M D Nalapat
Till two centuries ago, China comprised about 35% of the global economy while India accounted for around 26%. Only after the grip of European powers became strong in the 19th century that their economies contracted. The mentality of the European powers was that only they had the right to prosperity, while the rest of the world needed to be content as slaves. In India, Britain ensured the destruction of almost all of local industry, thereby seeking to create a market for its own manufactures. Certainly this brought some prosperity to the UK, but the wealth generated there would have been much more had India been allowed to continue to be a prosperous country. The markets for British produce would have been far larger. As for China, by squeezing revenue out of channels such as the opium trade, the European powers ensured the fall of the Imperial Dynasty and its replacement with a series of fractious and incompetent warlord regimes, a phase that ended only with the establishment of the Peoples Republic of China in 1949.
While China entered into its current period of economic growth through reform in the 1980s, till today India has continued with its colonial-era laws, that transfer obligations to the population and authority to the state Today, despite corrupt and incompetent governments at both the central and state levels, the Indian economy is growing at a speed of almost 10% annually, because of the savings of its people and their zeal for education and betterment. India is called a “free” country, while China is authoritarian, with no elections and single-party rule. However, here in Hong Kong, where your columnist has been since the beginning of the week, it would seem that people here have as much - if not more - freedom than people in Mumbai or Delhi, all of whom have to get permission from multiple authorities (usually in triplicate) before being allowed to do the simplest tasks.
In India, especially after the Sonia Gandhi-led United Progressive Alliance government came into power in 2004, there are a cascading series of taxes. Income-taxes, surcharges, service taxes, commodity taxes, octroi, state sales taxes, stamp duty, capital gains taxes and many, many others. Recently the “reforminst” government of Manmohan Singh unveiled a Direct Taxes Code that disappointed those who had hoped that India’s honest and brilliant PM would have been allowed by the Congress Party bosses to dismantle at least some of the many restrictions that have been a feature of the Nehru Era. Contrast the sorry situation in India, where the combined tax burden on a citizen sometimes reaches 70% of his or her income because of taxes at different stages, with Hong Kong. The residents of Hong Kong pay only income-tax, that too at a low rate. There are no taxes on capital gains or dividends, nor on interest and even the winnings from gambling.
In India, the web of regulations is so dense that most innovators either get nervous breakdowns or migrate in order to preserve their sanity. At every stage of any productive process, the citizen has to run the gauntlet created by officials (and their political masters) eager to enrich themselves at his or her expense. In Hong Kong, by contrast, most permissions can be secured online, while bribes are unheard of. The civil service in Hong Kong is well paid, and pensions amount to almost the full salary last earned,so that the incentive for graft is minimised. For a metropolis of 7 million residents,there is only a corps of 130,000 civil servants,or about as many as there are in a single district in the Subcontinent. Those resident in Hong Kong can move money anywhere they want,and convert it into any currency they wish. Even those coming from outside can set up businesses freely, getting permission online to do so, rather than in offices populated with corrupt staff, the way it is in Pakistan and India. Indeed, those investing in a business in Hong Kong of a level of around a million HK dollars can get Permanent Resident status and thereby ensure that staff from outside be given permission to come and work in the Hong Kong Special Administrative Region (HKSAR).As for visas, Commonwealth citizens are allowed visa-free entry for two weeks, while citizens of most of the major countries too are allowed visa-free entry. Had any government in India had the common sense (or good intention) to set up a Free Trade Zone in India on the lines of Hong Kong, several tens of billions of dollars of investment would have flowed in. However, such a project seems beyond the imagination of those politicians in India who are comfortable with poverty, because they believe that it is easier to fool the poor with false promises than to trick the middle class (which in India does not vote as strongly as it should). Recently in West Bengal, Mamata Banerjee, a politician who is now Union Railway Minister, cost her state more than 200,000 jobs (direct and indirect) by forcing the Tata Group to relocate its revolutionary small-car (Nano) factory from West Bengal to Gujarat.
Last month, Heir Apparent of the Congress Party Rahul Gandhi ensured that more than $1.3 billion of annual taxes would be blocked from flowing into the coffers of the (Opposition-administered) Orissa state by getting halted the setting up of a $15 billion enterprise, on the grounds that around 600 tribal people “needed to preserve their religion”. By this, Rahul Gandhi signalled that he would like to freeze this population at its present low level of subsistence, rather than give them the chance for modern education and employment. His recent actions and statements - which are coincidenally in tune with the vociferous demands of a clutch of Western NGOs active in India that would like development in India to stop and the country remain permanently in poverty - have shaken the belief within the middle classes that Rahul can modernize India. Interestingly, at the very time when he is campaigning against development, his cousin Varun Gandhi is stressing an economic agenda that focusses on high growth.
By allowing Hong Kong to be the freest economy in the world (a status that it has enjoyed for the past sixteen years, according to the Index of Economic Freedom), the Communist Party of China has shown a pragmatism that is absent in the neighbouring democracy of India, where Prime Minister Singh is having to tolerate both corruption and flawed policy as the price for remaining in office. After Hong Kong, the freest economy is Singapore, followed by Australia and New Zealand. While the US comes eighth in the list, this seems another example of how international rating agencies mislead the international community about the US and several countries in the EU. For the reality is that the US is today very tightly regulated, with several restrictions that were absent in the past.
As for “freedom”, the recent detention by US authorities of an Indian (Hindu) citizen on suspicion of being a terrorist (after all, he had a beard, brown skin and carried literature about Wahabbism ) is another example of how unwelcoming the so-called “Free World” is these days to people from underdeveloped countries An even worse example is France, which has shown its concept of civillisation by brutally expelling those Europeans who come from the Roma group. This small pool of people, who were significantly exterminated by the German state during the early part of the 1940s without getting any compensation, are the “untouchables” of Europe. Last year, a Roma girl was allowed to drown off a beach in Italy to cheers from the other beachgoers, while across Europe, their houses are firebombed and their women insulted. All this in a “free” society. Freedom, it would seem, means the freedom to deny rights to those who look different from others and who have been deprived of modern education and the opportunities that come with it Which country is really “free”? Here in Hong Kong, which is part of a country that is called “authoritarian” by the world, it is hard to give an answer. This columnist had dinner with a member of the territory’s. Cabinet (or Executive Council).The cabinet member came in a taxi, without any of the paraphernalia that accompanies those of a similar rank in the Subcontinent. Unless the citizen be given the right to ensure a prosperous and productive life for his or her family, just giving the right to vote every few years does not translate into a genuinely free country. India and Pakistan have a lot to learn from China, and its international financial hub, Hong Kong.