Indian Defence Review

Before I get to the economy of China I would like to say it is not a question whether we like China or not. It is our neighbour. Because of our policy errors we have them right on our border. We have not sorted out our problems. It is not the question whether China betrayed us or not in 1962. We have not sorted out our problems at an appropriate time even when we got a very good price. There is a long letter of Sardar Patel written to Pt. Jawaharlal Nehru where he warned of the consequences of capitulating on Tibet. Incidentally, capitulation was not only by Pt. Jawaharlal Nehru but, in fact, in 2003 Mr Atal Behari Vajpayee signed an even bigger agreement on Tibet where he even accepted the partition of Tibet into four parts. Today Tibet is not that Tibet of old days. It has been broken into four parts. Sichuan is one portion, Gansu province is another portion and it is now a truncated Tibet that we see today. So, it is of no use blaming the Chinese for taking advantage of our regions.

Now I would like to say what General Singh has said that any country has two kinds of policies that they has to harmonise. One is the policy for defence, which can be objectively structured because it is based on the capacity of your redressal. It is an assessment that you have to match. How many tanks does China have; how many divisions does China have; what is its logistical position? These are an assessment you can make objectively and, therefore, you have to match them. Not necessarily that if they have 1000 missiles, we also should have 1000 missiles. We can do it differently: If they have a fort in Ladakh, we also should have a fort somewhere else. We, for example, should work out on an agreement with Indonesia to police the Malacca Strait from where 90 per cent of Chinese trade passes through and we will be able to choose that at any time there are very alternate ways of doing things.

The assessment of defence capacity of our enemy or our adversary or even our friend is objectively assessed and we have failed to do it. General Singh talked about houses being built. I remember coffee park was also being built together with tennis balls for the cantonment tennis court and so. Therefore, that was the error we made and that is the error we should not repeat. Today, what is the proportion of our budget for defence—less than 2.2 per cent. China has maintained the consistent 6 per cent defence expenditure of the GDP which itself is going up pretty fast.

The second aspect of our policy is foreign policy where you try to make friends and try to choose friendships. Here ultimately, according to me, the Chinese policy boils down to two things, first you have to make up your mind whether the border solution is a consequence of a political solution and if you come to a conclusion that the border solution will not precede a political solution but must follow a political solution then you must decide what your political solution is. You must decide what are those elements which have come to the political solution, particularly how you are going to deal with the United States vis-a-vis question of China’s concern, which is definitely the strategical advantage that the United States would enjoy if we have extremely close relationship with the United States. You have to make a choice over there. Secondly, what the border solution is. Of course, I have always mentioned in the discussions held with the Chinese that since they have mentioned McMahan line with Burma in a formal treaty where they have mentioned that the McMahan line is the border between Burma and China, therefore they should not have difficulty accepting the McMahan line for India too. When I first mentioned in their State Council Research Institute they did not believe that such an agreement was signed by Burma. When they called to their research staff, they came to know that it had been done so.

So in my opinion for China the border solution is not by direct negotiation on border question, it is by first settling our political relationship with them. In the question of capacity, what is the status of the economy of China vis-a-vis India that requires a great deal of assessment and accurate assessment? Unfortunately, our academicians are all mostly left wing and are quite passionate to speak in glowing terms about China. First of all, we do not know when they say about the GDP what it includes. General Singh was absolutely right. As far as food grains output is concerned, I must say many years ago, I found that they lay their rice before the husk is taken out and we lay our rice after the husk is taken out. In fact, internationally it is after the husk is taken out. They include potatoes in food grains but we do not include potatoes in food grains. In fact, nowhere in the world are the potatoes included in the food grains. You make these corrections and there is a 25 per cent drop in the food grains production of China in the way we know it. The same applies to FDI comparisons—at least ours is not according to their definition.

We include in our definition the difference between China which will change from 10 to 1, to 3 to 1. So getting the accurate data, assessing it reworking on it accurately is very important and that is something which none of our academicians do and I did it in the 1970s. I wrote a book, my first book on comparing India and China came out in 1970 for which I was universally condemned in India because I said that growth rate between 1952 and 1970 or 1980 was about the same between India and China at 3-1/2-4 per cent per annum each and again that the growth rate in 1981 was about the same in China. The statistics, so far collected by us, was all bogus. It would now require setting up a National Bureau of Statistics to make it a criminal offence to falsify statistics. Even today that problem is still there where there is a pressure on the provincial authorities to produce data very quickly. If you look at the Chinese publications, you will find by the end of January they have already produced statistics for the whole previous year. How is it possible?

At least in India and even in the United States, it is not possible. For, the Chinese do not have established traditions of statistics. Their first population census was taken in their history in 1982 and we have population census all through, and formally in the present internationally format since 1871. So we have much longer tradition of statistics. The second aspect is that a lot of our opinions are formed by what is called anecdotal or visual—somebody goes to Shanghai or Beijing and comes back all in ruptures. We have a great deal on higher education is a priority. There is a great amount of social work done. Today when we talk of cyber army it is making fields of distinguished panels in China.

I had got the privilege to go to Gansu or Yushu. On the other hand, India is an open society. There is no bar to prevent beggars from coming and receiving you at the airport whereas in China they a very strict control on the issue—how to deal with the international migration. There are a number of issues on which you can get off-sided views on the economy. Having said that let me take you to the question that how you should view the economy? Broadly speaking, there are four phases and I will deal with the last phase. The first phase is the initial condition in 1950. Both India and China were victims of imperialism. There was a difference from ours. There were five powers demanding reparations all the time and there was a continuous instability in China. India had the most stable 100 years from 1850 to 1947—almost 100 years. We had a central British government from 1857; centralised control and nobody can say that India lacked stability. But the economic performance of an unstable China was subject to numerous wars from Japan, from five powers which had stationed themselves in Shanghai. Despites all these facts, their performance, economic performance, was a low performance like ours was about the same time. And in the end, they did not have the Zamindari system; they did not have the British siphoning off the resources from our agriculture and financing their own industrialisation, so the Chinese agriculture was in much better shape than that in India. That’s how we started off.

We had, of course, more foreign textile mills, more railway lines. We had certain advantages which arose out of the fact that imperialism needed it. These things have to be set up. But both India and China made the fundamental error of adopting the Soviet model and the Soviet model meant no foreign sector, no export or import, unless absolutely essential; extracting of resources from agriculture to finance industry—everything was on quotas and licenses and we lived on it for quite a number of years from 1950 to 1980. For thirty years we had lived on the dream that the communists sold to us, that there is no poverty in the Soviet Union, that there is no inflation in the Soviet Union, that there is no unemployment in the Soviet Union. The only thing that we found later on was that there was no Soviet Union any more! It was broken into sixteen countries.

The Chinese realised that much earlier and in 1980 they found themselves different than the Russians. They started disbanding the Soviet systems. For us, it took ten-twelve years more. Whatever the gap came between India and China was really put in between 1980 and 1992. After 1992 when India embarked on the economic reforms that gap remained more or less the same, once you corrected the data for China. If China says 10 per cent per year, subtract 2 per cent, so it is 8 per cent per year. If today they are assessing it as 8 per cent that means they are drawing it to be at 6 per cent. That is a rough rule of thumb. I would say that the gap that was not there in 1947, not there in 1980 emerged in that 12 years—from 1980 to 1992—when we still stuck to our loyalty to the Soviet model and the Chinese began disbanding the Soviet system and started going on for the market system.