The case of China and India

China and India provide a good basis for comparing the experience of planning. Both countries are large and had strong structural similarities at independence for India (1947) and China at Liberation (1949). Both adopted planning as a major means of accelerating the process of socio-economic development (Conyers and Hills, 1984:pp.41- 61).

The economic structures of India and China at that time, as Byres and Nolan (1976) state, were weakly developed. In both countries, technology was backward with a negligible amount of per capita agricultural output and only a minor part of industrial output was produced with modem techniques, hence per capita output was low. The economy was dominated by agriculture which generated the major part of national income and employed an overwhelming majority of the working population.

In 1950-51, agriculture contributed 50 per cent of total national income in India and employed 70 per cent of the working population. In China in 1952, agriculture contributed an estimated 47 per cent of national product and employed between 75 and 83

per cent of the population {ibid.:^.\\).

However, an important difference that existed between the two systems was the nature of the state and the respective ‘modes of production’ and the quality and effectiveness of planning that was possible. On the one hand, an effective planned economy in China operated through near state monopoly of internal and external trade, predominantly state-owned industry and collectively mn agriculture; these were brought into being by the political revolution of 1949, which swept away the class interests of a semi-feudal society, pre-empted the possibility of capitalist development and made

possible a socialist path for China {ibid.).

On the other hand, planning in India has been essentially ineffective (excellent at the level of formulation, very weak at the level of implementation, as we noted in section 3.5.3) and there has not been that firm rooting and growth of capitalism that planning has sought to achieve. In terms of autonomy of the state. Byres (1994:p.22) argues that in India, in the aftermath of independence, a capitalist class or capitalist classes, were weakly developed and could not effect the transformation of the economy in both town and country and society without state support.

In both countries there was a commitment to economic and social progress — in terms of development and reduction in inequality. In terms of strategies chosen, there was

a recognition in India that a doctrine of laissez-faire must be replaced by a commitment

to economic planning in order to promote (capitalist) development and furthermore, in certain sectors, public enterprises would suitably complement the development of private enterprise.

In terms of economic performance although China’s overall pattern of economic growth has been uneven,^ its overall rate of growth has been higher than India’s. China’s gross national product grew at a compound annual rate of growth of 5.6 per cent between 1952 and 1970, while in India net national product grew by about 3.7 per cent between 1950 and 1970; the equivalent annual per capita growth rates were 3.4 to 4 per cent and 1.5 per cent respectively. Industrial production in China grew by a compound annual rate of 11.9 per cent, while in India it grew by 6.5 per cent during the same period. Agricultural production during this period grew at a compound annual rate of 2.5 per cent in China, while in India the growth rate was 2.3 per cent (Byres and Nolan, 1976:p.51).

In terms of inequality, again Byres and Nolan’s (1976) study finds that China has

had a higher degree of success in reducing inequality. This they ascribe to the

transformation in economic structure that followed the liberation, with the establishment

’ This was because of the economic collapse from 1959 to 1963 after the Great Leap Forward, and by the less severe decline in output in 1967 and 1968 during the Cultural Revolution (Eckstein, 1973, as cited in Byres and Nolan, 1976:p.51).

of predominantly state owned industries and collective ownership in agriculture. In India, despite the policy statements included in successive plans, the net effect has been rather inegalitarian. This is ascribed to the hierarchical class structure in the Indian political economy.

Again, the recent experience of these two countries, in the wake of market-reforms and liberalisation undertaken by them, is quite different. In the case of China, which began to liberalise its markets and privatise its economy in the late 1970s, the expansion of rural

agriculture and industrial output had a significant effect on income poverty\ The

incidence of poverty in 1978-85 fell fi*om 33 per cent to 9 per cent and the number of rural poor fell from 260 million to 97 million (UNDP, 1997:p.49).

However, with a shift in development strategy, after the mid 1980s, towards industrial and export sectors, and a redirection of public investment and fiscal incentives to the coastal regions, the progress in human development went into reverse. By 1989 the number of income — poor people in rural areas increased to 103 million, adult illiteracy increased between 1982-87 from 24 per cent to 27 per cent and disparities widened

{ibid.).

Being concerned about the increase in poverty and widening regional disparities, the government in China started in the early 1990s to take measures to reverse the trend. A Poverty Reduction Programme, which aims to eradicate absolute poverty by the year 2000, was also launched in 1994. By 1992, this renewed commitment by the state was already showing results. Between 1991 and mid-1995 the number of people living in income poverty fell from 94 to 65 million (z7)/ûf.;p.50).

In the case of India, during the period following economic reform in 1991, although there was firstly a rise, then a fall in income poverty, but by 1993-94, the

’ A person is poor if, and only if, his/her income level is below the defined poverty line. Often the cut-off poverty line is defined in terms of having enough income for a specified amount of food (UNDP,

1997:p.l6).

incidence of income poverty in rural areas had increased to 39 per cent, compared to 34 per cent in 1989-90. To address this question, the Ninth FYP (1997-2002) calls for

eradicating poverty by the year 2005. However, as the 1997 Human Development Report

states, a cause for concern is the emphasis given in India, to deficit reduction and state minimalism, which is leading to the abdication of state responsibilities in key areas affecting the lives of poor people. “India needs sustained public action if it is to eliminate the worst forms of poverty and promote an equitable expansion of social, economic and

pohtical opportunities” (ibid. .^.52).

Thus as table 3.2 below indicates, China with its emphasis on integrating the market within the planning system, with the state taking a direct role in ensuring a more equitable distribution of social services, has continued to out-perform India. In 1994 for example, illiteracy in China was 19 per cent and income poverty incidence was 7 per cent whereas, in India the percentage was 48 per cent for the former and 39 per cent for the latter.

Table 3.2

Comparison of main socio-economic indicators : China and India 1970-1994

Indicators China India

1970 1994 1970 1994

Adult illiteracy (%) 34 19 66 48

Under-5 mortality rate (per 1000

live births) 209" 47 236" 115

Real GDP per capita (PPP$) 723" 2,604 617" 1,348

Income poverty incidence (%) 33'’ 7 54" 39

Human development index 0.248" 0.626 0.206" 0.446

External debt as % of GNP (1994) - 19 - 34

Notes:

a) Data for 1960; b) Data for 1978; c) Data for 1974.

Source: UNDP (1997) Human Development Report 1997, pp.49-52.