India Intelligence Report
India’s Stable Democracy Will Quell Chaotic Surface

Professor of International Business at Tuck School of Business at Dartmouth College Vijay Govindarajan said that India represents a chaotic surface and stable democracy while China has a stable surface but a chaotic foundation. In an interview with The Hindu, Govindarajan, who is also Founder Director of William F. Achtmeyer Center for Global Leadership, highlighted several pluses in India over China. 

Firstly, he pointed out that the statistics from China is unreliable. For example, the population figure quoted by the Chinese Government is 200 million less because people hide childbirth information because of its draconian one-child policy. Under this policy, China forcibly takes away the second child and places it in orphanages where they usually literally rot to death. Parents, who want a son but get a girl as the first child, often bribe local authorities to hide subsequent births so they do not lose their child. Hence, the sex ration in China is 1170 men for 1000 women much worse than the Indian context.


Secondly, since the development process of China is limited to the cities, agricultural population is moving to the cities in large numbers creating a “hollowed out” effect on its agricultural sector. However, India has many innovative schemes such as e-choupal and contract farming concepts that create employment, wealth, and opportunities for rural population.

Thirdly, Indian culture of individualism, open dialogues, freedom to think, freedom of speech have strongly imbibed a cultural of natural entrepreneurship resulting in increased problem solving ability and innovation. On the other hand, China’s restrictive policies stifle thinking, creativity, and individualism therefore denying them freedom to create enterprises and seek opportunities to innovate and grow.

Fourthly, 50% of India’s population is under the age of 20 who live in an environment of economic liberalization, openness, freedom of ideas, innovation, and competition and hence will behave more positively and seek freedom and growth. However, in China, average age of population is 34 (India’s average is 25) and there will be fewer people who will fund the maintenance of elderly and therefore the inefficient Central mechanism of Chinese Government will have to absorb more fiscal responsibility.

Fifthly, while Chinese labor productivity is reasonably high, its capital productivity in terms of Shanghai Sock Exchange (SSE) performance is poor. A bulk of listed companies in SSE is Chinese owned and their values have fallen by over 50% in 5 years while the nation’s economy grew by 50% in the same period. This only shows that the wealth creation process has been through multi-national companies and foreign investors rather than native companies.

Sixthly, China has a lob-sided growth pattern where its Eastern region is well developed while its hinterland remains backward. This will create a tendency for the economically prosperous to seek more political, economic, and social leverage leading to opportunities for social unrest. Govindarajan says that another Tiananmen Square like incident in a larger context is “waiting to happen.”  Traditionally, political and social change in China has always started from the rural peasantry and the lob-sided growth is begging for such an implosion.