India could be richer than China with right policies

Indians could grow wealthier than the Chinese in the next 30 years if the government brings in fundamental changes, starting with clear property rights to farmers, says a renowned American economist.

“When I say India would be richer than China in 2040, I don’t necessarily mean India’s GDP (gross domestic product) would be bigger,” said Derek Scissors, fellow at the Asian Studies Centre at The Heritage Foundation, a Washington-based conservative think tank.

“What I mean is household wealth of Indians would be bigger than that of the Chinese if the right policies are adopted,” Scissors, who was in New Delhi to deliver a lecture at the invitation of the Aspen Institute India, said.

The senior research fellow, who focuses his studies on the economies of China and India, said the key to increasing wealth of Indians lay in granting property rights to farmers.

“The original and vital aspect of China’s economic progress was the granting of a very specific set of property rights to the farmers in the 1970s. That was the trigger. Agricultural productivity just absolutely soared,” he said.

In comparison, India has about 70% of its population in farms still producing much lower than potential.

“By property rights, I mean the economic definition, which is not to say that Indian farmers do not have rights, but the extent of these is totally unclear,” said Scissors, also the adjunct professor at George Washington University.

“The land registration act, the state ownership of resources, the contest over title that undermines Indian agricultural productivity,” he added.

Indian agriculture largely consists of small farmers, who are either working as tenants on other big farms or have marginal holdings which curb productivity.

Scissors was also critical of some of the rural population-centric, state-run social welfare programmes like the national rural employment scheme. He said such initiatives make the beneficiaries dependent on doles rather than be independent.

“That’s not the way to create wealth, that is a way to perpetuate the power of the government. It may have some political advantages, but they are myopic because you are not solving the problem of rural poverty. You are just alleviating it temporarily. It’s a bandage solution,” said Scissors.

“These are poor substitutes. That’s what you do; you make farmers into permanent dependents of the state. What you want is farmers to create wealth for themselves.”