Zoo Station

The latest columnist to join the India Vs China debate is Nicholas Kristof of the New York Times. The column itself is mind-numbingly boring, except possibly to readers who are only just waking up to the India/China story. Nonetheless, Kristof is one of 2-3 of the most influential columnists at the Times and that is reason enough to at least bookmark this story. After all, the book by that other influential columnist has proved pretty darned beneficial in promoting the India story, no matter what else you think of Friedmanomics. So, keeping that in mind, here's Kristof.

President Bush's trip to India next month is important, for we in America must brace ourselves to see not only China looming in our rear-view mirror, but eventually India as well. India was the world's great disappointment of the 20th century, but now it's moving jerkily forward with economic reforms, reminding me of China around 1990.
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India has a solid financial system, while China's banking system is a catastrophe. And India is in better shape demographically for long-term growth: China has already reaped most of the economic benefits of population control and is now rapidly aging, but India's population will be disproportionately working-age for many decades to come (a factor that strongly correlates with economic growth). India's democracy, free press and civil society also provide a measure of political stability.
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Yet if democracy is one of India's strengths, it's also a weakness. Prime Minister Manmohan Singh knows exactly what to do, and I've rarely met a leader more competent (or less charismatic). But his reforms are stalled or slowed in the Indian political labyrinth. India's basic problem is that its economic policy-making isn't nearly as shrewd, pro-growth or farsighted as China's. That's a tragedy: we should all want India to demonstrate that democracy is an advantage. But Indian lawmakers aren't helping. Foreigners are still blocked from directly investing in some sectors in India, like retailing. Privatization is lethargic. Food subsidies are soaring and are so inefficient that it costs 6.6 rupees to transfer 1 rupee's worth of food to the poor. Restrictive labor laws mean that companies hesitate to hire, and regulations tend to suffocate entrepreneurship.

The Verdict?

Over all, my bet is that China will still grow faster and win the race of the century. I'm going to tell my kids to keep studying Chinese, rather than switch to Hindi.