India to do what even now looks improbable, that is catch up with China. Most readers are familiar that China is ahead of India when it comes to economic, human development and military parameters. And yet, it is important to recount and highlight some of the more glaring ways in which China - which was always bigger than India anyway - today outstrips and outperforms India. Can India ever match China ? Both in terms of absolute and per capita GDP, China is today four times bigger and richer than India.

Despite an unthinkable decline of more than 10 per cent, thanks to the recession after the global financial meltdown, the value of exports from China to the United States was about $ 300 billion in 2009. This is almost double the total exports of India to all nations of the world.

China is sitting on more than $ 3,000 billion of foreign exchange reserves. That is 10 times the size of the foreign exchange reserve of India.

China is now the largest automobile market in the world with projected sales of 13 million automobiles in 2010. India remains content with automobile sales of less than 2 million.

China manufactures 10 tons of steel for every ton of steel manufactured by India. This should be a sobering thought for those gloating ever since L. N. Mittal took over Arcelor and Tata Steel acquired Corus!

The average Chinese farmer produces more than 4,500 tons of wheat for every hectare cultivated. The average Indian farmer manages to produce less than 2,500 tons despite the Green Revolution.

More than 95% of China is literate while India can boast of a figure of less than 65%.

China won 100 medals at the Beijing Olympics. Indians were ecstatic with joy when our athletes came back with three medals.

The military budget of India in 2009 was about $ 22 billion; that of China was close to $ 80 billion. Most analysts are convinced that the actual military and strategic budget of China is far more than that.

Indians are very proud of Bollywood and prouder of our democracy. There is a perception that the authoritarian regime of China denies citizens any freedom, including that to be entertained. Well, the total value of business generated by the entertainment industry in India in 2009 was less than $ 23 billion. The size of the entertainment industry in China was more than $ 175 billion in the same period! Can India ever match China ? Any which way you look, a comparison between China and India can be a depressing pastime for Indians. It is no consolation to be told by historians and academics that the difference between China and India was as stark and as glaring even during the 17th century when Imperialism started making serious inroads into Asia. The obvious question is: Why is this so? From a historical perspective, perhaps the fact that China has been a unitary nation state far longer than India makes it easier for the rulers of China to remain focussed on the big picture. It also helps that the ethnic group and language called Han accounts for almost 90% of the population of China while India is a bewildering cocktail of ethnic identities, religions, languages, castes and what not. Says Dani Rodrik, a professor of Political Economy at John F. Kennedy School of Governance, 'The Chinese and their administration are committed to a different idea of the social order and polity: Community-based rather than individualist, state-centric rather than liberal, controlling rather than democratic. China has more than two millennia of history as a diverse society from which to draw potency. It will not merely fold under Anglo-Saxon values and institutions. The best part is that a Chinese Global order will exhibit greater reverence for national sovereignty and more forbearance for national multiplicity. There will be larger room for trailing with various economic models.'

But most people who want to get a sense of what makes China so consistently outperform India are more interested in recent history and also a peep into the future rather than going back to the days of Marco Polo or Huein Tsang.

When you look at things from a more recent historical perspective, two key reasons for China's unquestionably superior performance emerge clearly. The first is the superior ability of the rulers of China to think long term and pursue strategic national interests cold bloodedly and ruthlessly. Amongst all major nation states, India displays a baffling lack of strategic clarity and long-term vision. The second is the superior ability of the Chinese state to deliver clearly defined results in pursuit of strategic national interests. The comparative performance of the Indian state has been abject and pathetic, to say the least. Can India ever match China ? Lets analyse the first reason more closely. China remerged as a nation state after a civil war in 1948 as a Marxist regime. But those who ruled China, starting with Mao Ze Dong, had a clear agenda and a long-term vision that would not be accurately defined as Marxist or Communist. They wanted the Middle Kingdom to re-emerge as the most formidable nation state and country of the world. After 1947, when India emerged as a nation state, our long-term vision was a more idealistic (many would say wooly-headed) desire to be a leading moral force in the world. Look at the last 60 odd years and you will realise that India's foreign policy and approach towards the world has gone through numerous contortions. First, America was a friend; then it became the bad Imperialist and Pakistan backer; now it is being embraced again as a strategic partner. Just one example will suffice to contrast India with China in this context. Even when the Shah of Iran of Iran ruled the nation as an American ally during the 1960s and 70s, China was consistently building bridges with Iran as it recognised the strategic importance of oil. China continues to do that even with the Islamic regime. India actually voted with America and her allies against Iran. It is still paying the price as China walks away with all lucrative oil, gas and construction contracts. Even today, ask the elite of India based in Delhi where and how they see India in the next 30 years and most will have no clue except a few clich's about India 'emerging as an economic powerhouse'. The Chinese are not infected with such strategic confusion.

This lack of strategic posture among the ruling elite of India is something that a majority of common Indians don't understand or would even bother to understand. But what they do understand very painfully is the performance of the Indian state vis a vis the Chinese state. There is no doubt that the Chinese state has spectacularly outperformed the Indian state in delivering 'concrete and measurable' results to its citizens. Says Bob Wheil, an acknowledged China expert working at the US-based China Study Group, 'Some Indians, especially in the upper and middle classes, look to the current policies in China with unrestrained capitalist development tide to a still fairly high degree of state control, as an example to be followed. What they in most cases forget however is that though the rapid Chinese rise in recent years results from many causes, it was the head start provided by the socialist revolution - in better health, education, infrastructure development, and social egalitarianism -that laid the basis for this advance. Lacking a similar revolutionary transformation, India lacked in most key economic and demographic indicators by the late 1970s. Many in the Indian working classes and amongst oppressed communities have not forgotten this lesson. For them, the Chinese model is not its current capitalist market system but the socialist revolution that preceded it under Mao's leadership. In India today, as well as in Nepal, The Philippines and elsewhere, Maoist revolutionaries are a growing force as they try to carry out the social transformation that was never done after 1947.' Can India ever match China ? Quite simply and very starkly, the only effective strategy that the rulers of India can adopt if it can ever match China is to deliver better education, healthcare, sanitation and infrastructure to the aam aadmi. And it is here that the growing failure of the state becomes even more glaring and dangerous. The terrible truth is that even desperately poor parents in Indian cities try very hard not to send their children to government schools. Even if they are tottering on the edges of the poverty line, Indians prefer to go to private clinics and hospitals for treatment. So all those who argue that India needs less state are plain wrong. The Indian state largely works to further enrich the already rich; it simply doesn't work for the poor and the marginalised. That is the reason why despite corruption in both countries being equally rampant, China has moved so far ahead of India in key human development indicators. The truth is: Indians have ended up getting the 'wrong' state.

The solution is simple and India has the unique ability to harness both its imminent demographic dividend and democracy to deliver the goods to citizens. Some years ago, this magazine argued in favour of a United States of India; a new political and administrative system that would replace the colonial legacy left behind by the British. Even Manmohan Singh, in his early days as Prime Minister in 2004, had singled out administrative and bureaucracy reforms as the most important ones in his agenda. The plain fact is that the Indian bureaucracy - used as it is to complete lack of accountability and transparency - will always sabotage and destroy any plan to reform the bureaucracy. This magazine had argued a few years ago that India could be better served if, like in the United States, judges, collectors, police chiefs and district magistrates were 'elected' by voters rather than 'appointed' by the state. That is a revolution that Indians are still awaiting. Till that happens, let us keep agonising over how China beats India and will keep beating India.

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