China vs India - Which model is better?

Michael Schuman raises an interesting question in his Time Magazine column. Which is the best role model for developing world, India or China? Schuman cites some of the reasons why Indian model might be better than the Chinese model - namely, the fact that Indian growth is more balanced between exports and domestic consumption, more independence of private sector and the market, and democracy. True, Indian model has not produced the same results as the Chinese model, but the difference has been seen mainly in the last twenty years. If India puts its head together, there is no reason why this gap cannot be bridged.

What is worrisome about the Chinese model is the corruption associated with the current model, despite central control. China's Dilemma | Foreign Affairs points to a growing problem in China, namely income inequality.

"China’s wealth gaps have also grown; according to Chinese media, the country’s GINI coefficient, a measure of income inequality, has risen to about 0.47. This level rivals those seen in Latin America, one of the most unequal regions in the world. The reality may be even worse than the data suggest. Wang Xiaolu, the deputy director of the National Economic Research Institute at the China Reform Foundation, estimates that every year about $1.3 trillion in income -- equivalent to 30 percent of China’s GDP -- goes unreported. More than 60 percent of the hidden income belongs to the wealthiest ten percent of China’s population, mostly CCP members and their families."


Income inequality and corruption are equally big problems in India. While China has been able to keep the income inequality under wraps through strict control over free speech, such a social control is not possible under Indian democracy. Already the issue of income inequality is raising their ugly head in the form of Naxalite violence in the north and north east prompting me to believe that India needs to do more to increase the participation of the poor in the growth of the economy. This is the only way to prove to the world that the Indian model is worth following.
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