India, China should join hands to grow together

JUSTIN YIFU LIN is a professor of economics at Peking University and former chief economist at the World Bank. During his recent visit to New Delhi to attend the Kautilya Economic Conclave, Lin spoke to Asit Ranjan Mishra about the power play between the two Asian giants - India and China - and Beijing's anti-competitive practices. Edited excerpts:

What are the lessons India can learn from China's economic transformation?

We can learn many lessons from each other. We can also learn from India. China has been growing so fast. China has been able to eliminate poverty. That is the common aspiration between China and India. China did not grow dynamically before the transition to a market economy in 1978. At that time, India's per capita GDP was about 30 percent higher than China's. And now the per capita GDP in China is about five times that of India. So, that means China has grown much faster. The reason China was able to do that was because Beijing changed from an inward-looking country to an outward-looking country. To transit from a planned economy to a market economy, China adopted a very pragmatic approach. China continued to provide some necessary support to old sectors, but the Chinese government liberalized entry to new sectors, and the new sectors were aligned with China's competitive advantages. At that time, we were poor, wages were low, and that's how we developed very intensive manufacturing, by attracting foreign direct investment (FDI), by encouraging domestic investment. The government actively promoted investment, built up infrastructure like industrial parks, and special economic zones (SEZs) to facilitate lots of sectors. That was the reason why China was able to grow so fast by relying on our competitive advantages in a very pragmatic manner.

So, what are the comparative advantages that India can exploit?