‘India Grows, China Slows’ — even as we lag way behind

In 1990, meaning 33 years ago, India's per capita income was US$367. China's was $317.

That was the last time we were ahead of them.

Notice that China was slightly behind India around the time when both nations went into the phase we call ‘liberalisation’. But liberalisation has not helped us replicate what they have done.

China grew at 11.7 per cent in the 1990s (versus our own 5.6 per cent); then 16.5 per cent in the 2000s (against our 6.5 per cent) and then 8.8 per cent in the 2010s (versus our 5.1 per cent).

The reason China interests us is not just because China has as large a population as ours and is our largest Asian rival nation. A key reason for the comparisons is that it was exactly as poor as us at one point of time — or more so.

World Bank data shows that India’s per capita income in 1960 was US$82, while China’s was $89. In 1970, we were almost even, with India at $112 and China at $113. In 1980, India was at $266, and China was indeed considerably behind at $194. In 2000, however, we were at $1,357 and China at $4,450. In 2022, India was at $2,388 and the Chinese at $12,720.

To grow at 15 per cent per year is an astonishing feat, one which we have never ever achieved — but there are three nations (including China) that consistently delivered this growth to their citizens, in a sustained fashion over several years, to ensure their escape from poverty.

Japan grew by 13.7 per cent through the 1960s, to reach our current level ($2,056) back in 1970. In the decade leading up to 1980, it went on to grow its economy by 16 per cent a year, to reach a $9,463 per capita income. In the four decades after that, it averaged a growth rate of 3.5 per cent to stand at over $39,000 now.

The other success story, South Korea, grew at an average of 5.8 per cent in the decade between 1960 and 1970. From 1970 to 1980, it then grew at 20 per cent a year! In the decade after that, it grew at 14.4 per cent. In the decade after that (1990-2000), it grew at an average of 6.3 per cent. Between 2000 and 2010, it grew at an average of 6.5 per cent. And in the decade leading up to 2020, it grew at 3 per cent, having arrived at ‘developed’ status. In 1970, Korea’s per capita GDP in US dollars was twice as much as India’s. Today, it is 15 times more.

At the point in their history when all three nations had an average per capita GDP similar to what we have today, they were growing in the double digits every year. We never have. That is why we do not really belong on that list of Asian tigers with the other three.

So, where do we belong?

The World Bank defines lower middle-income nations as those where the per capita GDP is between $1,036 and $4,045 (at $2,200, we are lower middle-income and have been here since 2008, around the time we crossed the $1,000 mark). Upper middle-income economies are those with a per capita national income of between $4,000 and $12,300. China went over that, to reach $12,556 in 2021. Above $12,300 per capita, a nation is classified as high-income.

Our historical average for GDP growth in the last six decades has been 5.02 per cent. After 2014, our growth has been an average of 5.05 per cent. This is merely to say there is little difference, once again, between an India that is run under an economic ideology defined as ‘Nehruvian socialism’, under the Indira ‘Licence Raj’ or, as it has been over the last 30 years, under liberalisation. We bumble along regardless.

Meanwhile, on our other side, though today they are marginally ahead of India in per capita GDP, the Bangladeshis came out of the womb in much worse shape economically. In the decade between 1971 and 1980, Bangladesh’s GDP grew by an average of just 1.04 per cent a year.

In three of those 10 years, it registered negative growth, contracting by 14 per cent in 1972! This led the world to write it off as an ‘unviable state’. American diplomat Alexis Johnson described it as an "international basket case”, a term with which US secretary of state Henry Kissinger (who died a few days ago) agreed.

And yet here it stands today, alongside ‘next superpower’ India — and in fact slightly ahead ($2,688). In the last decade, Bangladesh has grown at an average rate of 6.4 per cent.

Our other sibling Pakistan outperformed India in the 1960s, growing its economy by an average of 7.25 per cent per year in the decade spanning 1961 and 1970. In two of those years, 1965 and 1970, it grew by more than 10 per cent. The American political scientist Samuel Huntington (who coined the phrase ‘clash of civilisations’) likened Pakistan’s president in that period — field marshall Ayub Khan — to the Greek lawgivers Solon and Lycurgus.

And yet here is Pakistan today, behind Bangladesh in per capita GDP and not too far ahead of sub-Saharan Africa, the poorest region of the world. Pakistan’s GDP grew by an average 3.7 per cent in the decade between 2011 and 2020, ahead of the global average of 2.38 per cent, though.

The world’s GDP per capita per year is an average of $12,262. China is slightly ahead of the world average and Bangladesh; India and Pakistan are at about one-fifth the mark. We were five times less than the global average in 1960 also, when the globe was at $459 and India at $82.

Note that this is per person income, and of the world’s 7.7 billion people, South Asia contributes a full 23 per cent. Meaning, we are a drag on the world’s economy and productivity, and have been for 60 years, at more or less the same rate. We can either accept that by looking at our actual performance and the hard data over 60 years — or we can delude ourselves with our rhetoric.

But where do we go from here? That is the subject of the book that I am working on currently, and we will look at that next week.

Views are personal. Find the author’s last column here.