At times, the mask of mutual respect slips. When India exploded a nuclear bomb in 1998, its defence minister, George Fernandes, let it be known that the arsenal was needed not so much because of Pakistan’s nuclear ambitions as because of the long-term threat from China. It was certainly true that India’s nuclear programme, started in the mid-1960s, was a response to its defeat in the 1962 war and to China’s acquisition of the bomb two years later. (来源：www.EnglishCN.com)

A widely held belief colours Indian analysis of China’s economic policies as well as its diplomacy: that Beijing has a grand and cunning plan, which survives all its political turmoil. Many Indian businessmen and policymakers react to evidence of China’s superior economic performance first with denial, and then with anger: China, it is well known, stir-fries its books, especially its GDP and investment numbers; India, suffering in comparison, is the victim of geopolitical statistical fraud.

It is true that China’s figures are highly dubious. According to the official data, China received $52.7 billion of foreign direct investment (FDI) last year; India got just 4% of that amount, $2.3 billion. But Sadhana Srivastava, in an article in India’s Economic and Political Weekly, has recalculated both India’s and China’s figures for the year 2000 to make a fairer comparison. He found that China’s FDI fell by half, while India’s more than tripled.

However, even on this basis, India was still attracting just 40% of the amount of foreign investment that went to China. Much of the gap is attributable to the activities of overseas Chinese—in Taiwan, Hong Kong, South-East Asia and America. They have ploughed far more of their money back into the motherland than have non-resident Indians, despite Indians’ economic success in many countries.

Making things better

Nor, statistical quibbling aside, can there be much argument about the relative pace of growth fuelled by such investment. China’s growth may be patchy, localised and exaggerated. But all the evidence of the senses suggests that it is far faster than India’s. That is especially true of industrial growth, and above all of manufacturing, which in 2002 made up just 15% of India’s GDP, compared with 35% of China’s. Indian manufacturers scratch their heads in bafflement at China’s ability to undercut them, usually blaming it on hidden support in the form of subsidised raw materials and soft credit. A recent report explained lower Chinese prices largely in terms of a tedious accumulation of minor cost disadvantages borne by Indian industry. The biggest, accounting for as much as half the difference, are sales and excise taxes, followed by the cost of capital. India’s much higher import duties—a trade-weighted average of around 24% compared with China’s 13%—also push up the cost of inputs.

Policy changes could do much to help India catch up: cutting import duties; simplifying and cutting indirect taxes; reducing the list of industries “reserved” for small companies; easing labour laws to make hiring and firing and the use of contract workers easier. Indeed some of these reforms are already, slowly, under way, or at least under consideration.

But almost all of them are politically difficult. The government has been loth to antagonise the many interest groups that have opposed reforms of one kind or another. Many Indians believe that a large part of the blame for their country’s inferior economic performance must be borne by the political system. China, the argument goes, is a dictatorship where the government and the businesses it favours can do what they want—change laws, build infrastructure, secure licences, fiddle their books—all without brooking any opposition. In India, however, not only does every step require dealing with an inept, corrupt and intrusive bureaucracy, but the democratic system itself also imposes extra costs and delays. For every important and helpful reform, there is a powerful lobby that will oppose it.

Such a political comparison, however, contains many misperceptions. First, as those who have done business in China know, decision-making there is far more erratic and far more prone to profiteering by rent-seeking officials than it appears to some envious Indians. Second, much that holds India’s economy and businesses back has little to do with democracy as such: corruption, fiscal mismanagement, a lack of international ambition and a history of over-protection at home. Where India overcomes these obstacles, and has a clear competitive advantage—as in software and other information-technology services—it can be a huge success.