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23th dec 09

A great ship asks deep waters.

Reverse Causality...

Today we ask any Indian they talk about growth in purview of


infrastructure Development and FDIs came in country.

But,

1980s india has edge over china in infrastructure , china had none
glittering infrastructure.

According Economist ANGUS MADDISON

In 1989 india had a longer network of paved road 1.4Mn Kms compared to
china had 0.862 Mn Kms and railway network of 60000 kms in india and
china had 46000 kms,in terms of qualified good railway system say
electrified only 1700kms compared to india 5345kms

Today, gap between india and china about economic performance is being
narrowed substantially bu t in 1980s there was no questions that put out
superior performance GDP per capita average more than 8% in china in
real & compare to in india only 3%(Hindu rate of growth) , thus if we look
at these countries in 80s there is no evidence that the country with an
infrastructure had edge to necessarily grow faster .

we can see that many world class infrastructure built in china during last
20 years when its growth rate is close to 10%.

so we can say growth is the main reason who leads us towards the
growth not viseversa ,

same story can be with FDIs in 1980s china attracted vely little FDI but it
was able to grow fast After about 15 years Foreign investors being
convinced about CHINESE growth ..and begun to pour money into country.

So FDIs is not reason for china’s growth.

It is about to huge investment in human capital. The direction which


deliberately neglected by politicians. There must have a capability to
digest the growth by civilians, they must be realise the change. They must
have lights to study at night ,road to go to work , low mobility barriers and
most vital BASIC education. There are other social problems which have to
solve by society them selves.

Amartya sen the noble laureate of economy have gave best treatment
on this topic in

“India:economic Development and social Opportunity”

He highlights a critical reason why india lagged behind china in initial


phase of economic development –india ‘s hightly inadequate and
inequitable provisions of healthcare and educational facilities.

The social backwardness of india prevented broad and effective


participation in economic and political activities even when the
opportunities for such participation presented themselves as and when
the country moved towards a market economy and was a democracy.

But union government has long term and structural deficit in its budget
and it has to pick its spending priorities wisely.

Infrastructure is not a magic bullet for india nor for china

India faces tougher challenge to improve basic education structure , but


have to take this challenge because infrastructure is not cause for good
growth ,but growth leads to infrastructure development automatically, so
to sustain growth for prolong period that has to have capabilities to
digest it .