Power is a beast with an insatiable appetite. The economy is its pabulum. As the Made in China virus rampages through the world, upending high tables and roasting economies from the west to the east, two mighty Asian nations seem destined to pick up the spoils. China and India, both traditional enemies and economic powerhouses, are currently corona stricken—one more, the other less. COVID-19 has paralysed the money machines of Europe, Britain and America, though Asia seems to be riding the curve. The final economic outcome of the battle could be decided by the two powers left standing: the Indian elephant and the Chinese dragon.
China’s $13 trillion wallet could shrink more than the American economy, which is expected to shrink by almost one third of its $ 21 trillion GDP. Germany and Japan are sneezing badly. India, the fifth largest nation in terms of GDP with around $2.8 trillion, is better placed not only to absorb the COVID-19 shock but become an attractive and profitable ecosystem for commerce. The Wuhan virus and its fatal fallout have raised apprehension among opportunistic multinationals who were taking full advantage of China’s prison labour and sweatshops. They are now looking for safe investment destinations. The authoritarian Communist dragon, flamboyantly fierce, projecting military might (though PLA hasn’t fought an all-out battle since its inception) and practicing rogue diplomacy has exported its image of a corporate treasure trove.
The majestically slow moving Indian elephant is the product of centuries of karmic deliberation, percolates every aspect of life even today. Sensing the Chinese crisis, PM Narendra Modi as the mahout of Indian power has decided that slow and steady wins the race. China, after North Korea, is known as the most inward looking nation. Modi urged pampered Indian capitalists to look outward for inviting MNCs leaving China to bring their wealth to the elephant’s stable. The Chinese economy has started to bleed. First mover Japan announced a $2 billion incentive package for its companies to move out of China. So did the US and the European companies. The virus is just a catalyst: the exodus is triggered by the fear that China would use its foreign exchange reserves to take over mega corporations devastated by the stock market.
By controlling almost 50 percent of the supply chain of global manufacturing, Beijing can bring global economy to its knees. With the second largest economy, it has a massive domestic market which every global corp would like to capture. Corona changed this monetary mythology. The elephant is better placed with a bigger market and better legal transparency. It is fluent in the global language of commerce. The chimera of China’s military invincibility was destroyed in 1979 by Vietnam, which routed the 200,000 strong PLA. China won the 1962 war because of the gaps in India’s defence. As the elephant got bigger and surer, the dragon encouraged its entrepreneurs to become global capitalists, but remained comrades at home. It used financial clout to infiltrate Western systems from media to diplomacy. While America influenced international economic policy through business schools, China used its trade dollars. Even in India, the Chinese control digital payment portals. They have invested enormously in Indian infrastructure. They even helped build the Statute of Unity.
With such massive penetration, India may find it difficult to offer an attractive entry to businesses leaving China. According to media reports, less than half a dozen foreign companies have moved to India. The Indian government’s struggle to contain COVID-19 seems to have hampered its efforts to woo foreign investment. However, Yogi Adityanath took the lead by inviting over 100 MNCs to invest in Uttar Pradesh; he offered almost instant entry with single window clearances for new projects. India’s challenge is to replace China’s economic charisma. Modi alone can’t be the investment magnet. His instruments and allies in governance are failing him. Despite a cleaner government, India is still the most difficult place to start a new business, taking over three weeks to complete all procedures as against OECD average of 12 days. A business entity has to pay over 30 taxes and other charges even after GST. Settling legal disputes takes at least five years.
Above all, the bureaucracy, instead of shedding its control, has further expanded its vice-like grip over decision making, staying out of sync with Modi’s new and innovating style of thinking. Global investors were ecstatic when he promised Minimum Government and Maximum Governance. Slowed down by pressing issues and elections, he is unable to control bureaucratic bloating. As someone used to leading from the front, he has converted his office into the engine that runs the nation. Never before has a PMO had cabinet rank officers who deal with Union Ministers as equals. Most ministries and their officers have used the PMO as an excuse to hold up files. Even as India effectively tries to contain Corona, the number of notifications and subsequent clarifications indicate the hidden hand of insensitive bureaucracy. Instead of minimum government, the number of babus, offices, personal staff and perks has grown exponentially.
More and more retired civil servants, defence officials and politicians are getting irrelevant plum posts. There are more Commissions, Tribunals, Expert Groups and Advisory Councils today, than a decade ago. According to official figures, India spends over `1.70 lakh crore in salaries for its 33 lakh employees. It has a top-heavy establishment with a multitude of mantris, mandarins and chairpersons heading statutory and informal outfits. Over `1,000 crore was spent to build swanky houses for senior civil servants. New offices have come up to accommodate them. According to an unofficial estimate, Central government offices and employees occupy space larger than the states of Nagaland or Mizoram.
The bureaucracy has framed rules only to promote red tape and create roadblocks. Some Union ministers hold charge of multiple departments. Each Cabinet minister is entitled to have 12 personal staff. Three ministries together have 36 officials from peons to private secretaries to keep files moving between the minister’s own desks. In spite of the political and economic reformative changes, babudom’s clout has only grown.
China, on the other hand, is ruthless in imposing the leader’s will over bureaucrats, even using extreme measures to end corporate corruption. Even celebrities and billionaires aren’t spared of the State’s wrath when the mandate of conformity is compromised. The virus has weakened the formidable dragon, official secrecy notwithstanding. The time has come now for the elephant’s trumpet to resonate around the world. It’s both the sound of welcoming and the sound of battle to mark the rise of a new global economy.
The author can be contacted at prabhuchawla@newindianexpress.com. Follow him on Twitter @PrabhuChawla