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India Will Never Be the Next China, Morgan Stanley’s Ruchir Sharma Says
By
Reshma Kapadia
April 7, 2019 7:00 a.m. ET
Forget the India/China comparisons. Apart from the large populations, these two great nations of Asia have nothing in common. Nothing. Everything you say about China, the opposite is basically true of India. Where China is more homogenous, India is as heterogeneous as they come. The risks China’s leaders have taken for economic liberalization are very different compared with what Indian leaders have done over time.
People always think of China as an authoritarian state-driven model, but the share of the Chinese government in the economy has come down dramatically over time. They took some big calculated risks with reforms, often with new leadership—not because of crisis, which is usually the catalyst for other emerging markets. During the reform of the state-owned enterprises in the 1990s, they let go of 70 million employees. That is what kept China ahead of the curve. In the past few years, China is showing some signs of reverting, but that doesn’t’ take away from the big picture. China gave its people much more economic freedom than India did. And that is ironic.
Give us an example of India’s failure in this regard.
Look at demonetization [Modi’s government voided 85% of the currency overnight in November 2016]. India wanted to move to a cashless society, but China has moved to a cashless society much quicker with the private sector. In Beijing or Shanghai today in the middle classes, cash is nonexistent. It happened organically through the tech revolution and the development of some great payment solutions, and not through some massive state intervention or something as draconian as demonetization. India’s not going to become the next China.
https://www.barrons.com/articles/india-china-morgan-stanley-ruchir-sharma-51554492012
By
Reshma Kapadia
April 7, 2019 7:00 a.m. ET
Forget the India/China comparisons. Apart from the large populations, these two great nations of Asia have nothing in common. Nothing. Everything you say about China, the opposite is basically true of India. Where China is more homogenous, India is as heterogeneous as they come. The risks China’s leaders have taken for economic liberalization are very different compared with what Indian leaders have done over time.
People always think of China as an authoritarian state-driven model, but the share of the Chinese government in the economy has come down dramatically over time. They took some big calculated risks with reforms, often with new leadership—not because of crisis, which is usually the catalyst for other emerging markets. During the reform of the state-owned enterprises in the 1990s, they let go of 70 million employees. That is what kept China ahead of the curve. In the past few years, China is showing some signs of reverting, but that doesn’t’ take away from the big picture. China gave its people much more economic freedom than India did. And that is ironic.
Give us an example of India’s failure in this regard.
Look at demonetization [Modi’s government voided 85% of the currency overnight in November 2016]. India wanted to move to a cashless society, but China has moved to a cashless society much quicker with the private sector. In Beijing or Shanghai today in the middle classes, cash is nonexistent. It happened organically through the tech revolution and the development of some great payment solutions, and not through some massive state intervention or something as draconian as demonetization. India’s not going to become the next China.
https://www.barrons.com/articles/india-china-morgan-stanley-ruchir-sharma-51554492012
