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Dousing the Dragon’s fire
When I visited China’s showpiece city Shanghai
at the beginning of this year, like every other first-time visitor
I too was awestruck by the imposing skyscrapers, impressive infrastructure
and furious construction activity everywhere. Walking down the legendary
Bund along the Huangpu River after dark, beside the brilliantly
illuminated Gothic and Baroque colonial structures juxtaposed with
the lofty steel-and-glass wonders of modern architecture, one cannot
but marvel at one of the prettiest manmade sights in the world.
Not a single Indian city will come anywhere close to such levels
of development during my lifetime, was my rueful thought.
That was Shanghai’s Pudong district. A concrete
testimony to the phenomenal financial muscle that China proudly projects to
the world. In Shanghai for a couple of days, I gingerly ventured beyond Pudong
into the guts of the old city. I could well have been back in the gloomy alleys
of central Mumbai’s squalid underbelly. One difference though: back in
Mumbai if English were the only language I knew, I would have had absolutely
no problem getting around and communicating with the man-on-the-street when
needed. And in Shanghai? No way, Jose! One hears of the Chinese taking to English
with a frenzy—all those frenzied, anglicised souls somehow eluded me. All
in all, one gets the impression of a hastily filigreed façade concealing
dreary dankness beneath.
But, like poet John Campbell Shairp, you ask for reality,
not fiction and filigree. And the reality is in the economic indices. Regretfully
(for us in India), fluency in the Queen’s English is not the only prerequisite
for economic ecstasy. On almost every other parameter you take, China is light-years
ahead of India. Let’s take a look at just a few such, to put things in
perspective.
Spanning a total area of about 9.6 million square kilometres
(slightly smaller than the US), China plays host to 1.3 billion people who account
for a GDP of $1.1 trillion at a per capita income of $850. India occupies a
total area of 3.3 million square kilometres, inhabited by 1.049 billion citizens,
with a GDP of $477 billion and a per capita of $460. Foreign direct investment
into China was a whopping $44 billion in 2001 compared to a paltry inflow of
$3.4 billion reported by India for the same year. PC penetration in China is
over 20 per thousand, in contrast to an embarrassing 5.8 in India. At around
40 million, Internet users from China outnumber their Indian counterparts by
a factor of four. Overriding all this, it’s also sobering to note that
China’s GDP growth rate continues to be at least two percentage points
above India’s—which means that the gap is widening.
There are quite a few economists who point out that
the economic disparity between India and China is mainly due to India being
a laggard (by about a decade) in opening up its economy; and the fact that Chinese
diaspora have deep pockets into which they have frequently dug into for investing
in projects back home. Until only recently, Indian government policy and the
overall economic sentiment dissuaded all but the most adventurous and patriotic
non-resident Indians from similar largesse into India. Further, several analysts
go so far as to allege that Beijing has cooked its books as well as it does
its ducks.
Whatever arguments and yardsticks you use, however,
it’s rather farfetched to prophesy that the Indian tortoise will ultimately
prevail. Pragmatism dictates that ‘hare today, gone tomorrow’ is the
stuff of Bugs Bunny toons, not trillion-dollar economies.
IT services and business process outsourcing (BPO)
are a different matter altogether, though. A year ago, the doomsday doyens of
the Indian IT industry were falling over each other in their paranoid predictions
of how China would wipe out India from the software services map by capturing
and controlling the outsourced services market almost overnight. This by a country
that doesn’t have a single recognisable name in software services that
could hold a candle to the billion-dollar TCS or an Infosys and a Wipro. This
by a country that did way less than $1 billion in software exports for 2001-02
(India did over $7 billion) and that itself had targeted $1.5 billion for 2005
(Nasscom says we’ll be over $20 billion then).
Gartner Inc. predicts that China will attain parity
with India by 2007, when the IT services/BPO industries of both countries will
be at around $27 billion each. In other words, the Chinese software industry
would have to grow at a CAGR of around 100 percent between now and 2007 (India
did it in the early nineties too, but we didn’t have another India to contend
with then).
Even if China has some secret Oriental elixir to achieve
this growth, nobody’s now saying it will be at the expense of India. In
fact the sensible (including Gartner) have realised that India can make big
gains through a presence in China. Gartner predicts that Indian firms will actually
be responsible for 40 percent of China’s IT services exports. Already,
at least 14 Indian software companies have set up shop in China, keen to use
it as a base from which to step into the lucrative markets of Japan, Korea and
Taiwan, as well as to keep down billing rates for their clients in the west.
And the next level of IT partnership between China
and India could well be a hardware-software one-two that knocks out the rest
of the world!
Val Souza, Editor
valsouza@expresscomputeronline.com
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