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Why the world may prefer India to China

Last updated on: September 22, 2011 14:29 IST

Why the world may prefer India to China

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Bala V Balachandran

The jury is out on when the global economy will fully recover from the deepest recession since the Great Depression.

However, prosperity in the long run will be strongly determined by the nature of human capital more than anything else.

The world's three most populous countries, China, India and the United States, together constitute more than 40 per cent of the world's population.

Thus, the economic stability and growth of these individual nations and the "co-opetition", or co-operative competition, among them should have a considerable impact on the global economic prosperity.

While India and China could be the source of a significant amount of emerging opportunities and future growth, the US would provide technological expertise and management maturity.

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Image: Prosperity will be determined by the nature of human capital.
Photographs: Reuters
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Why the world may prefer India to China

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So it will be critical for these three countries, as well as for the rest of the world, how US collaborates with India and China.

That China and India, two of the fastest-growing economies with huge populations and rising incomes, offer significant opportunities for business growth is well known.

China is, undeniably, the manufacturing hub of the world. It scores highly in terms of faster project approvals, speed of execution and infrastructure growth.

While these are critical execution-level factors that cannot be ignored, major multinationals are starting to take a long-term view and are considering factors such as shared values, protection of intellectual property, entrepreneurial ecosystem and competitive practices for their long-term business growth while making decisions on where to play.

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Image: Multinationals are taking other factors into account while taking decisions.
Photographs: Reuters
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Why the world may prefer India to China

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From this perspective, multinationals will soon start to see India as a natural fit compared to China.

Here's why.

India is the largest democracy, and like the US, it has strong pillars of governance.

In addition, its Constitution offers its citizens and organisations a non-vindictive or unbiased atmosphere to protest and influence lawmaking in the country.

The Lok Pal Bill is an example of people coming together to protest against corruption in governance.

Similarly, despite being a multinational, recently Vodafone was able to challenge the income tax claim on its acquisition of Hutch in the courts of India, in stark contrast to the recent Google fiasco in China.

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Image: Multinationals will soon start to see India as a natural fit compared to China.
Photographs: Reuters
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After having agreed to state-imposed censorship on content to get permission to operate, Google announced in early 2010 that it had faced cyber-attacks from China, especially, on Gmail accounts of China-based human rights activists.

Such incidents and the attempt to limit free speech on the Web have led Google to take the bold step of revisiting the feasibility of operating in China, with the possibility of shutting shop in China.

Although the execution of Chinese government officials convicted for corruption might seem to be a panacea, it has not eliminated corruption.

However government officials charged with corruption in India, like those in the 2G or the Commonwealth Games scams, are offered an equal opportunity to present their case, thus ensuring the rule of law.

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Image: Unlike China, there is rule of law in India.
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Why the world may prefer India to China

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Technology is a competitive advantage for most multinational companies, and its protection is critical to its future growth and sustainability.

Although the rate of patenting has been slow in India, it hasn't led to unhindered copying of intellectual property.

The recent incident of several fake Apple stores in China, widely dubbed the pinnacle of "fakedom", is only a drop in the ocean of counterfeits in China.

The future is ominous for multinationals whose Chinese partners have reportedly copied intellectual property and gone on to become competitors in newer markets.

Recently, GE CEO Jeff Immelt reportedly accused China of being increasingly hostile towards foreign multinationals.

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Image: Rate of patenting has been slow, but it hasn't led to unhindered copying.
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Why the world may prefer India to China

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Immelt was apparently giving vent to the growing anger among international businesses who believed that China was engaged in a systematic effort to siphon off their technology, turn that technology around, and then use it against them in China and overseas.

China's attempt to stop the export of raw minerals by using a ruling by the General Agreement on Tariffs and Trade applicable only to foodgrain that was struck down by the World Trade Organisation is another example of the means used to cripple fair competitive practices to attain competitive advantage.

An entrepreneur is one who builds a better "mousetrap".

Yet, an ecosystem that supports entrepreneurs in their ventures is the precursor to success.

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Image: Ecosystem that supports entrepreneurs is the precursor to success.
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Why the world may prefer India to China

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In India, this ecosystem includes several industry associations like the Confederation of Indian Industry, National Association of Software and Services Companies, Indus Entrepreneurs; vibrant academic incubation both in technology institutes and business institutes; and new age start-up platforms.

Many Fortune 500 multinationals and other marquee global corporations are the result of such entrepreneurial initiatives.

This is in contrast to companies in China, where most of the large companies are either state-owned enterprises or state-supported ones which receive huge lines of credit from the government.

So, from the perspective of entrepreneurial ecosystem and the spirit of entrepreneurship, strong synergies exist between the US and India, significantly higher than with China.

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Image: Most large companies in China are state owned.
Photographs: Reuters
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Thus, shared values, IP protection and competitive practices encourage a US-India partnership.

From a "politics of economics" perspective, both India and the US should continue to look at avenues for collaborating with China in specific areas.

However, given the core values on which these countries are built, it makes perfect sense for India and the US to develop a deep-rooted, multi-dimensional and long-term partnership to achieve their economic growth targets and for the greater good of the world.

The author is J L Kellogg Distinguished Professor of Accounting and Information Management (Emeritus in Service), Illinois.

He is Founder and Dean, Great Lakes Institute of Management, Chennai.

He wishes to acknowledge the efforts of Sathish Anand Seshadri and Ritesh Krishnamurthy, alumni of Great Lakes Institute of Management, in assisting with compiling this article


Image: It makes sense for India-US to have a deep-rooted relationship.
Photographs: Reuters
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