Development Agenda for India and China-aug-oct2010

Development Agenda for India and China: Evolving a New Sustainable Model for Inclusive Development -P. S. Deodhar 53 It is amply clear that the development model based on resource-intensive consumption patterns as prevalent in the United States and Europe is ecologically not sustainable.

This is the result of media provoked self-centred lifestyle, largely funded by careless financial credit offered to common people in the West. It is completely unimaginable therefore that 2.5 billon people of India and China can ever hope to have similar lifestyle. Nature has not endowed the world with matching resources. Not only does the world not possess the resources like the fossil fuels to support such dreams, but there is not enough water as well! Just compare the per capita consumption of the fuel and water by the Americans and Asians to understand the gravity of the situation. Indian engineers may develop a Nano but every Indian family owning one is a scary preposition. Today both countries have a sizable population that lives like the Americans and consume and pollute as much. Therefore, even if the leaders of both nations dream of bridging the widening gap between their haves and have-nots and focus on inclusive development, they can succeed only if they seek some alternative development model. In fact today, one realises that both, Dr. Manmohan Singh led India and Hu Jintao led China, in their own ways, are looking for it.

The issue indeed is more fundamental than materialistic aspects of life style that is an integral part of the western model. The western concept of being a developed society and their model of economic development itself has other serious short-comings besides not being sustainable. It is also increasingly being realised that materialistic lifestyle resulting from that model has many undesirable consequences, the most important being the menacingly manifesting global warming. At social level too, many believe that such a life is unnatural and emotionally unhealthy. It has widened the gap between the global rich and the poor. Various studies show that an increasingly large number of people in the developed world are emotionally unsettled, less happy and have psychological problems.

Interestingly both the Indians and the Chinese, on the other hand, have been practicing an alternate lifestyle model which can be roughly described as ‘simple living and high thinking’. Everyone knows that this alternative way of life is nature friendly, healthy and emotionally fulfilling. This has helped their huge population of poor to live tolerantly and peacefully. Those economically weak in both these

countries can bear their deprival of material comforts without the mental misery that the poor in the West are seen to go though. Psychiatric practice is not a rewarding profession in these countries. Teaching of saints in India and Confucian thoughts in China has prevented them from getting hurt. But everyone knows that this disparity and poverty is unjust and caused by their poor productivity.

What is exciting about the western lifestyle, besides vastly improving social order, is the reduced level of stress, safer living conditions and higher personal productivity. The development of science and technology during the last two centuries and its innovative exploitation for comfortable living is a major reason for these benefits. Progressively evolved Industrial revolution from the middle of the 19th century to the middle of the 20th century that was later seamlessly followed by the communication and information revolutions enabled this remarkable transformation. It allowed common citizens to become productive participants and get rewarded. Till the early 70s, the western developmental model looked ideal since per capita consumption was limited and earning differentials between the rich and the poor were justifiable.

But it is now realised that the money-centric modern business culture that evolved from the early 70s out of US business schools has been taking the world by a garden path.

Many are convinced that it is indeed the root cause of current global economic crisis. Businesses overtook their democratic governments with the so-called privatization, and since then the businesses have been brain-washing young men and women to practice mercenary, profitcentred style of management focusing on stock price and earnings. It sponsors a win-at-all costs trading approach with charismatic role modelling, teaching, and coaching with an orientation to be reckless and with a motive to profit by every means.

Eastern life philosophy has its own pitfalls. It may have taught people to face hard life with a smile but denial of basic necessities due to the failure of planners to enhance personal productivity of a large percentage of people in their society is not just unjust but almost inhuman. It is unfortunate that today a large majority of people in both countries is suffering that denial. People in the West on the other hand are also growingly realising the bitter truth that marketing is driving them into miseries. Boundless credit and multimedia luring is hurting them. Many independent

53 President, India China Economic & Cultural (ICEC) Council, New Delhi. The paper was presented in Mumbai on September 7, 2009.

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studies have shown that excessive consumption of food and fun is harming them both in body and mind. On the happiness index, both India and China have masses of contented poor who smile more frequently on an empty stomach than the well fed rich westernised living in their city towers. It is plus for those people but a shame for those who are elected to take care of them. Here one can see that the Chinese leadership did far better than their Indian counterpart, handicapped they may be by the ‘system’.

Careful study of China's spectacular success since it began its transition to a market economy will reveal that they managed it with adaptable strategies and policies: as each set of problems are solved, new problems arise, for which new policies and strategies were devised and this has been going on from year to year. One has to read the annual reviews of the country’s progress by successive Presidents since 1978 to appreciate this policy. It shows that China recognises that it cannot simply transfer economic institutions that had worked in other countries without adapting it to the unique problems confronting China. While it is clear that China has added and will continue adding to the pollution, one can see the series of policy initiatives in this regard. At every level in China, there is a consciousness of environmental limits and the realisation of its perils for its people.

Today Chinese leaders are discussing a "new economic model" even though they know well that their economic strategies largely based on the western model have been a resounding success, producing almost 10 per cent annual growth for 30 years and lifting hundreds of millions of Chinese out of poverty. What is not visible in the economic data like the Gross National Product (GNP) can be seen on the faces of the people as you walk around not just on the streets of Shanghai or Dalian or Wuhan but also in its villages. There one can see tremendous self-esteem and pride in the behaviour of a common person. Some of the areas that we went to were hundred miles away from China’s network of highways but they boasted of stable electricity, paved roads, televisions and even internet.

China in fact is far more internet savvy than India, simply because everything on their network is in Chinese, and entire China can read what is on the net. A lot of these rural communities live on the remittances from family members who had migrated to coastal cities. It is the same like the money orders sent by migrant Indians to their families in Bihar or UP or Kokan. We found even the farmers are better off, with new crops and better seeds. The local government sells on credit high-grade seeds with a guaranteed rate of germination.

Indian leaders too have the same realization as in China that it must change if it is to have inclusive and ecologically sustainable growth. Healthy life for all seems to be China’s agenda. Even in cities one can see carefully planned planed well maintained streets, green areas, parks as well as extensive public transportation systems. While Indian

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leadership in Delhi too has well intended schemes, their corruption infested delivery channels frustrate realisation of any of its noble objectives.

Realisation of the need to move away from the western model and seek another alternative model has become more urgent after the global economic crash and its backlash on India & China. China felt it far more strongly than India due to its over dependence on export trade. They realised that even countries seemingly committed to competitive markets were getting protective and complained of unfair competition. Export led growth model was in danger and maintaining high growth was untenable. That strategic model worked well for China for many ways. It supported technology transfer, helping to close the knowledge gap and rapidly improving the quality of manufactured goods.

Export-led growth meant that China could produce without worrying about developing the domestic market.

But global economic catastrophe changed that quickly.

China realised that it has to change. China has a large portion of its reserves blocked due to its earlier strategy of "vendor finance" by parking its earning in the US. It financed the huge US fiscal and trade deficits, allowing Americans to buy more goods than they sell.

In fact, to meet the challenge of restructuring China's economy away from exports and resource-intensive goods, China must stimulate domestic consumption. While the rest of the world struggles to raise savings, China, with a savings rate in excess of 40 per cent, struggles to get its people to consume more. Both Indians and Chinese, especially those who are not economically strong, intuitively don’t trust the government and focus on their ‘rainy days’. Therefore, the Chinese government is now focussing on providing better social services (public health care, education, and nationwide retirement programmes etc) with a hope to move people away from their urge to save. Chinese government is also giving cheaper access to finance for small and medium-sized businesses.

Both countries therefore will have to look for new sources of dynamism in its growing entrepreneurial ranks, which requires a commitment to creating an independent innovation system. China has long invested heavily in higher education and technology and now it is striving to create world-class institutions. India too has to somehow speed up.

Both countries need to stimulate dynamic innovation environment, while resisting pressure by the western governments to adopt the kind of unbalanced intellectual property laws that are being demanded. Instead, it should pursue a balanced intellectual property regime: because knowledge itself is the most important input in the production of knowledge, a badly designed intellectual property regime can stifle innovation - as has been the case in post -70 America in several areas.

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Till the early 70s, business culture in the US too was different. Bright brains those days were in research labs and on shop floors using innovations to create some real wealth.

There evolved a business culture that caused the US to get rich as a society. Significantly that also was an inclusive growth. The real income of an average American had been soaring since the end of the Second World War. Wage ratios between the wealth creating talents and shop floor workers were acceptable to all. The country’s balance of trade was positive and consistently growing. Employment was on the rise. Standard of living was improving democratically year after year. Number of college going students doubled every five years and unlike today getting in was no longer the privilege of the rich and the elite.

During those decades there were major breakthroughs in technology as well. James Watson and Francis Crick won the Nobel Prize for decoding the molecular structure of DNA. Tuberculosis had all but disappeared, and Jonas Salk's vaccine was wiping out polio in the United States.

Many may not know but Dr. Salk had refused to take a patent for his discovery and had said that he invented it to prevent human suffering. That reflects the culture that prevailed then.

During the last four decades, Western technological innovation has focused too little on reducing the adverse environmental impact of growth, and too much on saving labour - something that India and China have in abundance.

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So it makes sense for China to focus its scientific prowess on new technologies that use fewer resources. But it is important to have an innovation system (including an intellectual property regime) that ensures that advances in knowledge are widely used. That may require innovative approaches, quite different from intellectual property regimes based on privatisation and monopolisation of knowledge, with the high prices and restricted benefits that follow.

Too many people think of economics as a zero-sum game, and that China's success is coming at the expense of the rest of the world. Yes, China's rapid growth poses challenges to all including India. Competition however, must make India work harder, to become more efficient and stimulate value addition by focussing on manufacturing and achieving balance between export and domestic business.

In 2008, almost 80% of China’s US$32 billion exports to India was in the form of machinery and finished goods.

This created new wealth of over US$10 billion in China which went to enrich the Chinese. During the same period India’s US$21 billion consisted of nearly 70% of industrial inputs like iron ore and cotton. That not only was like selling family silvers but it also sent US$6 billion or so into the pockets of a few mine owners. This needs to change.

China needs to be forced to buy more from India and that would mean India working smarter.

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"Role of India and China in Addressing the Climate Change Crisis" Climate change is already happening and represents one of the greatest environmental, social and economic threats facing the planet. It has started to threaten food production, increased occurrences of extreme climatic conditions and water stress, flooding of crop fields and coastal settlements and increase in spread of diseases such as malaria.

Specifically, in India and China, increasing greenhouse emissions and rise in temperature have started to impact agricultural production, livelihood, bio-diversity, coastal areas, human health, availability of water resources, rainfall patterns etc. The climate change crisis, therefore, is a part of the larger challenge of sustainable development for India and China and requires constant efforts and initiatives from India and China to tackle the crisis.

With this perspective, India China Economic and Cultural Council in association with Rajiv Gandhi Institute for Contemporary Studies (RGF), New Delhi had organised a brainstorming session, entitled “Role of India and China in addressing the climate change crisis�, on 2nd September 2009 at Rajiv Gandhi Foundation, with the following objectives: l To bring together key players including policy makers, industry leaders and intellectuals from different countries of the world, to discuss about climate change and the possible role of India and China in addressing this global crisis. l To discuss various social and economic policy responses by key players in addressing the global climate change crisis. l To advance understanding on key actions needed to accelerate technology development and transfer in India and China, in accordance with their national needs.

In the welcome address, Dr. P. D. Kaushik from RGICS, highlighted the fact that there are a couple of areas in which India and China can collaborate and learn from each other to solve this crisis. This session is the first attempt to map what policy actions can be taken to curb this menace of climate change and develop a common platform for India and China to work together, Dr Kaushik said. Mr. Tirthankar Mandal from WWF-India, in his background presentation on state of response and key issue to address the crisis, laid emphasis on the various technological, political and financial challenges to address this crisis. He put forward certain issues and questions such as developed countries pressure on classification, the source and scale of finance required to address the crisis and its governance, the need for scaling up of adaptation technologies and overriding principle on IPR etc., for the panel to debate and discuss on.

As a response to the various political issues and questions put forward before the audience, Ms. R V Anuradha from Clauras Law Associates, emphasized on the need to address the differences in stage of development between India and China and the need for India to learn from the already existing domestic policies and initiatives by China to curb climate change. Ms. Aditi Kapoor, from Oxfam India, expressed that a lot of negativity is attached to India’s position on climate change and it is seen as a blocker, which is not the case. She said that given the differences between India and China, more emphasis should be on influencing China to be bold and on side of development. Mr. Ge Song

The brainstorming session was attended by people from the industry, government and nongovernment stakeholders from the Indian Government and from Embassies and High Commissions of various countries, civil societies along with intellectuals and professionals from India and China in the field of climate change. (Please refer to Annexure 1 and 2 for detailed schedule and list of participants).

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Xue, the Chinese Counselor for Science and Technology, highlighted the principle of common but differentiated responsibility and said that India and China do play an important role to address the crisis but not the key role, which is to be played by the developed world with a strong political will to address this crisis. Mr. Robert Donkers, the EC Counselor for Environment, also acknowledged this principle of common but differentiated responsibility and also expressed that responsibilities should change with time and even after US, UK and Russia stop every carbon emission of theirs, the temperature rise will still go beyond 2 degree Celsius, due to emissions from rest of the world.

The need is for countries to develop greener and better production processes and to come forward to take accept their responsibility.

In response to the need for development and diffusion of green technologies, Prof. Patrick Chezaud, the French Counselor for Science and Technology, sees technology as the main solution to address the crisis and highlighted that France is already in the process of technology transfer with various Indian bodies, such as with BEE for smart metering project. He also said that the focus should be not only on technology transfer but on technology exchange and technologies can also be fed back to the north to address the

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crisis. Mr. Donkers of the EC Delegation in New Delhi does not consider IPR as an issue as there is so much green technology available for mass scale deployment and it’s only in case of very recent advanced technology where IPR may be an issue. He mentioned the various joint technology development initiatives of EU with China and also expressed that EU would be happy to develop similar joint technology research initiatives with India, which would also lead to joint IPRs. Mr. Rudolf Rauch, from GTZ Indo-German Energy Programme, along with many other participants, emphasized that development of technology is evolution and market driven and before that there has to right policies and regulatory mechanisms in place to facilitate technology development and exchange.

At the end of the session, Mohd. Saqib from RGICS gave the vote of thanks and expressed that India is always looking forward to work with other developing countries and this session is a step forward to start cooperating and working together with China. He said that this session will be followed by a series of conferences and papers in future, dealing with various aspects and challenges to address the climate crisis and will not only focus on role of India and China but also of other BRIC countries.

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NEWS BRIEFS "Chinese President Makes Proposal for Tackling Global Financial Crisis at BRIC Summit" (July 2009) Chinese President Hu Jintao Tuesday presented a fourpoint proposal for dealing with the ongoing global financial crisis at the first summit meeting of BRIC countries which groups Brazil, Russia, India and China.

system, Hu said. To establish a new international financial order that is fair, equitable, inclusive and well-managed, and provide guarantee for the sustainable development of the global economy in terms of system and mechanism conforms with the trend of the historical development and is in the fundamental interest of all parties, he said.

Third, BRIC countries should commit themselves to implementing the UN Millennium Development Goals (MDGs), the president said. The international community should not overlook development issues and cut the input for development while dealing with global financial crisis, he said.

Instead, it should pay close attention to the impact that the crisis has left on developing countries, especially the least developed ones, he added.

The BRIC countries should call on all parties to continue to implement the MDGs and urge the developed economies to fulfill their commitment to assistance, he added.

Chinese President Hu Jintao (2nd R) poses for a group photo together with Brazilian President Luiz Inacio Lula da Silva (1st L), Russian President Dmitry Medvedev (2nd L), and Indian Prime Minister Manmohan Singh during the first formal meeting of BRIC (Brazil, Russia, India and China) leaders in Yekaterinburg, Russia, on June 16, 2009.

First, BRIC countries should commit themselves to bringing about an early recovery of the world economy and work hard to overcome the difficulties and try to take the lead in recovering from the global financial crisis," he said, adding "This is not only for our own need, but also contributes to world economic recovery."

BRIC countries should solve the long-existing structural problems in their economic development and change their development pattern in an effort to improve the quality and level of their economic development , while striving to resume world economic growth.

He also urged BRIC countries to continue to open their markets, make use of their mutually complementary strength and expand economic and trade cooperation.

Second, BRIC countries should commit themselves to pushing forward the reform of international financial

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Fourth, BRIC countries should commit themselves to ensuring the security of food, energy resource, and public health, he added. He said while tackling the ongoing global financial crisis, efforts should be made to properly handle some outstanding problems that hinder development, such as climate change, food, energy, resource and public health security. A long-term approach and overall plan should be adopted to take all factors into consideration as these issues bear on the wellbeing of all peoples in the world and their overall interests, he added.

He also urged BRIC countries to increase investment in agriculture, develop advanced agricultural technique and curb market speculation. He also called for greater food assistance and closer agricultural and food cooperation.

"We should also accelerate our efforts in developing clean and renewable energy, and establish advanced research and promotion systems in a bid to diversity our energy supply," Hu said.

He urged the four countries to strengthen information exchanges and communication, share the experience on epidemics preventions and control, and work together to develop and share vaccines, and cooperate in pandemic control and prevention.

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China and India Agree On a Common Platform On Climate Change

Need to Improve On this Climate Change Road Map

"China India Citizen Initiative Blog" Mr Jairam Ramesh, the Indian environment minister was in China last week for the first ever ministerial level talk on climate change. The Chinese side was led by Mr Xie Zhen Hua, vice chairman of China’s National Development Reforms Commission. The two sides explored common grounds as part of their preparation for the upcoming UNFCCC meeting in Copenhagen in December 2009.

Here are the key points from the discussions.

"China India Citizen Initiative Blog" If China and India work together, along with some other countries at the UNFCCC, they will pose formidable challenge to those who want these countries to take immediate action on account of climate change. But there are three areas of serious concerns about these key negotiating strategies being adopted by the Asian neighbors.

l The Indian minister confirmed that there is "total

convergence" in the negotiating positions of the two countries. The two countries have agreed to coordinate their views on climate change before major international meeting. l Both countries are committed to the idea of "common but differentiated responsibilities" of developed and developing countries. l Neither side will agree to legally binding emission norms. l Both want to negotiate for higher levels financial assistance and technology transfer in return for promises to do their best to tackle climate change. l Both sides agreed to oppose trade barriers linked to climate change issues being prosed by developed countries. l The two delegations agreed to undertake jointly mitigation activities to reduce carbon emission.

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1. They would have done well to note that the understanding of the science of climate is limited, and there are substantive flaws in the theories underlying predictions of global warming.

2. While they have consistently refused to accept emission norms, they seem to have not equally strongly emphasized the role of economic development and competitive economic environment in stimulating greater energy efficiency.

3. This may have led to commitment on mitigation, but not so much on adaptation. Although adaptation is likely to have a more immediate beneficial impact on the people, reducing their present vulnerabilities to vagaries of nature.

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