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C00002 00002	What is your opinion of the following, especially w/r India-China
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What is your opinion of the following, especially w/r India-China
comparison?
n041  1112  07 Jun 85
BC-ECON-COLUMN ADV09 (UNDATED 2takes
(FOR RELEASE: SUN., JUNE 9)
(BizDay)
Jagdish N. Bhagwati, professor of economics at Columbia University, is
author, with Padma Desai, of ''India: Planning for
Industrialization.''
By JAGDISH N. BHAGWATI
c.1985 N.Y. Times News Service
    India has come alive, imprinting itself on the American mind through
the celluloid images of ''Jewel in the Crown'' and ''A Passage to
India.'' The exotic has been reinforced by the outsized disaster that
overwhelmed the impoverished in Bhopal, as well as by the
assassination of Indira Gandhi and the violence that followed it.
    But, on the eve of Prime Minister Rajiv Gandhi's visit here, few
Americans are aware that India is no longer the ''dust and ashes'' of
popular imagination. The Indian economy has progressed without the
dramatic zigzags (such as the Cultural Revolution) that have plagued
China's economy. Far more than China today, India is an economic
miracle waiting to happen. And if the miracle is accomplished, the
central figure will be the young prime minister.
    Coming of age in an England no longer dominated by the Fabian
Socialism that influenced his mother, Mrs. Gandhi, and grandfather,
Jawaharlal Nehru, and intuitively sensing India's great potential if
the economy is freed up, Gandhi has seized the moment. He is giving
evidence of new directions, departing sharply from Mrs. Gandhi's
policies of strict bureaucratic control.
    His principal economic advisers, two brilliant and pragmatic Sikhs,
symbolize the change. Manmohan Singh, 52, heading the reinvigorated
Planning Commission, is an early and forceful advocate of an
increased outward orientation in economic policy - lowering trade
barriers, encouraging exports and embarking cautiously on external
borrowing and foreign investment to prime the development engine.
    Montek Ahluwalia, 41, adviser in the prime minister's Secretariat,
has articulately supported the thesis that growth does matter in
reducing poverty (against the left, which believes that poverty is
better attacked through stronger controls and redistribution of
income). He played a leading role in a recent reduction in income tax
rates, and he has argued successfully for the easing of internal
controls on investment. Under the old system, designed to prevent
concentrations of economic wealth, investment companies with assets
of more than $16 million needed government approval for new
investments. Now, the asset size has been raised to $80 million.
Also, irrational restrictions preventing diversification according to
market dictates have been drastically reduced.
    The new government's reforms are designed to free India from the
shackles imposed over four decades by a government that discouraged
trade and foreign investment and relied excessively on bureaucratic
controls of the economy to market approaches.
    Under the guidance of Nehru and Mrs. Gandhi, India progressed much.
But it also came to be afflicted by Soviet-style inefficiencies. As a
result, her postwar growth rate of about 4 percent a year, while
substantial, did not rise commensurately with the impressive rise in
her savings and investment rates and in her skill levels.
    Because India's policy makers were stubbornly tied to ''export
pessimism,'' they missed the postwar trade opportunity that the Far
Eastern economies seized to reach unprecedented prosperity. Thus,
India's share of world exports fell from 2.4 percent in 1948 to 0.41
percent in 1981. In contrast, South Korea's manufactured exports,
once negligible compared with India's, were four times those of
India's $4.4 billion in 1980.
    Controls on investment, production and exports multiplied over the
years to excess. The government's role often degenerated into a
series of ''don'ts,'' as opposed to the activist ''do's'' of the
authorities in the Far Eastern economies. The problem was not an
interventionist government, but that the intervention was of the
wrong kind. While often justified as a way of insuring fairness and
an even allocation of investments, the government bureaucracy may
have accentuated disparities.
    Despite these hindrances, India's economy grew strongly in the
postwar years - a further indication of her enormous untapped
potential. Growth rates rose from the relative stagnation of the
pre-independence years to almost 4 percent a year during much of the
postwar period. In the last five years, growth has accelerated to
over 5 percent. To sustain growth, it has raised its gross investment
rate, now financed almost wholly through domestic savings, to 25
percent of its gross national product of $184 billion, up from 10
percent in 1950.
    India's planners have successfully used growth to attack the
all-pervasive poverty inherited with independence. A recent study,
tracking the same families between 1970 and 1980, found that the per
capita consumption of the poorest 10 percent of rural households rose
by 128 percent. Other indicators reinforce this conclusion. Life
expectancy, now over 50, has risen by 25 percent in two decades.
Primary education (for students between 6 and 11), was slow to take
off but now shows enrollment of 83 percent of India's children,
compared with 43 percent in 1950. Infant mortality has fallen by 25
percent since 1960.
    India has also chalked up remarkable gains in dia's humane and open door po-
licy toward emigration.
    Years of agricultural extension, scientific work adapting the Green
Revolution to Indian conditions, and governmental incentives have
also produced results. By 1983, production of food grains had risen
threefold since 1950, to 151 million tons a year. Finally, food is
not imported.
    Remarkably, these gains have been made consistent with extremely low
inflation rates. The inflation rate has reached double digits in only
6 of the last 25 years, and averaged 6.2 percent between 1981 and
1985. But the greatest marvel of all is that the Indians have
accomplished this with a highly diverse and populous democracy rather
than with the aid of the iron fist that has surfaced too often
elsewhere.
    Whether the prime minister can stay the course, shifting India's
economy decisively into a higher gear, depends on a complex of
factors. Gandhi will have to contain the inevitable opposition from
the radical left within his own party. Bureaucrats nurtured on the
power that controls confer, will be eager for the new initiatives to
founder. Established businesses may wish to preserve the security of
controlled and hence protected domestic markets, seeking less hassle
from the bureaucrats but not the winds of competition that would be
let loose with the end of controls.
    If the prime minister fails to impose these economic reforms, a
splendid opportunity to stand tall on the shoulders of his
predecessors will have been lost. If he succeeds, as he well might,
the Indian economic miracle will come to pass.