Monday, November 12, 2007

Leapfrogging or piggybacking?

The economies of India and China are not as sophisticated as they appear
The back of Gopal Raj’s book “Reach for the Stars” carries a black-and-white photograph of the nose cone of a sounding rocket, carried on the back of a bicycle. The book chronicles the unlikely beginnings of India’s space programme, which launched its first rocket in 1963 from Thumba, a fishing village in the state of Kerala. Thumba was chosen as the launch site in preference to another location whose name translated as “White Elephant Island”.

The programme’s founder had little patience for scoffers. “One is often told that such and such a thing is too sophisticated” for a developing nation, he wrote. But “I have a dream, a fantasy maybe, that we can leapfrog our way to development.”

India’s path since then has remained idiosyncratic. The skills demanded by its industries are those of a much richer country. This can be shown, roughly, by statistics; more sharply by anecdote. General Electric’s technology centre in Bengalooru (formerly Bangalore), to pick one, is working on advanced propulsion systems for jet engines. India’s Tata Consultancy Services (TCS) produces the software for Ferrari’s Formula One cars. India’s drugmakers offer 60,000 finished medicines; only three countries produce a bigger volume.

China’s evolution also has its peculiarities. In 1964, recently estranged from its Soviet patron, it devoted a larger share of its GDP (1.7%) to R&D than it ever has since. But after the decade-long Cultural Revolution, this is how one study described the state of its industry on the eve of Deng Xiaoping’s economic reforms in 1978: “vans and transformers that failed to keep out rainwater, sewing machines that leaked oil onto the fabric, power tillers rusting outside a factory that churned out fresh batches of unwanted inventory”.

Now, according to Dani Rodrik of Harvard University, China’s exports are as sophisticated as those of a country three times richer. The goods it sells to America overlap to a surprising extent with the merchandise America buys from members of the OECD, a club of rich democracies, argues Peter Schott of Yale. By this measure, China’s exports are more highly evolved than those of Brazil or Israel.

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Publication : The Economist print edition
Date : 08 November, 2007