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China and India: The difference in infrastructure planning and execution

China and India: The difference in infrastructure planning and execution

Akilesh K.Prasad

There have been inevitable comparisons between the growth stories of China and India; two of the fastest growing large economies in the world, over the last two decades or so. There are, however, aesthetic differences in the growth models of both these economies.

The most outstanding of these contrasts is the speed at which China undertakes the development of public infrastructures, such as roads, highways and warehouses. The speed of progress on this parameter is largely attributed to the singular approach of the Chinese government. Quick infrastructure development has helped bridge the urban-rural divide and has directly impacted businesses and improved people’s lifestyles in all cities, towns and villages alike.

In India, the progress with respect to public infrastructure has been slower. Considering that the India rural economy contributes 50% of the consumption and makes up 70% of the workforce, there is an urgent need to bridge the 6% gap in urban-rural economic growth.

Apart from the pace of execution, the Chinese vision for infrastructural growth is nothing short of fanciful in its ingenuity, in terms of its sheer scale and impact. For example, OBOR (One Belt One Road), conceived in 2013 as a modern day equivalent to the Silk Road with a $40 billion Silk Road Fund to finance the initiative. The road will connect China to Europe (via Central Asia), the Persian Gulf, the Mediterranean and the Indian Ocean.

Chinese development compliments its policy. A good example to elucidate this would be the Hangzhou Cross Border E-commerce Zone; a platform to boost the growing local manufacturing and cross-border e-com businesses. The project boasts of having over 5,000 cross-border e-commerce companies, 10 cross-border e-commerce industrial parks, and more than 20 cross-border e-commerce incubation platforms. The platform adopts innovative measures for customs clearances, tax refunds, finance, and logistics, to meet the need of global e-commerce developments.

On the contrary, the Indian growth story is marred by several bottlenecks, starting with the acquisition of land for development purposes. While in China most of the land is owned by the government, the Indian government must acquire land from several private owners which in itself is an onerous task. Moreover, in India project clearances are often delayed due to red-tapism and stringencies. These factors often lead to delays and in turn, escalation in costs over initial estimates.

Due to its single and unopposed government, China enjoys the advantage of responding quicker to global business opportunities as and when presented. However, experts opine that the Indian political system is more suited to long-term equity investments, while China is attractive to mid-term investors.

In the long run, there is every possibility that India will outstrip China in terms of growth due to some fundamental reasons. India relies more on IT which requires less land and infrastructure than manufacturing, which is China’s forte. There is a default ceiling on land in the case of China as most of it is owned by the government. Moreover, China addressed the recent global economic downturn with stimulus packages, while India tackled it with far more circumspect fiscal policies which appear to be a more sustainable stance.

Akilesh K.PrasadAn MBA by qualification, Akhilesh has dabbled into various businesses. He is a keen debater, data miner and analytically inclined. His blogs tend to present a fresh perspective on any given matter.

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