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In Focus

September, 13

Why Make In India must not copy Made in China




In the calamitous aftermath of General Mao Zedong, the Communist Party found it hard to maintain authority in the single party state. In 1976, Mao’s successor Deng Xiaoping faced a choice. He could either hold on to socialism or maintain his party’s monopoly of power. Socialism was abandoned in all but letter as Deng chose to reinstate a free market economy that would “spread prosperity instead of poverty.”  Famously declaring, “It doesn’t matter whether a cat is black or white as long as it catches mice” he abandoned ideology for pragmatism for the sole intention that his people would trade their freedom for rapid economic growth and material prosperity. 

India’s developmental journey was different. In 1947 Prime Minister Jawaharlal Nehru found himself at the helm of an industrial giant that once controlled 23% of the world economy which had been brought to its knees by a sustained campaign of de-industrialisation by its colonial masters. As a result of this India’s share of the global economy was a mere 4% while accounting for a fifth of humanity. Pandit Nehru faced a situation where food security was beyond the grasp of 400 million hungry people. Our cottage industries like cloth in which we had accounted for 27% of global supply were criminalised and broken and we did not have the capital machinery or the means to extract the resources we needed to catch up with the industrial revolution either. Yet the pledge our first government redeemed was for freedom via self-rule and democracy. In India, this necessitated that the means of our growth were as important as our developmental outcomes. Socialism was only adopted insofar as the state was tasked with building the commanding heights of the economy, help the various sectors of the Indian economy play catch up by subsidising the technological inputs they required and to create healthcare and educational infrastructures to augment human development. Besides in the case of natural monopolies, the competition was only limited in favour of import substitution to allow nascent infant industries to be able to grow into manufacturers that could compete in the global economy. 

Therefore, while China’s Model of Development was borne out of the need to create growth rapid enough and means of employment regimented enough for its single party state to survive overthrow, the Indian Developmental Paradigm tasked the state with creating infrastructure required for its citizens to equitably achieve their potential and pursue material prosperity within a democratic framework of freedoms and due process. 

While China made good in overcoming its developmental deficit with a strategy of export-led growth which invited foreign investments by bartering cheap labour for increased employment, India chose to encourage entrepreneurship and power its growth by encouraging domestic consumption. As the communist party saw their people as subjects serving the state as opposed to those they must serve, they could afford to regiment the millions of factory workers, subject them to poor working conditions, and secure their tireless participation in sweat shops by ghettoising them into public housing. Over time elites connected to the Communist Party were encouraged to make billions as entrepreneurs, but not the ordinary Chinese. 

In India, the social contract required that the government served the citizens as their masters, so the state had to increase their capabilities to be able to participate in the market as both producers and its beneficiaries. This has meant gradually reducing the government’s role as a job provider to encouraging the growth of medium and small enterprises as avenues of job creation in the interest of sustainable growth and increased economic choice. We have also benefitted from cheap manual labour, which has given us a competitive edge in securing foreign investment and brought us out of subsistence farming, but this is not structured by the government for social control. 

India, under the Modi Sarkar, is experiencing jobless growth for the first time since liberalisation. Congress Vice President Rahul Gandhi points out that the Modi sarkar is creating only 500 jobs per day despite 30,000 new job seekers every day. He attributes this to Modi’s flawed Make in India whereby the government only pays attention to the Top 100 companies controlled by the Prime Minister’s corpus of crony capitalists. The Modi Sarkar’s crony-centric policies are complicit in snatching away credit needed to expand Medium and Small Enterprises and ensuring that their pet industrialists get to monopolise the banking system. Meanwhile, macroeconomic blunders like a punitive GST tax regime and demonetisation have forced millions of small businesses to close, spurring job destruction, while only large corporates can weather the government-created calamity. The Prime Minister foolishly seems to believe that his oligopoly of companies and the foreign direct investment he attracts for the delegation of crony capitalists who accompany him abroad can provide the employment we so desperately require. PM Modi is compromising India’s free market and obliterating MSMEs which are the country’s main job creators while he tries to replicate the Chinese Model with no success. 

While the Prime Minister’s Start Up India, Stand Up India has failed to get itself off the ground, India risks growing at a slower rate than 8%, which we need to consistently achieve for at least thirteen more years if we are to lift 350 million people out of poverty by 2030. Jobless growth risks frustrating the aspirations of our overwhelmingly young nation and increasing political instability. Sacking the Modi Sarkar in 2019 and voting the Congress back into government is key to jumpstarting job creation. As our track record demonstrates, we have what it takes to build the financial, communication and political infrastructure required to allow India to fulfil her economic potential.

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