What India Can Learn From China: Dedication to the State's Mission

Indian policymakers must study how the People's Republic deployed capitalism as a tool to advance its core socialist agenda

- Arun Maira

India is at a crossroads. Both the political Left and Right agree that the economy needs substantial reform, but disagree on the direction. The progressive Left wants more socialism with more liberal democracy; the conservative Right wants more free-market capitalism and seems willing to tolerate curbs on liberty. The Middle seems muddled.

The 20th century was a test of competing economic ideologies—socialism versus capitalism; and competing forms of governance—liberal democracy versus authoritarianism. When the Soviet Union collapsed in 1991, victory was declared for the Washington Consensus of free market capitalism and liberal democracy. India's reformers adopted the Washington formula in 1991. By and large, they gave up on socialism, abandoned industrial policies aimed at growing domestic industries and opened the Indian market for foreign companies without technology-transfer requirements. China did not yield. It stayed its socialist course with single-party governance and continued to build domestic industries.

The growth of China's economy is a miracle, economists say. In the 1980s, China and India's economies were comparable in size and per capita income. Now, China's per capita income and GDP are about five times India's. China's high-tech manufacturing sector has grown 48 times larger.

The US, meanwhile, has grown alarmed with China's remarkable economic growth and industrial strength despite Beijing not following Washington's economic formula. That consensus has ended even in Washington, where ideological cracks have appeared with increasing inequality and unrest among workers in the US.