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China's entry into WTO portends threat to India

Fakir Chand in Bangalore

The recent entry of China as the latest member of the World Trade Organisation has forced India to sit up and assess the fallout on its prospects in the global market with added competition.

The threat posed by China's burgeoning exports and consistent growth in its GDP above 7 per cent even at a time when global economy was reeling under recession has forced China watchers to alert the Indian government on the urgency of the second-generation reforms being implemented and the stepping up of investments in various infrastructure facilities across the country.

The Chinese challenge to Indian exports in the international markets was stressed at the ongoing eighth summit of the CII (Confederation of Indian Industry) partnership summit in Bangalore when distinguished speakers at the first plenary session on What Drives China? Learning from the People's Republic, warned the government that prevarication on social and economic reforms, especially on the labour front may cost the nation dearly vis-à-vis the 'big brother' across the Himalayan border.

"China's entry into the WTO will give further fillip to its economy though India can also capitalise on its access to the Chinese market provided the Indian industry is able to offer goods and services at competitive rates with lower production and labour costs," declared C V Ranganathan, former Indian envoy to China.

Ironically, while India continues to be either defensive or evasive about the role of WTO itself in the comity of nations, China was all set to use its entry into the trade body as a effective tool to quell any resistance to economic reforms back home on many fronts, including the state-owned enterprises and its financial sector such as banks.

"China is not only way ahead of India on many economic fronts save the software sector, but also hell bent on going ahead with as many as 2,000 legislative changes to comply with its commitments to the WTO by 2005. What's more, once China begins to play by the WTO rules, it will up its ante to demand as many concessions from other countries, including India at the next ministerial meet of the WTO in 2003," claimed CII senior advisor T K Bhaumik.

If India has to compete with China on a level-playing field, then it has also to reduce tariffs proportionately to be cost effective. Though India currently enjoys surplus food grain production, it needs to lower its agricultural tariffs so as to become competitive.

"With China's total imports set to touch $600 billion by 2005 from its current level of $350 billion, India should gear up to double its exports so that it could secure at least one per cent of China's imports by then."

According to JM Morgan Stanley Securities Ltd vice-president Chetan Ahya, most emerging economies of the world have grown at a faster rate and became globally competitive once they became integrated with the global market and their products are being accepted.

"Likewise, Chinese economy is set to grow by leaps now that it has entered the WTO. Contrary to popular perception, the foreign direct investment accounted for just 10 per cent of China's capital accumulation and the balance 90 per cent was from its domestic resources," Ahya stated.

Focus on manufacturing sector, emphasis on primary education, well-developed infrastructure, incentive for foreign investors, decentralisation of economic decision-making are some of the factors that have helped China to achieve a consistent growth rate in GDP.

Financial Express editor and a keen China watcher Sanjay Baru told rediff.com on the sidelines of the summit that it was an uphill task for India to catch up with China in terms of economic growth as the present government continued to be bogged down by political, social and religious issues like terrorism, elections, and Ram mandir.

"China's rapid economic growth did not take place overnight. Decades of planning and implementation were behind its success, with growth rate of around 9 per cent annually between 1978 and 1996.

Much of this growth - up to 5 per cent had come from industrial and agricultural productivity over the last two decades on account of the ground work its government did between 1950 and 1980 when China invested heavily in people and infrastructure, besides setting up a framework for consistent socio-economic growth," Baru asserted.

Though politicians have been groaning about the population explosion in India over the last four decades, China with more population than India converted its 1.5 billion populace into a great asset by empowering them with appropriate skills in industry and farm output.

Earlier, CII past president and SRF Ltd vice-chairman Arun Bharat Ram said India had much to learn from China. "We must engage with China and increase our trade with it. In a bid to give a momentum to the process, CII will be opening its offices in Beijing and Hong Kong in the near future," he added.

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