Why comparisons between India and China are absurd?

I am sick of all these articles that have been emanating from Indians worldwide for so many years: How Indian Tiger will tame the Chinese Dragon. In my opinion, these opinions are based far less on reality than wishful thinking on the part of Indians.

Chinese are building 108 new airports between 2004 and 2008, including the world's largest, Beijing international Airport, designed by Foster and Partners. On the other extreme, Indian airports are filthy, ill-equipped and swarming with touts. Indians are resisting tooth-and-nail any improvement to their airports, that are worse than many developed countries' train stations.

Chinese population is stabilizing, with the population growth rate as low as 0.59% (estimated, CIA WorldFactbook). Agreed, that a lot of coercion has gone behind the fulfillment of the Chinese objective of a stable population. But all this is now beginning to yield fruit. While with a stabilizing population promises that the fruits of Chinese prosperity would be more tangible to its people, India is consistently losing the fruits of its boom to ever-burgeoning population, which, even now grows at 1.38% (estimated, CIA WorldFactbook).

China has averaged growth of 10% over last 2 decade. Not only has China outpaced India in the rate of growth for each of these 20 years, it had a far bigger GDP compared to India to begin with. You do the math.

The proponents of the Tiger overtaking Dragon often point out that India is a democracy, and that would eventually turn out to be better for India, and investments would pour into India because the investors would see India as a better investment option. This has not happened in the last 15 years, and I still don't see it coming. China attracted an FDI of 40 billion in 2000, while India managed 3.1 billion. (Some Indians point out to differences in computation of FDI, that adjusted China's FDI to 20 billion, and increase Indian FDI to 8 billion. That still leaves China's FDI 2.5 times that of India). Chinese administration has its own flaws, freedom being the topmost casualty, but the world's largest democracy is also fairly feeble. Regional and ethnic strife, and religious issues are extremely disruptive to the business climate (an ample example, why Bihar, one of the most natural resources rich state attracts hardly any industry). Every new administration reverses the decisions made by the previous one, or orders enquiries - not very conducive to creating a good investment friendly environment - as Enron would readily testify. In comparison, with the exception of Tiananmen Square, China has experienced a good deal of peace and tranquility.

While China's share in the World Trade is roughly 6%, India's is less than 1%. Chinese GDP is more than twice that of India's. China's literacy rate is 91%, compared to 60% of India. And everyone knows what literacy means in India.

While China is going around, signing contracts with nations around the world, assuring itself of energy supplies for the years to come, regardless of the regimes, India, is taking the high road (of not dealing with questionable regimes), and missing the bus.

The recent growth rate of 8.1% in the second quarter of 2006 for India (S&P estimates a growth rate of 7.6% for the year) might not really be a sign of things to come, or a source of optimism, but maybe just be cyclical. This is buttressed by the fact that in 2006, the developing world (including Sub-Saharan Africa) has averaged a growth rate of 4.8% and China has averaged 11.1% for this quarter (and the World Bank estimates a growth of 10.4% in 2006). Even Pakistan has managed a growth rate higher than India.

Finally, while China has developed its economy in a planned way, creating linkages between its manufacturing, service and agriculture sectors, Indian economic development is more haphazard. Hardly a million Indians work in the IT and ITES (IT Enabled Services) sector. This constitutes less than a quarter of a percent of Indian workforce, and its contribution to economy is less than 10%. In addition, a lot of ITES is back office and call center work, that produces no intellectual capital, and is prone to moving elsewhere for precisely the same reason it moved here. Indeed, Chinese are learning English in a big way, and believe it or not, competition is going to threaten this one biggest bastion of Indian industry.

The difference between Chinese and Indian growth is that while Chinese growth has been FDI-dependent, Indian has been more organic, and intrinsic. That has led to many more entrepreneurial ventures in India, compared to China. Many more Indian companies are listed in the Fortune 500 list, compared to those from mainland China.

The huge monetary inflows have caused the banks to give out non recoverable loans, and the NPAs of banks in China may be as large as 50%. At some time these would have to be written off. At that time the investment in more productive area would take a hit. While India also has large NPAs, at 15%, they are significantly lower than China's.

Chinese growth has been because of the government, and Indian has been inspite of it. Till the Indian government changes for the better, or the Chinese government changes for the worse, don't expect miracles to happen. And till that happens, all the pipe dreams of India overtaking China are well...just pipe dreams.