India has always looked to the west for its free trade policy. Yet, India is more similar to the Chinese than to the USA. Being Asian nations both China and India have very similar cultures. Chinese culture revolves around the Confucius philosophy and buddhism which, are very similar to the Indian philosophy of looking inward — the character. Both preach non violence, egalitarianism and tolerance as core belief of the systems. China faces the exact same issue like India. Corruption is rampant. The country is over populated and Govt is big player in their market economy. Their have poor relationship with their neighbours like Japan, South Korea and Taiwan.
Yet, India feels more at ease with the US way of economic policing. Our corporate Tax rate are similar to the US not to that of China. Both the high ! Yes US and India are both democracies but the similarity ends right there.
Lets’ talk economy.
In China, the standard corporate tax rate is 25%, unlike 30% of India. Further the tax rate could be reduced to 15% for qualified enterprises which are engaged in industries encouraged by the Chinese government (e.g. New/high Tech Enterprises and certain integrated circuits production enterprises).
In India the corporate Tax rate is 30%. The Govt has proposed to decrease this by 5% but not by the preferred sector rather by the size of the companies. Should we focus on high growth sectors rather than size of companies ?
How is it possible for India to have a 30% tax rate while, China next door has 15–25 % corporate tax only? It ludicrous to think that we as a country haven’t even fixed our tax policy, yet.
Further, China has never bothered to reduce it “cash” in the economy. Why is India so keen ? Money comes with a certain “black” element to it. It’s the nature of money making. No one makes money to pay taxes. India needs to worry about the black money problem when it turns into a large economy like the US or China. Its current focus should be to grow the economy. As they say “you can’t have the cake and eat it too”. Likewise money should be allowed to grow and instead of a hammering it down. This will make people happier to pay taxes than forcing them to work hard an pay more taxes. Reduce taxes and they will pay them !
Next, let’s look at infrastructure. China has invested heavily in infrastructure. Indian have to live with, huge infrastructure issues which gargantuan. China on the other hand is building new ports and highways at a frantic pace.
SEZ’s : China took the concept of SEZ to a different level. They have SEZ cites. China has established special economic zones in Shenzhen, Zhuhai and Shantou in Guangdong Province and Xiamen in Fujian Province, and designated the entire province of Hainan as a special economic zone. India has managed to only have a few areas marked as SEZ. We need to thing big like China. Why can’t we have a SEZ policy like China were we declare cities like Bangalore, Hyderabad, and Chennai as SEZ cities. Alternatively what stops us from creating SEZ provinces near all our international borders ?Why can’t we declare islands like Andaman islands and Lakshadweep as free trade zones ? Probably India has still not shed it past fear of colonialism. Dubai, Singapore and Hong Kong have been shining examples of this model. Yet India has failed miserably to create free cities. Instead it is good at only renaming existing cities, which have done well.
Think economically not politically. When China threw the Dalai Lama out, India was happy to take him in. We are still claiming sovereignty for a piece of land aka Aksai Chin and have been fighting a lossing (rather lost battle) battle with China. This land is not accessible from the Indian side of the border. Its barren and has no natural resources. India pick up fights with China on matter which doesn’t even concern it like the border dispute with Bhutan-China and India. India is naturally protected by the Himalayas and has buffer nations like Nepal and Bhutan to thwart any enemy attack. China can never attack India. Yet India, fights these political battles at a huge loss of Chinese capital Investment into the country. We withdrew from the much glorified silk route project called “ The One Belt One Road Initiative”. This project would bring in huge infrastructure benefits to the country. Atleast we should have attended the conference.
In essence, I think India should look at China as a opportunity not as a threat. India has more to gain being with China than with the US. US is beginning to show signs of stress. Yet, it will continue to dominate the politics of the world for the next 50 to 100 year perhaps. But the economic power house that US was is surely shifting to nations like China. India needs to learn the model from China and scale quickly.
Demographically, this is a golden era for India. We can easily turn this nation around and build it into the third or perhaps the second largest economy. Yet the task before us requires quick action on the part of the Govt.
