Overcoming Infrastructure Roadblocks: Are Chinese Lessons Relevant?
This paper aims to document and analyse the different approaches in overall infrastructure sector performance for these two very different countries from the policy and institutional dimensions. It identifies factors that have worked in China and India. It also identifies some important lessons which could be relevant for future infrastructure development.
For the last two decades, both India and China have grown at twice the global rate and If this trend continues for next few decades, with their vast labor supply, favorable demographics, and aspirations for reaching the developed world per capita income and consumption standards, these economies can be expected to have a significant impact on the world economy.
China adopted a development model where manufacturing and exports are the key drivers of its economic performance. Chinese government recognized that export competitiveness and manufacturing require connectivity to the global economy and, as a result, infrastructure development was propelled by a substantial and sustained drive supported by the government. The most remarkable common factor behind the success of infrastructure in China was the single-minded goal of sustaining economic growth and recognition of the importance of infrastructure development in achieving this goal. China’s unparalleled growth and poverty reduction in the last two decades has gone hand in hand with development of infrastructure stemming from its export-led strategy. India, the other “giant” in Asia, did not follow the suit of the successful this infrastructure model in building ahead of demand. Its development strategy from time to time focused on redistribution of wealth rather than growth.
In the early 1980s, China was among the poorest nations in the world, with more than 60% of its population, or over 634 million people, living on less than $1 a day. By 1990, China reduced poverty to less than 33% and, by 2003, to 13.4%. This was possible because of very high growth rates fueled by trade openness. India’s achievements on growth and poverty during the same period have been steady but relatively modest—the overall population living on less than $1 day declined from 54.4% in 1980 to 42.1% and 30.7%, respectively, in 1990 and 2003. The total number of poor, however, remains high at over 325 million. To some extent, India’s overall performance was negatively influenced by the initial development model that emphasized import substitution and self-reliance, which was one of the contributing factors to its lack of trade openness for most of the period since independence.
In the early fifties and sixties both countries had fairly similar levels of infrastructure assets and services. For example, China’s electricity output at 7.3 billion kWh in 1952 compares well with India’s power output of 6.3 billion kWh in 1950-51. The Indian road network in 1950s was extensive at 400,000 kms compared to about one third that in China and both countries, about 40% of roads were paved then. India’s railway network at 53,000 kms was more than double that of China at 23,000 kms. India and China had similar numbers of telephone subscribers
Though most Indian planning policies have continued to emphasize the importance of Infrastructure, they did not embrace the Chinese single-minded goal of infrastructure development, anticipating future demand and building ahead of time. India’s development model, which began with a balance between growth and distribution in the early fifties, was changed in mid-course with a greater emphasis on redistribution during the critical period of growth. A number of pro-poor programs were introduced which reduced overall fiscal space for infrastructure development, even within infrastructure priorities, political interests drove the overall resource allocation,...