At about the same time that a regime change was being orchestrated in Lucknow last week, the Chinese prime minister, Wen Jiabao, was announcing that a huge $ 85 billion has been spent over the past three years in China’s much-talked-about western region development programme. This is a massive investment campaign to deal with growing regional disparities in that country. China’s populous regions are rich and dynamic. India’s populous regions are poor and laggard, rich in identity politics but suffering from appalling governance. Although they are still poor and face formidable challenges, Rajasthan and Madhya Pradesh are definitely no longer prisoners of the BIMARU syndrome first identified by the noted demographer, Ashish Bose, almost two decades ago to describe the state of affairs in the Gang of Four — Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. But Bihar and Uttar Pradesh — home presently to a quarter of India’s population and between a third and two-fifths of its poor — have become “failed states”. Regime changes are simply meaningless. What makes matters more serious is that for the next half a century, at least, the sheer demographic momentum will increase the share of the Hindi-belt states in India’s population from some 40 per cent now to perhaps about 60 per cent.
China’s western development programme was launched with great fanfare in 2000. It covers 11 administrative units: the five autonomous regions of Inner Mongolia, Tibet, Guangxi, Xinjiang and Ningxia, the five provinces of Gansu, Guizhou, Shanxi, Sichuan and Yunnan and the Chongqing municipality. These, all together, account for something like 70 per cent of the land area of the country, but for less than a third of the population. These provinces are resource-rich and, like the autonomous regions, are home to China’s numerous ethnic minorities. The focus in the programme is infrastructure and some of the more visible of the projects include the Qinghai-Lhasa railway and the west-east natural gas pipeline to exploit Xinjiang’s rich hydrocarbon reserves.
According to an International Monetary Fund study, Centripetal Forces in China’s Economic Take-off, by Anuradha Dayal-Gulati and Aasim Husain, published in May 2000, “after declining in the late 1970s and 1980s, the dispersion of provincial per capita incomes has increased steadily”. They estimate that in 1978, real per capita income in the richest province was around nine times that of the poorest; by 1997, the multiple had risen to over 11. When economic reforms were first launched by Deng Xiaoping, barring perhaps Shanghai, the more advanced provinces of China were in its northeast, the region much like our own eastern region that received significant doses of public-sector investment in coal and steel-based industries in the Fifties and the Sixties. But in two decades time, China’s coastal provinces of Shandong, Guangdong, Fujian, Jiangsu, Zhejiang and Hainan, along with the city-province of Shanghai, surged ahead on the backs of foreign investment (largely from nearby Hong Kong and Taiwan), exports and the growth of township and village enterprises that ensured diffusion of prosperity within the regions. In India, when we talk about China, we automatically think of foreign investment and foreign trade. But the role of the township and village enterprises has been equally crucial, and they contrast with our own failed subsidy-based, protection-driven, scale-hampered, investment-starved rural industrialization efforts carried out in a romantic Gandhian framework.
Regional disparities in India take on a different meaning. In China, even in the poor regions, real per capita incomes have increased by 5 to 7 per cent compound per year over the past 20 years as compared to between 1 to 2 per cent in states like Assam, Bihar, Orissa and UP. While regional disparities persisted during 1950-90 in the heyday of the planning era and in some cases, paradoxically, even increased, the dispersion of real per capita incomes went up in the Nineties. The decade of the Nineties brought them into sharper focus and in some cases accentuated them. But the normal perception that poor states became poorer and rich states became richer is not entirely true. This conclusion has to be nuanced somewhat. Punjab’s compound annual growth rate decelerated from 5.7 per cent in the Eighties to 4.9 per cent in the Nineties. Haryana took an even steeper fall from 6.1 per cent to 4.7 per cent. Among the poorer states, Madhya Pradesh improved its performance from 4.2 per cent to 5.4 per cent. In India, the real per capita income of the richest state is about six times that of the poorest state. That is because there is really no state in India that can match China’s growth performance.
Even after accounting for exaggeration, real per capita incomes in the coastal provinces of China have increased by anywhere between 7-8 per cent per year for 20 years, which means a quadrupling. In India, by contrast, real per capita income in Gujarat and Maharashtra, our two most dynamic states, have increased by 4-5 per cent per year. Goa is perhaps the only state to have Chinese-type growth numbers in the Nineties, but it hardly conveys the image of a booming region. Relative rankings have been more stable in India than in China, although West Bengal’s rank has come down sharply, much like China’s northeast, and Tamil Nadu, Andhra Pradesh and Karnataka have all improved their positions, Tamil Nadu most dramatically from number 11 three decades back to number five now. But even here, you don’t get a feel of a boom — perhaps because urban renewal does not take place as spectacularly in this country as in China. The national bird of any booming economy, it is said, is a crane. But construction technology in this country is such that cranes are hardly visible in our cities!
China’s western development programme is of more than academic interest to India. Historically, this region of China was traversed by the famous Silk Route that led to enormous cultural, economic and technological cross-fertilization between the Indic and Sinic civilizations in which, it is largely forgotten that Kashmir has played a crucial role. But more than history, the improvement of connectivity to provinces like Tibet, Yunnan and Sichuan will boost Sino-Indian trade. The Chinese have also been pushing the so-called “Kunming Initiative” named after the Yunnanese capital. This envisages investment and trade cooperation between Yunnan, Bangladesh, Myanmar and India’s Northeast. This initiative has meandered along for two to three years not the least because of lukewarm support from the Indian establishment, suspicious of Chinese motives. What is unusual about this move is the keen interest being evinced by the province of Yunnan.
What will happen if sub-regional cooperation is fostered' India’s Northeast cannot develop except in a regional context. Even Bihar and UP need closer cooperation with Nepal on water management. Three years ago, India too came up with its grand Ganga-Mekong project to promote a broad range of cooperation in that region involving India, Myanmar, Thailand, Laos, Cambodia and Vietnam. How this will work leaving out China, through which the Mekong runs, and Bangladesh, where the Ganga ends, is a separate issue. But lofty announcements have to be backed by money allocations and expenditures on specific projects particularly in infrastructure like roads and highways. This has yet to materialize.
The Chinese central government has taken on a direct role in developing its backward regions. We had such an approach in the Fifties ,but lost it along the way. It is time to rediscover that Nehruvian vision. Transferring more money to poorer states through the finance commission is no solution, nor is panchayati raj.