The buzzword across three principal Asian countries India, China and Japan is `reform'. It's clear that their impulses are interlinked and have consequences for the world. Coincidentally, all three have been having key annual sessions of their respective Parliaments whose proceedings provide us some markers as to their respective priorities.
Chinese Premier Li Keqiang's
opening speech at the annual National People's Congress in early March
laid out the agenda for transforming China into a middle-class nation,
by creating an economy based on consumption and innovation, rather than
merely investment and export.Arun Jaitley's budget is seeking to
initiate his government's huge agenda in a modest and workmanlike
fashion. As for Japan, the challenges are different structural change
is needed to give a second wind to an advanced economy trapped in
multiple layers of regulation and red tape.
For both India and
Japan, China is a benchmark of sorts. Growth of Chinese power has
implications for them. Both have outstanding boundary disputes that
periodically flare up. But equally important are their concerns relating
to the economic and military rise of China.
economic size approximated that of China in the 1980s, may not be able
to match China in this century, with attendant political and strategic
consequences. Japan, which has had a troubled history with China,
worries about the consequences of Chinese hegemony in East Asia.
What is striking is the clarity with which China is adjusting to what
President Xi Jinping calls the `new normal' economic growth slowing to
7.4% in 2014 and possibly 7% in 2015. Beijing has clearly understood
that it needs to become an economy based on entrepreneurial skills and
better off consumers. NPC is likely to follow the recommendation of the
National Reform and Development Commission, China's Niti Aayog, which
has proposed cutting down the number of restricted areas in investment
from 79 to 35.
Xi told a group of Shanghai parliamentarians on the sidelines of NPC
that China will quicken the pace of creating free trade zones and make
institutional innovation key to development. `Innovation' has become the
new motto of the Chinese, whether it relates to economy or foreign
In his remarks Li also noted that China has taken steps
to cut red tape for private companies, permit online retail to
expand.He promised that China will make it even easier to do business.
Currently China is listed 90th among 189 nations in terms of ease of
doing business; we are listed at 142.
China's strategic goal is
among the first of Xi's four comprehensives: “To build an all-round
well-off society by 2020“. Recall, in 2012, the key word was
“moderately“ well-off society. The second is to comprehensively deepen
reform, the third to create a society which works under the rule of law,
and the fourth to “push for stricter governance“ of the Communist party
itself. The last may sound innocuous, but anyone who has observed the
tion campaign, knows that it means business, given the list of the high
and mighty `Tigers' who have been brought low.
The test for
China is tough enough, but the challenge for India is far tougher. Most
Indians are desperate to see PM Modi's government succeed, if only
because it is India's last chance at getting onto the high-growth track
which can help eliminate poverty by 2030. But what is absent is a sense
of self-confidence and clarity over the direction we are headed. As of
we have a slogan: Make in India. Yet it is not even clear as to what
As for policies, government is still grappling with
the problems of the past.Recently it passed an insurance reform bill
pending since 2008; likewise an overdue mines bill has been passed as
well, though the crucial land acquisition bill remains to be passed.
But equally important steps such as the need to cut through the
thicket of regulatory regimes that plague India are not yet on the
agenda. Whether it is universities, banks, airports, India is one of the
most over-regulated countries in the world, a consequence of
government's desire to retain the levers of power through regulators,
who are almost always former civil servants.
There are no
signs, as of now, that the Modi government has a plan to reform the
administrative and regulatory system of the country, an important
element in any `ease of business' strategy. It is one thing to say that
India will enhance the ease of doing business in the country, quite
another to clearly spell out the steps that will be taken and their
timeline. As for eliminating corruption, that item seems to be absent
from the current government's agenda, though it remains a real problem
for the common man.
As for Japan, PM Shinzo Abe has promised
“the most drastic reforms since the end of the Second World War“. But
his efforts have been tangled in the politics of the country and its
powerful lobbies of doctors, farmers, bureaucrats and workers. In the
current Diet session, he has slashed the powers of the agriculture
lobby, but he still has a long road ahead. Two of his “three arrows“ of
reform higher government spending and massive monetary stimulus have
been blunted and the third, structural reform, remains in his quiver.
One reason for the energy that Beijing exhibits is that the
consequences of failure there will be severe probably the collapse of
the Communist party rule. India and Japan only risk the possibility of
sinking back into the torpor of low growth or deflation.
Times of India March 30, 2015