India’s “Hangover” From Colonial Past Colors Hampers Development

China is surpassing India in manufacturing partly because of China’s attitude toward foreign direct investment, according to Girija Pande, executive vice president and Asia Pacific director of Tata Consultancy Services, one of India’s largest information technology companies. 

The Chinese attitude since 1978 has been that “if foreigners come in, we will get rich,” Pande said. “The free market was imposed and everyone bought into the argument.”

Pande made his remarks during a panel discussion titled, “India-China: Twins or Not?” during the 2008 Tata India Business Conference at the Charles M. Harper Center in Chicago, hosted by student-led South Asia Business Group. The panel was moderated by Brian Barry, clinical associate professor of economics.

Meanwhile, India remains suspicious of foreigners because of its colonial past and a strong anti-monopoly view. “In this democratic system, our politicians say if we get foreign direct investment, we will get colonized,” Pande said. “It’s a hangover from India’s colonial past. Not everyone in India has bought into the argument for foreign investment. The Indian free market has taken a long time to build a consensus. They have yet to convince 1.5 billion people that foreign investment is good for everyone.”

Pande, whose information technology firm is involved in a joint venture with the Chinese government, described China as “extremely business friendly.” In the last five years, the government has even developed “very clear strategic goals” that include the consolidation of every major industry, he said. In comparison, he called the Indian government “obstructionist.”

“It’s better to have state machinery that is pro-business, rather than what we have —  obstructionist state machinery at the ground floor.”

In China, incentives for growth begin at the ground level, Pande said.  “Every state and municipality has to report the amount of foreign direct investment and level of employment created. The party, mayor, and state officials are incentivized to encourage business.”

Vivek Sharma, associate partner at the Chicago office of McKinsey & Company, said he believes there is “more leadership in China” than in India.  “In India, there is too much debate. We built a new airport in Bangalore and realized there was no road to connect it to the city.”

Still, China can learn from India about innovation, banking, research and development, and even information technology, which Sharma called “a huge success story.” Sharma sees India’s democratic form of government as a positive force that China should emulate. “In certain states, elections in the last one to two years were actually fought and won on a developmental platform,” he said. “It was impressive that the agenda of the politicians fighting that election was pure development. It’s been facilitated by the democratic set up of the country. I think that’s a great thing that China can learn—how to take the wishes of the masses that want development and talk about it in a forum.”

Raj Mamodia, head of the Consumer Goods Business for Cognizant Technology Solutions, said India was surpassing China in the service industry, but not in manufacturing.  “My clients are not willing to buy services from China as long as they can get similar services from India,” Mamodia said. “Companies are using the manufacturing excellence in China, but they are using the talent in India. There is a lack of infrastructure in India, but for the service industry, that doesn’t hurt at all.”

Sharma said the government “needs to get out of business. A lot more needs to be done to ensure that if someone goes to India, they should be able to start a business in two days—not in 75 days, as it takes now.”

—Mary Paleologos