Tuesday, November 17, 2009

India or China?

There are scores of articles in every major newspaper and every major magazine comparing India with China on various economic progress indicators. There are even books written about Tiger of India pitted against Dragon of China. To those who base their opinions on such reports, articles and books, it looks as though India is posing a strong completion to China, when in fact every measurable economic indicator suggests that China is clearly leading India on all fronts. Moreover the gap between these two countries is only widening with each passing year. And yet, many Indian commentators continue to complacently believe that India has some edge somewhere when in fact none exists. 

The tone of these reports and analysis comparing India with China suggest that India is actually inching towards China. That is not the case. In reality China is leaving India behind by a bigger margin every year. It is becoming tougher and tougher for India to catch up. In the last few years, Chinese have built the biggest dam on the planet, built the longest bridges, built the fastest cities, built their own planes, submarines, ships, magnetic trains, and even the highest railways while India continued to lay another layer of asphalt on its decrepit roads after each rainfall.
India is not even showing a promise of catching up. None of its policies suggest this. None of its initiatives give a glimmer of hope. Even the Indian industry is not thinking big. It is still content to play a small game.

Indian commentators continue to tell us that all this China-leading-India comments are based in myth, because Indians have English which Chinese don’t have. Is English really India’s edge? Only when India looks at itself as servicing the West using its BPOs then yes, English gives India the edge. However, if the competitor is bent on actually creating its own technology product industry to take on the West, does English still matter? When was the last time a Japanese car company could not sell its cars because the makers were not good at English? When was the last time someone in Europe balked at buying a Sony Walkman because its makers couldn’t speak English? When it comes to China, how come their lack of good English not stop Huawei from becoming world #2 in telecom equipment? How come it did not stop Lenovo, Haier and ZTE from becoming leading global brands? Just to give a perspective to Indian readers – 2 telecom equipment companies of China, Huawei and ZTE put together made USD 30 Billion in 2008 while the entire IT-ITES industry of India put together made USD 58 Billion in 2008-09. 

China is changing the rules of the games. It is taking on the West where the West has dominated so far, bringing the fight closer to the technology leaders, while India has conveniently told itself that it will not even play this game. 

Indians are in self-denial. They foolishly believe everything Thomas Friedman tells them, and they are happy serving their European and American masters setting up BPOs, KPOs, LPOs, software services, helping them do their things in a cheap and cost-effective way, while Chinese are poised to take on these European and American masters head on. It’s as though the Chinese have completely overthrown their colonial inferiority complex. 

For many years now, Indians gloated over the characterization that India is good at software services while China is good at manufacturing. This was a convenient characterization that only Indians believed because the books were written in English which only Indians could understand. Chinese blissfully unaware of what Friedman said were not constrained by this characterization and hence clearly violated all hierarchies.

Indians limited themselves to serving the West. When they looked in the mirror, they said, “I am an Indian. I am good at services. I should just stick to it”. That India is only good at software services became a cultural phenomenon with every major industry bigwig repeating it on various forums. Even Indian government fell into this trap where all incentives and subsidies were geared only to promote the software services companies. Go to a hardware park in India and compare it with a software park in India, you will recognize the step-motherly treatment meted out to the hardware companies. 

India made no attempts at taking on China in manufacturing. Nor did they attempt to take on the West to go up the value chain to actually deliver technology and products. The Flat World theories told them that they can just concentrate on what they were good at, that is Software Services, KPOs, BPOs and LPOs, giving up on manufacturing forever thereby handing over the race on a silver platter to China, and giving up on technology products thereby continuing to serve the West.

China not only won the race in manufacturing and consolidated its position, it is now entering the technology product space, the domain held closely by the European, American and Japanese technology leaders. What more, it has started to beat these leaders at their own game. Huawei has recently won the contract to supply 3G equipment in Norway, the bastion of Scandinavian giants, Nokia and Ericsson. While India made feeble attempts with C-DOT and ITI who are not even able to sell into BSNL, China has launched not one but two major telecom companies – Huawei and ZTE, that not only sells within their countries, they sell to BSNL also.

CK Prahlad in his closing comments at Nasscom Summit of February 2009 advised that Indian companies should foster more startups because they are the ones which bring vibrancy to the economy. His advice comes late, and even when it comes, it falls on deaf ears.

Infosys, TCS and Wipro, the giants of Indian software services which the Thomas Friedman lauds, did not do much to sponsor or promote startups in India (barring few exceptions).

Meanwhile, China has launched extensive nationwide program to promote entrepreneurship in China. I was told that even a district head, equivalent to Indian District Collector, could invest up to half a million US dollars to a company that sets up shop in his district. Writing about China, a report says:
An analysis of documenting the tremendous growth of the Chinese entrepreneurial and cultural initiatives since the demise of Communist leader Mao Zedong reveals that this accounts for the Chinese economy’s double digit growth in the last couple of decades. [1]

It is clear to some countries that startups are essential for the growth in economy. Not so, thinks India. India has never believed in startups. They don’t think they add up to anything. The government is obsessed with giants because they look at them as employment provider – therefore the bigger the employer the better it is. Not a single major initiative has been taken in the last few years to promote startups in India. While the government boasts of loans to SMEs, when startups actually approach the banks, they feign ignorance of any such initiative.

All initiatives and decision making bodies in India are headed by people who have been good at software services and therefore there is not a single policy that actually aids home grown brands, products and technologies. STPI still thinks that software is exported only as floppy, ftp or a CD. If you put that software in telecom equipment, a mobile handset, or a DVD player, then it does not recognize it as software and hence are not given the incentives. If Apple existed in India, there is no category for recognizing it. The prevailing mood is clear - you serve a foreign master you get the incentives; you try to become a master you don’t get any incentives.

Also, there are not many places a startup can raise funds in India. That’s why most startups continue to be family-owned or family-backed. First generation entrepreneurs find it impossible to raise money. The number of VC firms in India is limited. Most government funds are small and therefore their mandate does not allow them to fund big ideas, while the miniscule few bigger size funds do not fund loss-making companies – which completely rules out startups. 

China, on the other hand, is actively promoting startups through various forums and incentives. Though it is a communist country it hosts millions of entrepreneurs and VC firms which is aiding its economy.
China currently has over 200 million entrepreneurs and it houses 200 venture capital firms. The country accounts for 24.6% of the total entrepreneurship activities across the world, far ahead of Indian at 13.9% and the US at 14%, according to a survey by Global Entrepreneurship Monitor.
About 116 Chinese companies are listed on NASDAQ, as against 2568 US firms, Israel’s 63, and a handful from India, says the study. [1] 

China is even popularizing entrepreneurship as a cultural attitude with various initiatives including TV programs.
…a Chinese reality TV show “Win in China” has received applications for entrepreneurial ventures from over 1,20,000 aspirants. Of these, 108 were chosen for prize money and working capital of $5 Million. [1]

Indians don’t know what to do. They don’t know if they are socialist or capitalist. The reality is that they are clueless – they are neither capitalist nor socialist. China is both socialist and capitalist playing these two cards really well. The only floating hope for Indians has been their mastery of English. And the following observation should submerge that hope as well.
To give competition to India and other cost-effective English speaking countries like the Philippines, millions of Chinese students are learning English systematically. “China will become the largest English speaking geography in the world by the end of this year”, Compton added. [1]
[1]: China is an entrepreneurship juggernaut, Times of India, 17 November 2009.


Vijay said...

Quite a well written piece with some striking proof points supporting your arguments. However I do not buy into your argument that we have consciously/unconsciously taken a decision to serve the erstwhile colonial powers. I think any decision a country can take is constrained by the decision it took previously and the weight of these decisions bear upon the maker of the next decision. It takes a long time for the effect of these decisions to bear fruit and an equally agonizing amount of time for their effects to wear off. SO whatever decisions was taken by Nehru's socialist governments are still having their effects in vast swathes of India. Whatever decision was taken by Narasimha Rao's govt has started bearing fruit after 1-2 decades. And we being a democracy makes decision making or decision breaking a tough job. India will evolve on its own terms irrespective of the Friedman's of the world. An example I can take is in reference to your statment that none of the IT majors are promoting start-ups - What about the huge amounts of Infosys shares that Narayana Moorthy and his wife Sudha sold to create a VC funding company focussed on start-ups? I am not saying your article is wrong in its observations, but it definitely is more critical of the country than it merits....That reminds me of the Hindustan Times' "Time to stop being critical..." TV ad. Good Job anyways !!

Engr. B. Rajaram ;Inventor ACD/Skybus said...

"...on colossal idiocy called humanity." Well It is so true that we are a nation with self-destructive attitudes, only waiting for some foreigner to take over and govern us. China brazenly is able to claim Arunachal Pradesh and may be even our PM may have to issue strong denial that his PMO is not falling within the ambit of the border dispute to be settled! A cartoon to that effect made me truly sad about ourselves. We remain slaves and refuse to fly... total lack of country's interest while making national policies within policy making bodies, is causing us this pain and there is none to correct. All are lost in counting their MPs and MLAs and getting the seat of power, to make a quick buck. My country has stopped caring for their own citizens'original work. Media is equally harming our nation.
May be I should now try to sell away my Gravity Powered transportation technology to China-- it will save world more than 30% of current oil consumption and help slow down the global warming. (www.atrilab.com)

Anonymous said...

About 90 per cent of China's billionaires are the children of high-ranking officials

You decide what kind of country you want.

Vikas Banga said...

Eye Opener Sujai! Thanks for the article, You are very true about stating that we are hiding behind the fact that our English is better than China. Wow! 5 Million grant compared to 10 Lakh grant which WagonR contest is promising right now..

Bijay Rungta (@rungss) said...

Very well Written..

I agree with most of the points laid out here.

kudos to you.

@rungss on Twitter

Prem said...

Article is well written. We are also burdened with activities like tackling Koda, who swindles $4billion.

Also, we are more risk averse in our own country and this makes us either start a services company or work for one.

Gaurav said...

i completely agree with your views and the way China is building some of their tier II & tier III cities for BPO's it shouldn't take them long to over take India soon

Deepak Bhardwaj said...

Every country has a genesis and an attitude. We cannot do much about history, except to be either critical or supportive of it. But we can definitely carve out a future without being over-burdened by history. A Tianmen Square happens in China and yet the country gets an increased FDI. A Hyderabad or Kolkata happens in India and we self dtermine the collapse of the entire system and how FDI will turn its back upon these two places. We are over critical of ourselves, not that I hate self introspection.

If there is a direction, irrespective of change of course to be adopted to reach the target, as a nation we should be united to achieve success. If we flounder in between, we do that as a nation and it is upon ourselves to chart the path again.

We have everything any nation would aspire to seek - all forms of wealth. We need to exploit this wealth to generate more to be prosperous. And wealth is not money alone. And it should not definitely lead to hegemony of any kind. That is definitely a genesis we Indians do not believe in.

So, let us rise as a nation. Our aspirations and belief are a significant element of the wealth we are seeking. If, for example, we as a nation can just take a concerted decision to completely shy away from corruption, and I mean completely shy away, we can possibly lay the foundation for a strong reputation. Wealth will automatically follow such a nation.

Sachith Kumar Rai said...

Good post..
lots of idea's for an true entrepreneur.
but ya as you rightly penned down the support from the govt need to more only then india would be a place which would yield lot of products* and get supporting services from other countries.

Recruise india consutling

Arun said...

I am a regular reader of your blog. I normally find your ideas illuminating and very intelligent.

I saw a link to sramana mitra in this blog. I didnt know this person, so I was randomly checking out her site, and happened to hear this radio talk. What crap!! She seems so stupid, and of course she is a successful career author.


Anonymous said...

Hope you're feeling better after that ridiculous rant. It's all very well talking in the third-person and laying the blame at everybody's else feet, but I would ask myself this: "What have I done to change things?"

If there're not many VC's in India, there're plenty elsewhere in the world. If you really have an idea, how does geography matter? Why look to the Government when you've already established they will not help you?

Propaganda (maybe that's a strong word, but your rant has annoyed me a tad) such as this is not constructive in the least. I would quit whining, and look deep within myself before blaming an entire country.

storyspice said...

Truly awesome...well written. Today, world's fastest train too belongs to China. We are still doing feasibility studies and we are yet to discover "how to run train during winter !"

Apart from issues discussed in the blog, I would like to point one more problem which hinders India's development - Corruption.

We need to stop corruption to speed up development process

Anonymous said...

We cannot compare India and China. India is democratic, so have to get consenus on everything before they do. Materialists(Capitalists and Communists) have more centralized control. India tries(T.R.I.E.S) to check corruption where materialists do not. India has centuries of history in its spiritual and agri-culture on its back and is not able to throw that away easily.

I dream my India one day will get out of this global race and decide to live a peaceful life, untill then we have to smell the colonial sh.. on our back.

J Rajaram said...

I can not say I disagree! I even believe Indians are followers and not the masters! Your statistics are beyond doubt correct but all I want to say is...
Just Complaining will not solve the Issue! These naked database will not fetch any cover for our shameless attitude!

Shall we Begin working towards realizing the goal of bringing back the honor of India to which we have lost some 1500 years ago??