China beats the virus, eclipses India in growth

To keep local transmission at negligible levels, China has been extensively tracking its population through their phones and going in for testing. Perhaps the most draconian step has been the imposition of lockdowns for weeks on end. Ironically, India has also gone in for extensive lockdowns, but the results have not come remotely close to those in China.

Festival rush: As caution is likely to be thrown to the winds during festivals like Durga Puja, another Covid surge is feared.

Subir Roy

Senior economic analyst

China and India present a sharp contrast in three key areas: the immediate direction in which the two economies are headed, the ability to handle the pandemic, and policy initiatives to revive growth.

Before the pandemic, China and India were showing around the same traction. China was reporting a growth of six per cent in 2019. In the last quarter (ending March) of 2019-20 towards the end of which the lockdown began, India achieved a growth of 5.8 per cent.

In the July-September quarter, China has clocked a growth of 4.9 per cent and India 4.5 per cent. The two figures are not all that far apart, but the Indian figure is poor in terms of its own earlier achievements. It marks the slowest expansion in over six years.

But the two economies are likely to sharply diverge going forward. In 2020, the IMF sees the Chinese economy growing at 1.9 per cent. On the other hand, the multilateral organisation sees the Indian economy contracting by a massive 10.3 per cent in the current fiscal, about the severest in the world.

But the two economies will catch up again in 2021. The IMF, in fact, sees India beating China by a small margin, foreseen to clock a growth of 8.8 per cent, compared to China’s 8.2 per cent.

What we see is that the two economies were running neck and neck just when the pandemic came. But the impact of the pandemic has been sharply different between the two. India is set to fall back significantly, but within a year the two will be back to where they were earlier — neck and neck.

Economies across the world contracted sharply when the pandemic arrived but thereafter climbed out of the downturn. In this return to growth, China has shown the greatest robustness. Right now, it is significantly better off than where it was at this time last year.

The reason for this is that despite being hit by the coronavirus first, it has been globally among the foremost in successfully tackling it. Right now, China has almost no local transmission (as distinct from what infectious baggage those coming in from outside bring). On the other hand, the US and Europe are buckling up to face a second surge. India, after becoming the country with the world's second highest caseload, has only for a month now been able to bend the curve downwards. But there is no knowing what the immediate future holds.

India’s recent performance has been marred by a huge surge in, of all places, Kerala, which was earlier the exemplar in handling the pandemic. The state did itself in by losing all self-control during the Onam festival. West Bengal, in all probability, is likely to follow the same pattern. There have been crowds of pre-Durga Puja shoppers following no rules whatsoever. As caution is likely to be thrown to the winds during the actual pujas, it is feared there will be a massive surge right after, taking down the national performance.

How has China tackled the pandemic? In order to keep local transmission at negligible levels, it has been extensively tracking its population through their mobile phones. It has also gone in for extensive testing as soon as even the smallest outbreak of infection has been reported. Perhaps the most draconian step has been the imposition of lockdowns for weeks on end in cities and urban infection zones.

Ironically, India has also gone in for extensive lockdowns of different durations and patterns in different states. But the results have not come remotely close to what has been achieved in China. What India has not resorted to is intensive tracking through cellphones. If it sought to do that, there would certainly have been strident protests over violation of privacy. A totalitarian country like China will not allow that and certainly suppress any protest by rights activists.

It is tempting to think that this is an inevitable price to pay for being a democracy of sorts with a degree of civil liberties allowing at least minimal civil society action. On the other hand, a small country like New Zealand has been able to totally suppress the virus without trampling on people’s right to privacy.

The India story is that despite the break in the transmission of infection from lockdowns, there has been no proper follow-up. The Indian public seems to be remarkably indisciplined and its leaders equally unwilling to impose some discipline. Across most of the country, there is enormous indifference towards the wearing of face masks in public. One state which is different is Goa.

While the economic contraction across the world is explained by the pandemic, the variation in pace and extent of recovery has hinged on economic policy. The robust Chinese recovery is explained by extensive public investment in infrastructure areas like highways and high-speed trains. This put money into people's pockets, which is now pushing consumption expenditure.

India, on the other hand, has been hugely parsimonious in financing a policy of stimulus, which, despite two rounds, has been unable to put in anything more than two per cent of GDP. Despite significant poverty and the plight of migrant labourers, India has not gone in for extensively putting money into the hands of the needy to spend. And public spending has got nothing to do with being totalitarian or democratic.