ASIAN

STUDIES
Journal of the Department of Governmcnt and Politics

No. 8, May 1986

trl Pakistan and the Gulf : An Increasing
Ilole in the Islamic Bogey. Ajoy l{.
Jha E Afghan Crisis and Its Impact.
Dilara Cho''vdhury E Urbanization,
Its Impact in Deveioping Societies :
a general discussion. Al Masud
I'Iasanuzzaman E3 N{anagement Issues
in the Four Pathfinder Project Areas.
IvI. Kabir and lvloslehuddin trl
Social Justice and Economic Growth
trade-off Hypothesis : An Illustration
from the Comparative Economic
Perfonnance of China and India.
A. T. M. Nurul Amin tl Caste
Politics in India : a review essay.
NI. Salimullah Khan.

Jahangirnagar University
A. T. M. Nurul Amin*

Social Justice and F,eonoruic Growth

Trade-off Hypothesis : An lllustra-
tion frosl the Comparative
Economic Perf,ormance
of China and India**

Introdrction
For several reasons research on the relative economic
performance of china and India is of great interest to
social scientists. The practical significance of such
research lies in the fact that the accumulated development
experience of initial 30 yearsl (since their respective
liberation and independence) of these two Asian 'giants'
can serve to test empirically some of the social and
* Asoociate Professor ln Economics, Jahangirragar University,
Baagladesh.
**I rvisht , t0 express my sincere thanks to Mr. M. Salimullah
Khan, Associate Professor, Department of Government and
Politics, Jahangirnagar University, for enccuraging me to
work on this paper and providing somc comments on an
earlier draft.
 t't
Asian Studies / {J

economic issues rvhich are hot

debating points among
economists and political scientists.
To t"
a comparison allows one to test the relative specifi., ,u.h
of the two alternative politico economic ferfor*un..
systems. With
similar initiar econonric conditions,
china and India
have pursued their paths of deveropnrent
under strikingry
different poriticar conditions :
china with its own
of Marxian socialism, I:rdia with a lVestern-style brand
cracy and free market system.
d;;"-
Thus these two countries
have come fo be seen as representative
examples of
two alternative economic systems,
Their r"t"ti*^p.rtor-
mance is commonly believed
to have significant impli-
cations for the less developed
countries (LDCs) in their
pursuance of economic policies.
And since both the
superpowers (U. S. A. and U. S.
S. R.) are directly or
indirectly involved and. interested
in the affairs of these
countries, the whole episode has
drawn global interest.
Related with the interest in knowing
,t
performance of the two divergent
systems, there are"
other interesting questions too,
f6g5 are of significance
in tire context of a China-India comparative
siudy. For
example, in the recenf past Indian
course of economic
deveioprnent hasoften been pointed out in the soviet
economic literarure, dealing . with the
LDCs, as an
example of the so-caliecl .non-capitaiist,
] road to
development2. F'inding that most of
these countries are
not interested in or suitable for a
Soviet ,rO"
over, the Soviet Union prescribes this "i.rU._
road to develJp-
ment for the Third worrd countries
as an arternative
to her orl'n command model.
'rhus as a test
of the so-cailed 'non-capitarist, theory
 A" T. M. Nurul Amia 75

of development too, India is an interesting case study.

It directiy interlocks with china in the context of the
claim by some hardcore X,{arxist idealogues that
development of the productive forces or classicar
capitalist development is no longer possible under a
bourgeois ieadership. According to this view, the
Chinese model offers the real alternative to
both capi-
talist and the so called non-capitalist course to
development. Many are particularly sceptic about
rhe
Iatter course to deveropment because such an
order is
believed to destroy the dynamic elements
of both capi_
talist and socialist systems. A China_India
cleariy can shed some Iight in this respecr. "omporiro,
Yet another issue which is relevant in the China-
India development context is the question whether a
semi-feudal economy can directiy transit to sociarism
without going through tlie necessary stage of
capitalist
development.3
Since borh China aud India at the time of their
liberation (194g1 and Independence (1942)
respecrively
svere still predominantly semi_feudal economy
with ail
its socio-economic ramifications, the question
sometime
raised is : whether the two countries
can escape the stage
of-capitalist development as they appear to
be trying, in
different ways though ; and what l, ,n,
Jor,
i1.uny, of such skipping. China has taken".ono*i.
u a"r.r*ir.i
effort to build socialist society without necessariry
passing
through the stage of capitaiist order. Even the
recent
experimentations in ailowing individuar
initiatives,
market's role, foreigu investment, etc. have not
altered
the basic chinese course to deveropment
which is ensured
7tj Asian Studies i B

by the co:rtinuity ofcommunist rule. In contrast, India

has always vacillated and she' did not allorv either
capitalism to play its dynamic roJe nor [4arxian socialism
io take a firm grip. As a resuit, she could not benefit
from the productive power of either systern" One can
of course argue that she has shown more pragmatism by
trying to combine best of the two worlds. To what
extent that has been done and n,ith what results, are also
interesting questions.
All these are of absorbing interests, no doubt. But
from the point of view of more precise economic content
of these questions, it seerns China-India economic deve-
lopment experiences provide a unique opportunity for
conducting an empirical test of a tinre-honoured the-
oretical stand that there is an inherent confiict between
econotnic growth and greater equity. It is claimed
that there is a "basic conflict" between social justice
and economic gror,r,th. The persuasive argument runs
as follows :
It is well to recognize that economic growth is
a brutal, sordid proce$s. 'fhere are no short cuts
to it. The essence of it lies in rnaking the labourer
produce more than he is allovzed to consume for
his immediate needs, and to invest and reinvest the
surplus thus obtained"a
It is argued that the ,'clamour for better distribu-
tion" before increases in production and "'vague welfare
state' ideas undermine a firm committment to gror,.rth
philosophy." The inevitable conclusion fronr the above
iine of argurnent is :
'fhere exists a functional justification for inequality of
A. T. M. Nurul Amin 77

income if it raises production for all and not

consumption fora f ew. The road to eventual equalities
may inevitably lie through initial inequalities.s
One can easily see that China arrd India offer
contrasting experiences in the background of the above
sort of growth philosophy. While China organizes her
development thrust on the explicit strategy of greater
equity, India appears believer in the conflict
to be a
between growth and equity. Ifence, the interesting empiri-
cal question is if India has achieved greater growth
rate than China or rvhether tlhe 'eventual equalities'
have been reached (or approaching anyn,here near that)
by pursuing a growth strategy accepting'initiai inequali-
ties.' Similarly, the moot question for the Chinese case
is that if pursuance of a vigorous equity poiicy has
entailed significant sacrifice in grovrth.
The research of this paper is prinrarily concentrated
on this theme. The hypothesis that there is an 'inherent
ancl basic conflict between growth and equity' will be
weighed in the background of the available evidence,
both qualitative and quantitative, from the two contrasting
strategies of development pursued in China and India.

China-India : Problems of Comparabllity

Ever since China and India emerged as independent
nations, they have been subject to comparison on the
scale of economic performance.6 Some similarities facilitate
such comparisons. Each is of continental size, with an
enormous population ; each began their development
efforts from a predominantly agrarian society with an
gxtremely low level of per capita income base and
 78 Asian Studics / B

correspndingly widespread poverty. India had

certain
advantages such as a centralized administration
and a
more advanced transport infrastructure. But on most
counts, the two sides were more or less evenly matched
at the start of the race. ?
However, despite these obvious similarities, people
express reservations about comparability
of economic
perfornrance of these two countries.
The objections are
rnainly raised on the following grounds : (a) fotally
different poiitical system, rbl fime pericd is not long
enough, (c) complexity and staggering problems
of the
two societies, and finally, lack of reliable
1d) information.
On the first objection, it is argued that given the totally
different political s)'stem it is neither desirable nor use-
ful to compare the two systems. Instead, it is suggested
that more meaningful question is to astrr whethei
eo"h
is efficient or equitable within the constraints specified
by respective political system.8
we would however note that the continued interest
in comparing the two countries precisely lies in the
fact that two systems are radically different. on the
second point, we u,ould argue that the time span of
experience is not that short given the fa-ct that rapid
development is the goal all arourid. complexiti*, of ihu
societies involved and the information problem should also
not act as deterrents since it is onry through relentless
human search for tnowledge that unknown is unveiled,
Thus raising fundamental question as to the tJesirability
or efficacy of comparing the two systems does not seem
to be illuminating.
A. T. M. Nurul Amin 79

Somo Recont Comparlsons

There have been four nrajcr recent elforts of compa-

ring the economic performance of China and India.e
Rlchman Iligler Sociel Development of Chlna

Richman's original studyl0 is based on his first hand

research frcm visits to India and China, IIe later up-
dates his studyll with evidence drawn from several other
sources. On the basis of his findings he claims that
"China has done considerably better than India...with
regard to most indicators of economic development."
His specific findings are (a) China has a substantial
Iead in technological, industrial, and agricultural fields ;
(b) India has a major lead in special management deve-
lopment and executive training but Chinese managers'
typically seem to be more pragmatic, inventive, persistent,
flexible : (c) China has been more suceessful in matching
educational system to manporn er requirments and thus
has less uuemploymbnt and greater job satisfaction on
a national scale than India and finally 1d; iabour produ-
ctivity is higher ancl absenteeism is lower in China
than India.
It is interesting to note that Richman develops a
thesis in which Chinese success is attributed to its higher
level of social development. His central argument is :
The willingness and ability of people to work
relatively hard and effectively on a national scale
for goals which inspire them are the most important
factor in explaining a countt'y's economic develop-
ment, and that such willingness and ability stem
chiefly from a country's social development.l2
Richman suggests that Chir'a's social development as
-€

80 Asian Sturlies i I
measured by
literacy/education levels, work motivation,
social mobility, inconre distribution, employee participa-
tion in management, health seryices, etc., considerably
higher and hence performed better economically.
In explaining the chain of causal links, Richman
then attributes higher social development of china to
its ideology. But he fails to note that at a certain
stage of development, higher level of social developnrent
itself rnay have negative contribution to economic
growth.I3 For example, increasing awareness for social
justice or uirdue radicalisation of societ-v (as is often
the case in so may LDCs ancl welfare and environrnental
concerns (as is the case in nrany DCs) n:ight adversely
affect economic growth. For LDCs this can happen
through spending of investible funds in sectors due to
the rising expectations and greater mass awareness for
social justice. Sectors of the economy in the narne of
social justice but having little positive effect on the
increase of production, For countries like China, the
relevant point is that there might be a critical point
at which ideological exhortation and enforced discipli,e
could also negatively af.f.ect economic growth. The
growth figures of the period of Great Leap Forward
and Great Proletarian cultural Revolution have widely
used in support of such c]aim.la
Richman even discusses the prevalence of an in_
herent conflict between ideology and the .,ultimate
economic, materialistic and power objectives,, of China,s
Ieadership of the Mao era. But he appears to be
optimistic about china and predicts that it will be
able to strike a right balance between the two. In
 8l
A T. M. Nurul Amin
India's case, the outlook for "development does not
look nearly as bright". "In general," Richman asserts'
and
"India is much further from its idealized society
its ideology has been far more ambiguous and far less
effective with regard to social change and overall
development than has been the case in China"'r3
justified'
Richman's pessimism on India might be
But the problem with such a framework of analysis
is that there is no way to specify the economic variables
vvhich are affecting his hypotiresized higher
social
with ideology
development and its functional relationship
as he sees it.

Swamy g An Ioilian View

On the other extreme of Richman' we have a

He
representative view of Indian position in Swamy'to
the development performance of China and
"xu*ines the purely economic sphere and attempts a
India in
detailed statistical analysis of economic growth in the
two countries. Swamy's study is a bold attempt at
tackling the difficult statistical problems arising from
inter-country comparisons. His major conclusions are
as follows :

(a)therateofecodomicgrowthinChinaandlndia
(3'0%
was about the same over the period 1952'65
per annum), but if the period is extended to 1970'
India increases its lead over China (India 3'7%,
China, 2.3% Per annum);
(b) India's foodgrains production rose by 2'9 per cent
per annum between 1952 and 1970, as against 2'2
pe, cent for China, China's rate of growth of f ood
 82
Asian Studies / B

grains output dropped significantly

(c) India's performance
in the 1g60s
-*u,;
..decisively
in non_foodgrain .ror,
better,, ; anrl
(d) industrial procruction rose at the
same rate in both
countries between 1952 and
1965 $){per annum).
China, however, gained moderately,
period lgSZ-70 (6.?% per
i, ,fr.-i"rs.,
annum as against 6.1%
per annum).
Swamy,s conglusi6ns, however,
can be challenged
on the following grounds :
First that the findings of Swamy are arypical
and represent overry1b1v1
brown Iniian ,u.cess are crear
when
compared with findings of other
researchers (see Table 1).
second, Swarny's concrusions
foilow from his
assumption that there \^ras
a dramatic farr in the share
of the service's sector in china's
GDp between 1g6b
and 1970 (from Bz.g%of
GDp in 1965 to 22.91i in
1970) as a result of trre curturar
Revorution. perrcins
has demonstrated implausibil;ty
of this assumptiop.rz
Third, Swamy,s estirnates have
also been infiuenced
by his use of a rarher low ofi:cial
US estimates of China,s
indtrstrial output and his use
of Inclian lg4Ll4gprices.
Fourth, the bias is also evident
in the fact that
whereas he Iiberairy depends on
India's offciar figures
but carefully discounts Chinese
official figures.
Finally, swamy's study did not examine rerative
performance in the area of
income distribution at all.
Flowever, to be.fair to Swamy,
it is to be acknowf.Jg.a
that notwithstanding the ubove .riti.irru,
it is a good
source of sectoral and overall
data on grov,,th of the
two countries"
A. T. M. Nurul Amin 83

Weisskopf g Favourablo to Chlua

Weisskopf's papersls also concentrate in the, pure
economic sphere in comparing the development perfor-
mance of the two countries. The evidence is mainly
drawn from the moclern postwar period data.
Comparisons are made on performance regarding three
broad economic objectives : economic growth, econonric
equity and economic self-reliance. The various indicators
on each of these cbjectives show that China has been
more successful than India.
Weisskopf's conclusions however warrant some
qualifications.
First, the rate of growth of India's per capita national
income beiween 1951 and lg7t averaged 1,.4 per cent
per annum as against a Chinese average range of. 2-4 per
cent per annum for 1952-70. An underlying assumption
in these calculations is that India's rate of population
growth is higher than China's. It is plausible, but there
is no firm Chinese data on which this assumption is based.
Second, Chinese self-reliance, on which Weisskopf
is so eloquent, has rather been forced on China by
Soviet withdrawal in 1960. It is like 'making a virtue
out of necessity.Ie Weisskopf attributes many failures
of India to foreign economic control. This does not
seem to be wholly true. In fact, despite receiving huge
foreign aid and private investment, India has been able
to keep itself free from undue foreign control. Of
course it has largely been possible for its size, resource
diversity and poiitical sophistication in deaiing with
external powers. One would rather suspect that Indian
failure is more due to its outdated institutions and
g4 Asian Studiet / B

firmly rooted vested interest in the leadership.

Third, Weisskopf's appraisal on equity is based pri-
marily on qualitative evidence. As a iesult" the founda-
tion of his evaluation on this count is somewhat weak.

Lateef : An Ayowedly Neutral View

Another study on the relative economic perlormance
of China and India has been done by Lateef.2o Given
the controversial appraisal on relative achievements of
the two nations, Lateef starts with an avowed bow of
neutrality. The paper's analysis at places appears to
represent a balanced view but the basic contention
becomes clear from the statement that ,,China's lead over
India is not decisive enough to be significant,,. Indeed
his sympathy to Indian position becomes often obvious.
Lateef spends much space demonstrating the ina-
dequacies of the data base in rnaking any cornparison
between China and India which of course hardly any
one denies. He is very much critical on any observation
based on visual impressions. It is not dificult to
appreciate his uneasiness with such basis of evaluation
since it may easily hurt humai values and dignity vahen
the common sights of Calcutta streets are portrayed even
by a casual observer.
His point on China'e population figure is well taken.
It is imperative to have a good approximation of the size
of population. Because much of these appraisal will
breakdown if the population is really near one billion
as claimed by some even during the seventies. Bur it
seems to be an exaggerated claim. Clark's estimatezl
seems to be more plausible, which puts the 197b size of
A" T'. M. Nurul Amin 85

China's population to 768 millions. It is based on 1953

census and a 'compromise'rates of increase averaging
1.24 per cent per annum during the period 1953-75.
Lateef admits that "in the area of income distribu-
tion China's achievements are most impressive".
However, he is critical of Weisskopf for similar conclu*
sion for the deficiency in substantiating China's
achievements on equity. But Lateef fails to provide any
additional quantitative evidence to increise a reader's
confidence in this regard.
Finally, although his paper is basically a survey of
the other works, it attempts a projection of the relative
prospects in growth of the two nations in the coming
years. Thus in the absence of use of concrete data, it
looks like mere conjectures.

Growth Performancs : A Sumnary

Since primary planning objective in both countries
is rapid economic growth. records in this repect of{er a
eommon denominator to evaluate their relative
performance. Comparability on this account is further
facilitated by the f.act that both countries, as started
previously, stated their develdpment efforts about the
same time with more or less the same initial level of
development. India launched its F'irst Five Year Plan
(FFYP) in 1951 and China in 1953. At that time, the
level of per capita income was roughiy the same in the
two countries ; agricultural productivity was somewhat
higher in China, while the level of industrial develop'
ment was somewhat more advanced in India.22
Unlike data on other economic indicators, the data
A. 1'. M. Nurul Amin 85

China's population to 768 millions. It is based on 1953

census and a 'compromise'rates of increase averaging
1.24 per cent per annum during the period 1953-75.
Lateef admits that "in the area of income distribu-
tion China's achievements are most impressive".
However, he is critical of Weisskopf for similar conclu*
sion for the deficiency in substantiating China's
achievements on equity. But Lateef fails to provide any
additional quantitative evidence to increase a reader's
confidence in this regard.
Finally, although his paper is basically a survey of
the other works, it attempts a projection of the relative
prospects in growth of the two nations in the coming
years. Thus in the absence of use of concrete data, it
looks like mere conjectures.

Gtowth Porformancs : A SumnarY

Since primary planning objective in both countries
is rapid economic growth, records in this repect of{er a
common denominator to evaluate their reiative
performance. Comparability on this account is further
facilitated by the fact that both countries, as started
previously, stated their development efforts about the
same time with more or less the same initial level of
development. India launched its I"irst Fii'e Year Plan
(FFYP) in 1951 and China in 1953. At that time, the
level oI per capita income was roughiy the same in the
tw,o countries ; agricultural productivity was somewhat
higher in China, while the level of industrial develop-
ment was somewhat more advanced in India.22
Unlike data on other economic indicators, the data
 88 Asian Studies / [3

Flowever, it should be noted that the long-terrn

rates of agricultural growth cited above are apt to be
misleading. For India's growth advantage was confined
largely to the first decade of the period. Since the early
1960s the rate of agricultural growth in China appears
to have exceeded that of India. As Table 1 shows,
the average annual rate of growth of Indian Agricuitural
output dropped from 3.8 per cent in the 1950s to 2.2
per cent in the 1960s.
The directly relevarrt question for the major thesis
of this paper is : why did China fail to exceed India
in agricultural growth ? Is it because the Chinese are
paying a price for their stress on its distribution z
Before we attempt to analyse this, let us examine what
has happened in the industrial sector.

Inilustrial Growth
Estimates of China's rate of growth of industrial
output for the 1952-70 period range between 8 to lZ
per cent (Table 1). The rate was especially high from
1952 to 1958 (between 75/, and, z\%),which accounrs
for the fact that China's overall rate of growth exceeded
India's in the 1950s even though Indian agriculture
grew more rapidly than Chinese agriculture (Table 1).
Estimates of Chinese industrial growth since the mid-
1960s range from 8 to 10 per cent per year.--close to
the full period average.
Official figures suggest that Indian industry grew at
a rate close to 6 per cent from l9b1 to 1,gTt, with a
slightly higher rate recorded in the 1950s and a slightly
lower rate in the 1960s. According to Table 1, the
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A. T. 1\{. Nurul Amin B9

average annual rate of growth of industrial output was

6.0 per cent from 1950-52 to L970-72,6.5 per cent from
1950-52 to 1960-62 and 5.6 per cent from 1960-62 to
7970-72.
The slower Indian industrial growth is not hard to
explain. The single most important factor is the sharp
decline in the rate of investment. Net domestic capitai
formation (as a percentage of net national product at
tactor cost ) dropped from tT per cent in 1966-67
to I3.7 per cent in !972-73.24 Gross domestic capital
formation in China increased from 23.5 per cent in L957
to 32.2 in 1970 (as a percentage ot 1952 prices. )
People have suggested this high level of investment
for the Chinese has been possible through severe restric'
tions on the rate of growth of personal and social
consumption expenditures. This point, again, isextremely
important for the central theme of this paper, namely
the trade-off between accumulation for growth and
consumption needs. We postpone this discussion for a
separate section.

The points of Doparture

This paper seeks to make its points of departure
from the other al'ailable studies on the relative perfor-
mance of China and India in the following :
First, although we hear a lot about the contribution
of motivation, ideology, mass participation in Chinese
economic growth*all affording X-efficiency25 in the
productive activity, no attempt have been done to measure
the growth effect of these factors precisely. A neoclassical
production function framework can conveniently be
9r)
Asian Studies / 8

used to this end. This paper makes an atternpt in this

direction.20
The second point of departure of the paper lies in
investigating the reiative economic performance of China
and India in light of the growrh-equiry trade-off or
conflict hypothesis, which, as discussed at the outset, is
the central task of this research.
We would also attempt to briefly discuss the Chinese
arid Indian economic performance from a angle of
standard demand suppiy constraint to development. To
us the Indian strategy appears to be an strategy in
confronting the supply constraint to development, which
is the on-going tradition in the LDCs. On the contrary
the Chinese approach appears to us to be dealing on the
demand side constraint to development. If this is true and
if China has really done better than Inclia, this approach
will shed new light on drawing development strategy
vis-a-vis supply and demand constraint.

(i) Neoclassical Framework

We mentioned previously the context in which using a
neoclassicai production function framework may be
useful in a China.India comparative study. Let us see the
reievance of the point below.
The general form of a neoclassical production
function is :
Q:Q(L,K,I)......... .....(1)
where Q:Output rate
L:rate of labour input
K: rate of capital input
t :a residual
A. T. M,I'iurul Amin 9l

One specific form, a Cobb-Douglas one is :

8B
Q:L K t...'..........,...,..(2)
where 8: share of the labour and
F: share of the caPital
Also, Cobb-Douglas form implies I + p: 1
Taking the logarithm of. (2), we get :
Log Q:8Log L+plog K+Log t
Taking the change in the variables,
d11og 91:td(log L)+pd (los K)+-d (los t)
Which is /o change in Q:8/o change L+ ft% change
in I<+% change in t
or, % LL + % LK +% Ll.. ... (3,
The usefulness of this framework should soon become
ciear.
The explanatory variables for a change in growth
of output are labour, capital and a residual't'. That is
the percentage change in output can be attributed to
percentage change in labour, capital and the residual 't'.
The residual 't'can represent a host of factors which
are not directly measurable. In case of China we can
accommodate the motivational factors, ideology, mass
participation, etc., and their contribution in growth via
X-ef6ciency. The point is that if we get a significantiy
greater contribution to growth attributable to 'to the
conclusion becomes obvious that those factors (as a
group) are impcrtant. Appiying this to both China
and India, we can approximate the contribution to growth
emanating from factors other than labour and capital.
The basic problem arises due to the fact that all the
required data are not available. We need the growth
92 Aslan Stutlies / B

rate of output, labour force, capitai stock, share of

iabour and capital in national income. f)espite the in_
herent Iimitations, output figures are not difficult to
find. But the same is not true for the labour force
data. In China's case it is not even fully meaningful
in conventional sense because of the peculiar way of
employing the whole population through its commune
system. Under such a situation the closest proxy of
the iabour force growth is the growth rate in population.
In India's case, altirough some labour force data are
available for the industrial sector, the corresponding
figure for the agricultural sector is not a'ailable. Hence
here also we are to depend on population gror,vth rate.
l\doreover, for comparability with China, this is the
better alternative instead of using some partial labour
force data. Investment or capital forrnation data is used
as an index of rate of capital input.
The most difficult task is to get estimaies of and
F, the shares of labour and capital respectively in the
national income. Several attempts to get some indexes
for this did not meet with .r...rr. Fuither exploration
is necessary in this regard. The only way out for the
moment is to make a realistic assumption o, the relative
shares of income by labour and capital. Both countries
being still underdeveloped and capital stock not being
at a high level, a priori one expects that .huoe oi
capital in the national income will be relatively lo,+,,.
The high corporate profit in India might alter the
situation marginally. But noi to a significant extent.rr
With this in view, an assumption is nrade that the
proportion of share of income between labour and capital

d
lfr

{
.;
,i
A. T. M. Nurul Aniin 93

is in the neigirbourhood of 4: | (80% to labour and

20\ to capital).
The use of Weisskopf data yields the contribution
of residuals to incom e as 2.4 per cent for China and
1.4 per sent for India.28 Swamy,s data yield sdiil less
significant resuits. But the relative position does not
change (.28% for China and .L$% for India). Since
Weisskopf's data are verified with several other in-
dependent estimates, they seem to be more reliable
than Swamy's.
The results confirm that China has been relatively
X-efficient in its productive activity than India, presumbly
through its ideological exhortation and institutional set-
up. But once again it is stressed that this result and
analysis remain very rough and tentative. We would
like to make it clear here that further work and more
refined analysis is necessary to reach definite conclusion.

li. supply vs. Demand Constraint Framework

As noted before, the development strategSr drawn
with respect to supply and demand constraints offers
another contrasting dimension in evaluating economic
performance of China and India.

supply Constraint
As is the case in development literature in general,
most of the theories view development as constrained
in some way by the limited availability of crucial
productive inputs such as capital, skilled iabour, entre-
preneurial talent. Some theories stress the long-term
factors such as appropriaie economic, social and political
 96
Asian Studies / 8

l:d. major thrust to enter the middle-Eastern

and other
LDC martr<ets including Bangladerh
io ,.lt its products.
But in this respect, China has shown
u *r.*.rdow
arnount of rearism. It has create,
a we, baranced internar
market' Its distributionar priority "or
afforded .p..uairg
purchasing power among
broad masses of its people.
It did not hang up on supply constraint and the policy
of self-reliance (wheth", tv .ioice
or being forced upon)
has been a boon, in following
u-.or*"t strategy.
Thus the rnajor hypothesis that
the above discussion is that crriou emerles out of
has done rerativery
well concentrating on the a.roura
.onstraint of develop_
ment. And India has pursued a policy
to confront th.
supply constraints to
tance of the demand_developntent,
ignoring th. irrp;;-
side. lts poli"y and perfor*ur."
on economic equity, examined below,
show concluriu"iy
that the demand aspects have
care of. lVe would argue that to
not U..rr r#.#ffi.;
pJrenomenon exprains_
a great extent this
the better f.rfor*un.e of china.
.!owev11, this hypothesis requir.r-*o." precise
verifica-
tion. This should be possibte if more
data are available
on econonric indicators which have
direct b"urins on
both the supply and dernand side
irru.*.
Comparatlve performarce In
Economlc Equity
'Io illustrate the utility of
the growth equity trade_off
framworh and put it on use, ,u" ,u-.d precise
information
en the relative perforrnance of both
countries on the
scale_of economic growth as
well as economic equity.
We have already aiialysed the growth
aspect earlier.
We need now to examine the respective
achieve_
A. T. [,{. Nurul Amin 97

ments with regard to ,distributive justice,, which is,

again, an explicit planning objective in both countries.
As discussed previously, despite their deficiencies,
we could assemble some precise data on output growth
rates. Unfortunately quantitative data on the indicators
of economic equity are generally less available and less
reliable than data on economic growth. Because of this
non-availability of precise data, the analysis on income
distributio' cails for a detailed discussion of economic
indicators which have direct or indirect bearing on econo-
rnic equity. The discussion that follows will concentrate
on the following such indicators : (a) wages and salary,
(b) personal rural income, (c) employment, (d) consump-
tion floor, (e) Ilealth Care, (f) Iiteracy.education level,
(g) Social mobility, (h)regional disparity.

lfage antl Salary

Unlihe some of the more aggregative measures of
inequality, wage and salary differentials are easily ancl
precisely measurable. Hence their comparison should
provide some definite indication on'the issue.
Almost all available evidence indicates that China
has drastically reduced salary differentials. From a span
o{ income difference of 50 times between the highest
and the lowest salary prior to the liberation, the Chinese
reduced this, rougirly to 3:1. Of course the differential
has not heen stable throughout the period. It rose
somewhat in the later 1950s, contracted again in the
1960s, restored again in the early 1970s ; but it did
not exceed 7:1,3I
Riehman's survey32 in the mid=lg60s revealed that
-f

98 Asian Srudies / B

the ratio of pay to average pay was typically no greater

than 2.5 to 1" The highest ratio rvas 4 to 1. In the
most enterprises the differences between the highest and
the lowest pay was less than 4:1, and the highest paid
employee in the entire sample received only about 7
times mcrre than the lorvest paid.
in a plant are classi-
Anotlier repc'rt33 shows johs
fied into 8 labour grades. 'fhe ratio of the highest
to the iowest Eage is about 3:1, from about 40Y34
a n:onth at the hottom to I10Y at the top. The plant-
wide average was usually betrveen 50 and 60 Yuen. This
indicates that the labour force is heavily concentrated
in the lower ]abour grades. The manager usually earns
Iittle rnore than the rnost sLilied worher. Engineers,
however, sometimes get as high as l50Y per month.
The pay range for university teachers is about 70-350Y,
but there are ver!' few at the top rafe, the report
says. The highest salary in the country, for a iop
government official is reported to be 450Y. But
tire numbers enjoying this high salary are very
srr:all.
In the incc''me differentials in India have
contra-st,
long been and stili remain amor:g the highest in the
rvorld. fn case of Ini{ia some estimation of the Gini
Coefficient3s is avaiiable. F'or urban or non-agricu]tural
income the Gini was 46 in 1967 68.36 Since comparable
data for China is not available we do not intend here
detailed anall'sis in this line.
Richrnan study shows the high-level company a:rrl
plant mangers in India often receive net incomes 20 tc'
30 times greater than the averag'e worker. This contrast
A. T. M. Nurul Amin 99

in mere pay dif'ferentials between India and China.does

not fully reveal the difference in inequality. Because
many gcods and services in China are provided rnore
or less equaily to all employees at highly subsidized
rates. On the other hand, in India higher Jevel execu-
tives often enjoy various fringe benefits that are unavaila-
ble to lower level ernployees. These facts combined
with the institution of private ownership, inheritance
law, lveak property tax structure well illustrate that the
inequality in real income (arising out of wealth and
assets) will be much wider than indicated initially which
showed merely the nrargin of difference in wage and
salary incomes.

Rural Porsonrl fncome

The difference is f ound furtlier marked on individual
rural income. Most evidence indicate that income distri-
bution w,ithin a commune in China is quite egalitarian.
While people may receive more or fewer'work points'
per day, depending on the job and their performance
of it, the range is not wide. Days worked in the industrial
enterprises of the commune pays a bit more than days
spent as farm labour, but not much more. However, 4
priori ane expects that income can vary significantly within
a commune with the nurnber of able-bodied workers
in the family, the quality of land alloted to each produc-
tion team and the quality of land for private plots.
Good quantitative estimation is not available ; Perkins'
conjecfures that differences in the qualitS of land bet-
ween production teams could lead to "income differences
of a ratio of at least 511'rt:z
 100 Asian Studies y r)

When considered the incomes among communes,

the above difference further widens, depending on soil
fertility, wa.ter availability, crimate, distance to market,
and other factors. One sample survey found average
income per worker in the richest commune studied
was
3.4 tirnes than in the poorest one. Also, the average
level of rural income is substantially below than that of
urban incomes. Another study shows that at the
Iowest botiom the incr:me can be as low as 12y
per
month.
This, compared to 40y, the lowest wage in the
urban area yield a rural-urban income differential of
1:3.3. One typical Indian view38 claims country-wide
income differentials in clina is r:4s without providi,g
the basis of such ciairn. It is arso essential to remember
that these differentials do not talre into account social
welfare benefits lwhich'would reduce urban differentials
but widen rural-urban di{ferentials) ancl do not atternpt
to cost. in terms of urban prices, the value of peasant
consumption leveis (r.vhich might lower the rural-
urban differentials).
Son:e Indian studies indicate a decline in rtiral
inequality since independence. But these ignore the in-
crease in urban inequaliry* due to the rural-urban
migra-
tion. Most of these studies arso fair to tarre account
o'f differe,tial price changes facing different income
classes. lt is obvious from the price indexes of the
staples3e had other essentials that price movements
have
been differentially unfavourable to the poorer classes
with the result that tlie relevant studies underestimate
the income.inequality.
A. i'. M. Nurul Amin i0r

At least two studiesac reveal that there is no evidence

of any increase in the real wages of agricultural labourers.
The data compiled by the World Bank show that Gini
Coelficient for rural income rose from'36 in 1954 to
'46 in 1967-68.4'
The prevaience of widespread underemployment in
rural India is well-known. The rural urban drift indicates
increasing open unemployment. As now most observers
tend to agree that the "Green Revolution" teclinology
(which took firm roots in parts of India in the late
1960s), had a disequalizing effect on agricultural output.
The problem in determining the extent of incorne
differential in rural India lies in the fact that unlike
the Chinese Production Team as a basic accounting
unit there is no organized producing unit in India except
the 'natural' family unit. Given the subsistence nature
of the poor family units, comparison of their income
with rich peasants is difficult. The coverage of income
tax couid give quantifiable information. But the fact is
that most of the Indian population still remains outside
any assessment for income tax,az

Employment
Perhaps, none will deny that the first requisite for
any step towards equitable distribution is to guarantee
employrnent to every able-bodied person. China's achieve-
nrent in this regard is truly unique.
The secret lies in the so called "zero mobiiity,
full employment" rnodel of the Chinese economy. Open
employment is effectively contained throughstrict controls
on the migration of labour. Surplus labour in the
 l$2 Asian Sludres I iJ

countryside is absorbed in the communesystem guaran-

teeing employment. This unique achievement is cleariy
in sharp conlrast to the prevalence of widespread open
unernployment in Indian cities and rural areas. T'he
increasingly serious unemployment problenr is evident
even from its officiai figures 3.3m in 1951 ; 6.6m in
1966, 12.6m in I969.4s Because of the surplus iabour
absorption in the comrrune system and strict restriction
on labour mobility, the Chinese have virtually eliminated
open unemployment. This lrowever need not imply rhat
China has solved eniployment problem in its totaliiy
siirce underemployrnent may be very much wiclespreaci
in the country.
As a matterof fact, scanty evidence ihat are available
suggests :
(i) disguised and underemployment exist both in China
and India,
(iil urban unemplolr6ent is more severe in India,
(iii) urban underemployment is probably more serious in
China,
(iv) unemployment among high school and college grad_
uates is much worse in India than in China.
Richman's (1969) study partially substantiates this
overall picture. The rate of labour absorption in the
modern industrial sector in the two countries provide some
indirect evidence of respective severity of unemployment
situation. Industrial employment increased in China at
an average rate of roughly i0 per cent per year bet-
ween 1950 and lgOO. Since 1966, the corresponding
growth figure has been slightiy loi,ver. By contrast,
industrial employment increased in India at an average
a. t'. tr,t. ir{urul Amin t03

rate of only 2.2 per cent per year between 1951and

L97 1.44 Thus China has abseirbed labour much nrore
rapidly into modern industry tlian India. Whether this
has been possible due to greater concern for labour
intensive production technique in China with the consequ-
ence of less efficient production and lor,ver grovrth rate
is, although interesting, but a di{ferent question w}ricir
rve have analysed previously by. The emergirrg picture
there does not tell us that China has done any wol'se
than trndia in output growih.
However, it must be admitted that because of the
unique mehns of labour absorption in China, there is no
lvay to determine the'real' unemployment (in the sense
of including the underemployed with the unempioyedl
figure for China which wi]l be comparable with the
Indian figures on open unemployment, Because of this
uncertainty, the better performance of China has a built-
in mechanism in the system to absorb the potentially
dangerous threat arising out of the mass of the
unemployed. When the rest of the world is particularly
beset r,vith this probiem, China has apparently. at least
lessened the most important source of social unrest.
Also when the governments of most of the LDCs
have not found an answer to tackle the exodus of popula-
tion from the rural areas to the cities vvhich is generaiing
unprecedented urban scenerio, the Chinese seems to
have evoh'ed an effective means to tackle this inherent
problem associated with the conventional way of indus.
trial development. Cirina restrains this continuous iabour
flow from country to city in several ways (a) industrial
location policy, (b) enrployment control, (c) housing
 lU4 Asian Studies / B

allocation, (d; registration requirement for residents, (e)

social pressure and even (f) some element of coercion,
if necessary.
China appears to be very much aryare of the in-
creasing probiem of tlre cities and have succeeded ro
:'estrain the growth of urban population. For example,
rvhile the cities in India and ersewrrere in trie rncs
are growing at an unprecedented rate, Shanghai,s
popula_
tion is on decline.as Apart frorn the above pot;"y of
indirect inducement, thiS has been achieved through
what has been called the .rustication, program of the
eclucated youth. Since the Cultural Revolution,
the pro-
gram has sent more than l2m urban youth in ull of
China to the counrryside for permanent relocation.ao
Ilecause of this effective dumping of labour in
the
countryside, the ratio of China,s rural population to total
population has ireld steady at about B0 percent, instead
of falling as it normally does in the course of economic
developrnent. One,s first impression might be that this
is simply shifting the burden of surplus labour from
urban to rural area, with an intensification of rural
unemployment. But rvhat seems to have happened is
that the new uses for labour within the rural sector
(for tiuilding social overheads, agro-based industries,
small industrial units, etc.) have adequately accommoda-
ted the growth in the rural labour force. Compared
to this, India typifies the pattern of develop*.rr, o,
predicted in the .dual economy model,az But,
urnorg other
reasons, due to the (a) unexpected growth rate in
fopulu_
tion (perhaps due to the dramatic decline in death rate
contributed by modern life.saving medicine), ancl (b)
A ?. M. NuruiAmin ro5

application of inappropriate, technology, the absorption

of surplus labour in the modern industrial sector has
not been possible at a rate warranted by the growth
of tlre labour force. To meet this new reality, India
did not succeed to innovate an alternative development
path. China, on the other hand, has shown more realisrn
in appreciating the limitation of the urban industrial
sector to absorb the rapidly growing labour force and
consequerltly took all precautionary measures to curb the
urban drift.

Consnnrption ['loor

Concern about unemployment ori grounds of equity

reflects not only concern about the ar.ailability of work
opportunities but also concern about the availability of
basic necessities of iife to to economically rnarginai
population. The unique way of tackling unemployment
with the commune system also afforded China to
guarantee a consumprion floor, i.e., a minimum share
of what is produced by that commune.
It is striking that a country as poor and vast as
China has managed to establish a guaranteed minimurn
level of living, something which many of the rich
countries have still not accomplished, The main compo-
nents of this minimum level are : (a) a grain ration in
the range of 40-50 pounds and vegetable oils amounting
two-thirds of a pound per person per month (vege-
tables are plentiful, fruits and animal product are not),
(b) the ration of cotton cloth : 15 to 20 feet of cloth
per year of a 2.6 feet width, (c)some kind of housing
for every one, (d; free education, including a living
 106
Asian Studies I I
allowance for each coilege student (lgy per month, of
n hich 14Y for food, remainder as pocket money).
One thing must be noted that this basic minirnum
of living is an earned one and does not originate from
any welfare fund for doling out to the rvork-shy or
Iazy individuals. This sort of minimum guarantee for
food, ciothing and housing is unheard of in India.
The government of India fin<is it diffrcult even to supply
the ration (which jusr includes rice and/or wheat, edibie
oil, sugar) merely to the .statutory rationing area',
rvhich refers to big towns and ciries only. But one
can easily appreciate the importance of a minimum
consumption guarantee for a country lilie kidia in which
traditionally, drought, famines and floods wrcught periodic
havoc. Although India has, in the post indepeirdence
era, been able to avert serious famines on the scale
of the Bengal famine of the eariy 1g40s (rvhich has
eargely been possible due to the emergency external
aid and relief), the widespread nralnutrition and frequent
reports of starvation death particularly in the rrad harvest
-v*ears reflect the severe inadequacy of lndian econoniic
system to cater the basic human needs. In this Contert,
one can hardli, ignore the achievements of China.as

Hoalth Care
[,{edicai care is almost free in China. Chinese
systern of health care has widely been reported to be
a good example in medi-care. It is not things like
acupuncture (which has received wide publicity in western
news but the euphoria on this rvilr eventually diminish;
which is of great significance. Rather it is the particular
A. r. U, Nurul Amin 107

achievement of the Chinese in reducing the bias in

favour of the urban areas and more particularly the
urban upper income classes, a cornmon characteristic
of medical services almost everywhere else in the world,
which has inspired many people both in the rich and
the poor countries. Evidence shows that'barefoot doctor'
is not a fiction. It has really enabled the Chinese
to take health care to the remotest corner of the
country. All this suggests that the Chinese have been
highly conscious of the productivity gain of hetter health.
India has also made considerable strides in medicine
and public health since independence. Average life
expectancy has risen by almost 20 years ; the number
of doctors per capita and hospital beds per capita
increased roughly 30 per cent and 60 per cent between
1950-51 and 1969-70" Nonetheless, coinparative studies
suggest that China has been far more successful in
spreading the benefits of improved health care among
its populace, whereas in India rvhatever has been the
improvement in health facility is enjoyed mostiy by
the upper and nriddle income groups.
i
Literary aud Educatlon
In the immediate postwar period less than 10 per
cent of the Chinese population and about 15 per cent
of the Indian population was literate.as By 1970, the
overall literacy rate was approaching 50 per cent in
China while it rvas nearing only 30 per cent in India.
l\,{uch of the Chinese success is attributable to spare-
time adult literacy programs, which have been relatively
uncommon in India.so
 l0B Asian Studies I rJ

Provision for universal primary education is com-

nronly considered essential for a developing economy in
which again China has maintained an edge over trndia.sr
Only in upper secondary and higher education do India's
enrolement figures exceed those of China. The notable
exception is observed in specialized technical and voca-
tional school enrolement. But this n:erely underlines
the relatively top-heavy structure of the indjan education
system, which provides disproportionately great opportuni-
ties to those who have the resources to continue their
education rvhile at the same time limiting access to
the bottom of the educational ladder.s2 India also seems
to be ahead qualitatively, in the iiberal arts, humanities.
and the social sciences, though here too the gap has
been narrowing steadily.s3
On the whole it appears to us that China,s emphasis
on adult literacy, universal primary education, vocational
training reflect its priority in achiveing greater economic
equity"

Social Mobility
The extent of sociai mobility is another important
dlmension of economic equity. Educational and career
opporturities can be considered as two important indica-
tors of social mobility. Richman study shows the propor-
tions of studenfs froni rvorker and peasant origins have
increased 'very dramatically' since 1949. Students from
less humble family backgrounds have also received higher
education in numbers equal to or greater than their
proportionate representation in the Chinese society.
Alrhough comprehensive comparative data is not availa-
 A. T. M. Nurul Amin 109

ble, Richman seems to the justified in claiming that

India's secondary and higher educational systenrs have
been predominantly more ejitist. As compared to China,
fewer studdnts have been from *o.Le, and peasant
fan'rilies. Richnran's anarysis of the crass origin of
key
personnel in a sample of 88 chinese indust,
iar enterprises
revealed that a substantial of such persorulel
u,ere from
worker and poor and middle peasant backgrounds.
In
contrast, studies of social structure in India clearly
show the continuing significance of class and
caste
in limiting upword mobility ancl determining the
or:cupational hierarchy.sa
Of course in China,s case discrimination against
the children of past iandlords, capitalists, bourgeoisie,
c]ass enemies, etc. is not difficult to trace. It
is also not
uncommon that the party Ieaders, cadres,
top administra_
tors and their children enjoy special privil*ges. But
most reports indicate that such discrimination appears
to affect only a smail uumber of people in China. But
that is uot so in India where discrimination is wide-
spread which. essentially arises for it being a highly.
caste and c'ass riden society although gradually
; it i,
diminishing. Bur very slowly indeed r

Regional Disparities
substantial regional inequarities are inevitable in
countries as iarge as china and India. Differing climatic
conditions and soil fertility and an uneven distribution
of natural resources and mineral wealth are the most
obvious sources of regional differentials.
Qhina's rich agricultural land is concentrated in
 I l0 Aslan Studies / B

the south and south east region.

Two thirds of its indus-
trial wearth before rg52 r,vas concentrated
on seven coastaI
provinces and three municipaJities
(Beijing, Shanghai ancl
Tientsin) centrally administer.d
o, the country,s eastern
seaboard. !trith such an initial
ccndition, Chira started
vigor.us policy of rapid economic deveiopment.
Jaw of cumulative circular causation
ii:th*
as enunciated by
Myrdatss was fully operative
in case of China, regional
disparity would have witrened
further. ?he .spread-effect,
rvould have rlade the rich region
still richer and the
'backwash effect, would hav.
furiher worsenecl the poorer
regions. F{owever, a priori r:re also expects
that regional
disparity wouid be narrower in china
since the central
government rveilds enorrnous
control over invesr*arr,
taxation, and fiscal policies and is capable
of truruferring
income frorn the richest to t]re poorest
provinces parti-
-
cularly through hearth, education aad werfare expenditurer.
Cornpared to this, India has basicaily
relied
forces for development. In such a situation "*
*rrf.",
there is no
automatic mechanism to reverse
the trend of increasing
disparity that generates out of the
developmerrrnro...ruri*-
ing out of the'cumurative causation"
as mentioned earrier.
Those who 61gus that China has
,.f_rJ.fr'0.._
formed better than India in narrowing
down regionai
income differentiars base their
ergurnent in the above
secjuence of l,gic. However,
there is a flaw in this
Iine of argument. Firsf of all. except for
a brief p"riod
of 1950s, China f-ias
-
not reaily followed _ a;;H;;;
centralized moder where the centrar
authorities utto*t."iit
investments. On the other hand, for
India ,t, pr.*ulf,.
tion that everything was lefr to the market forces ancl
 A. T. 1\{. Nurul Amin lll

hence income disparity accentuated is also not correct.

As a matter of fact, India has follorved a more or
less planned path of development from tire very beginning
of its ihdependent nationhood and' thereby toc,k active
to reverse the onatural' trend that develops in the process
of economic development generating regit,nal disparity.
In fact, il did much mcrre than what it did in the
sphere of ir:ter-personal income disparity, sometirne even
at some cost of economic growth in order to remove
regional discontentment and strengthen nationai unity.
l!{oreover, China"s ecotiomic experience in the 1960s
seems to be marked break frour the 1950s and increasing'
decentralizaticn became the declare d objective. It dces
not seem that the Chinese leadership has shown a great
deal of concern about regional differences as such. Ti'ie
instances of removing some industries away from the
eastern seaboard iilustrate strategic considerationsthan
anything else.56
From the aboveanalysis, the a priori expectationthat
China has performed relatively much better than India
in narrorving down regional disparity does not seem to
hold good. Whatever comparative data are available
seems to support this point.
I As the table 2 indicates, the poorest 5 doubled their
I share of industrial output in two decades. But the gap
between the richest and poorest areas remains substantial.
{

In terms of industrial output per head, the most well'

endowed province/municipality was 52 times richer than
the least well endowed in 1957, and 48 times in 1972. If
Beijing, Shanghai arrd Tientsin are eliminated the differe-
nce widens from l0 times in 1957 to 11 tinres in 1972,
 il2
Asian Studler
/ B
Cornparison with India becomes difficult due
in scope, coverage to
..11.:.1.,"r and definitions of eq uivalent
rndustrial oufpuf value- datal y.t,
project tlr" tr[t. below does
a picture which is not ,orrt,
of China. Unlitr<e the table different from that
to. Ctlru, the value figures
are expressed in current
prices, and thereforethe
oY ,.h" period partly reflects 'rri."-'.t increase
exclude the value of un*.r. The data
mining output, whereas this
included in China. is

ffn::l:ljl, !I,*-i:l;:,?-r
by Provinces (1952
prices
vurPLlL per
ourp,rt cr uflplla
capita r'

- :9".rTr ; Yuan per heady

rank
1957 1972 t957 t972
Shanghai 7879
Tientsi 4796 1
r335 s937
1
Beijing 575
2 2
Liaoning 2500 rl .f
475 997
Kirin 177
4 5
Inner [,Iongolia 525 5
164 6
rtwangtung 1142 6
102 4
306 ,-,
I
Klangsu 101 8
38515a7 8
Fukien 85 7
Sinkiang 80
168 I 13
Shantunoo
2a5 10 11
74 237
i>.
I\rangst
.
68
1l 9
Szechwan
213 72 10
68 151
Yunnan 72 74
57 714
Tsinghai 13 15
54 237 14 q
Kansu 45
Honan 100 15 16
oo 170 16 72
Source : K. S, t"t*ffiir"
ma^nce
p. 39,
and prospects,;, ^ii"ti*;-:;;1,e#\:.,,'?;:
 A. T. M. Nurui Amin llg
Like China, the top five states maintain their lead
over the period. However, unlike China, there appears to
be some decline in the spread of manufacruring output
disparities. In 1961, the richesr Indian state enjc,yed 13
times the per capita manufacturing output of the poorest
state. In 1969, it was B times better off.
It is quite clear then from the two tables that neither
of the two countries have really been able to reverse the
inherited regional disparity to any great extent. This
is not surprising though. Because development
experiences of most of the countries show that reduction
of disparity' is one of the most difficult tasks. This
problem is so much entrenched in the developrnent
process that even a Soviet-type command economy is
unlikely to find an easy way to develop Siberia at a rate
equal or nearly equal to its central regions.
Sunanlary and Conclusions

Ilaving evaluated the relative performance in econo-

mic growth and econornic equity separately in some
details, we are now in a position to interpret these results
to address to the centrai question of this paper, i. e,,
the validity of the .growth"equity conflict, hypothesis.
Before drawing an inference as to this hypothesis" Iet
us recapitulate what we have found so far with respect
to the broad indicators of economic growth and equity
for these two countries :
First, despite two major dips, China has maintained
a clear lead over India in long-term growth of real
output 14.6% vs, B.b"/"). Chinese industrial growth
(8-12%, clearly expeeds trndian rate (6i/,). .Green

,I
I

.f
I
 I 14 Asian Studier /B
Revolution Technology' has afforded India a higher
agricultural growth (roughly 3fi vs. Z-e%l; some
estimates put Indian agricultural growth at a level
higher than even this rate. Second, given the
uncertainty of population figure, it is better not
to jump to firm conciusion with respect to per
capita real output. Reasonable approximation of
the rate of growth of per capita output is Z-a/,
for China and l-5% for India. Third, rhe dara
Tatrle 3
Total Indiair Industrial Outpur Per Capita by State
(Current Prices ; Rs. per head)
Rank Rank
State 1961 1969 1961 1969
Wd-B."s"l*---231 -860 l-:- -
Z --
fuIaharashtra 226 539 2 1
Gujarat 155 332 3 3
Punjab and l-Iaryana 84 ZSZ 4 5
Tamil Nadu 8323854
Assam 77 107 6 I
Bihar 65 106 7 10
Kerala 4915686
4B 138
Mysore (Karnataka) g 7
Uttar Pradesh 39 84 10 13
Andhra Pradesh BS 1 1g 11 E
Mahya Pradesh 32 10S tZ t 1
Orissa 24 99 13 12
Rajasthan i8 66 L4 14
Source : K, S. Lateef, .,China and India : Economic perfor-
mance and Prospects", II)S Communicatiou paper no.
I i8, p.39
A. T. M. Nurul Amin r15

on capital formation, investment rate ; general

information on innovative activity, and utilization
of capacity suggest that China should be able to
maintain the lead in coming years too, However,
it should be noted that successful adoption of
'r4/estern developed technology afford India a higher
productivity in certain industrihl ventures. It seems
China will also have to open up for sophisticated
technolo_gy in near future. Indeed it has already
started that in a real big way.
Fourth, the detailed analysis of the various economic
indicators of economic equity suggests that China,s
achievements in the area of income distribution
are clearly better than India. Most of the available
studies concur on this. However, regional income
differentials exist in both couniries and perhaps
stili persist for reasons noted previously.
What does then emerge from these results with respect
to the hypothesis that there is an .inherent, conflict
between growth and equity a The obvious temptation
is to deny the claim of such an inherent conflict between
these two top social priorities. But we must note that
one would reach such an unqublified inference at the
risk of being labelled as sweeping generalization. On a
close reflection it becomes clear that such a conclusion
can be easily misleading. For example, if the hypothesis
is wrong, does it imply that India would have achieved
higher grorvth rate with greater egalitarian policy ?
Although this is a hypothetical question and difticult
to answer, y€t one can say this much that there is
no reaspn to believe that greater concern for distributive
 116 Asian Studies / 8
justice automatieally guarantee
higher economic grorvth,
notwithstarrding the Chinese .*u*pi..
As a matter of fact, the trade-off or
confJict hypo-
thesis on grov,,th and equity
arises f,rom a veryi_ple
economic fact. tligher growth rates
require higher inv"s_
tible surplus. Higher investible
surplus .un b.*g.reratecl
oniy by curtailment of current consumption.
As oppo-
sed this if the planning objective is greater
-to distributive
justice, it
would lead to high., currenr consumption
with the consequence of lower investible surplus,
which
in turn, yields lower growth in national
income" No
research has yet farsified this
basic chain of economic
relationship. Neither the finding
of this paper weakens
this proposition. How is then to explain
the better
performance of China better in
both growth and equir.y ?
Our explanation ,vould be that China,s gains in
income
distribution with simultaneous growth in real
output has
been possible due to its unique political
order and
institutional set up.
In seems to us that China,s development strategy
has been such so that distributive gains have
an imme-
diate positive effect on productivity and
;ains vice versa.
The mechanism of affecting this is its overarl
economic
organization, particularly the commune system
for the
vast rural sector. They have successful]y evolved
a
mechanism of
ensuring increase in productiu;5, tfr.ougl,
their system of expanding equity. Thus investible
funds
used for expanding equitv does not necessarily
entail
a loss in economic growth. Hence the
so cal]ed ,inher_
ent' conflict between growth and equity has not
been an area of obvious economie dilemma for
China
A. T. M, Nurul Amin Ln
as it is for many orh.r loortries including India.
On the contrary, because of India's socio_economic
structure, there is no way to ensure increase in produc-
tivity out of any greater economic equity policy. In
this environment scarce investible surplus expanded
for purposes of social justice does not necessarily lead
to an increase in production. India thus classically
validates the growth-equity conflict hypothesis. In today's
world hardly any government can ignore the need
of adopting certain policies for social justice and equity
considerations. Indian planners are not any different
stuff and thus need to respond to the rising welfare
and social justice clamour which further squeezes the
already scanty investible surplus with the uitimate con-
sequence of low economic growth. Although this is not
the only explanation for lower Indian economic growth
and development, but it does support our basic conten-
tion which calls for a little more elaboration.
We observe tlat in case of one country the conflict
appears to be f ully operative and thus the hypothesis
does hold ; but for the other there is no evidence to
substantiate that there is an inherent conflict between
growth and equity. The findings of this paper streng.
thens our confidence in human ingenuity which can deal
with conflicting economic reality by erecting appropriate
social and economic institutions in which China has
been clearly more successful than India.
One may argue that the societies which have
removed drastic inequality by introducing radical policies
particularly abolishing private property have ended up
creating other types of inequality which arise from
I l'i Asian Studics I {l

i:ureaucratic privileges, power urd .onsequent abuses"

One here recalls Bertrand Russell's arguments that it
is not the equalization of wealth but the equalizatiou
of power which is more important for real equity between
man and man.57
Going back to the economic issues, ancther relevant
question is to ask horv the incentive structur is affected
as a result of pursuauce of greater equaliry objective ?
So far the discussion has not been explicit on this
question. Because of the ideological con:mitment for
greater equality on the one hand, and oinherent' human
instinct for seif-interest, socialist countries find it parti-
cularly difficult to erect an appropriate incentive struc-
ture. Despite continuous experimentation, the Soviet
Union and the East European countries are {inding it
extremely difficult to strike a right balance between
egaiitarian goals and the need to provide material in-
centives to motivate people to work. China during the
N{ao era has been pariicularly cautious on this. The
idea of. crealion of "new tnarro' and. other ideological
exhortations stressed by Mao were basically meant to
minimize the role of material incentives. But monetary
incentives had not been totally suppressed, they were
restricted only in their quantitative scopes and supplem-
ented by greater stress on. moral stimuli. social and
'psychological need-fulfilnrent ; and other incentives at
the rnirco-level. This policy had been called ,.the eco-
nomy of incentives'', and has resulted in more financial
and other resou.rces being available and use for
reinvestment.
Thus, until then,ss China has not been particularly
A. f. M. Nurul Amin ll9
beset with the problem of maintaining incentives for
higher productivity. It seems to us that this had been
possible for China because it was still at a low level
of development. As development proceeds and the urge
for modernization takes momentum, strengthening of
the incentive system becomes essential since societies
then need more scientists, skilled management, engineers
and other professionals. At the risk of some over-
simplification, we venture to characterize the present
changes in China as a reflection of these new needs
and realities.
Compared to China, material incentives in India
have never been restrictive. As discussed previously,
the differentials in income and fringe benefits are quite
significant. However, it does not appear that India has
particularly derived any productivity gains out of this
wide margin of income differentials and consequentiy
lagged behind in the rate of economic growth too. One
plausible explanation of Indian failure in this regard,
among others, is that the incentives are heavily concen-
trated only at the very top level. The incentive structure
does not really cover the human productive agents at the
grass-root level. This provides a clear warning that
existence of differential incentive structurc per se does
not guarantee gain in productivity and growth.
In concluding the paper, we would venture to draw
some policy implications of the foregoing evaluation
which may be useful for other LDCs including Bangladesh.
First, the apparent 'growth-equity conflict' can be
resolved substantially by constructing appropriate institu-
tions which would afford to benefit from productivity
 120 Asian Studies I
I
gain leading to higher economic growth
with simurtaneous
pursuance of equity policies such
as ensuring empioy_
ment, improved health care, minirnum consumption,
etc.
Second, demand constraint to developnreat calJs for
more attention from policy matrrers. The policy to affect
the determinants of demand lvill aiso .n.ur" better
distributive justice. But appropriate social and economic
institutions is a pre-requisite to rnake certain
that such
policies would bring in productivity gains.
Third, poiicies of pursuing self_reliance, adopting
indigenous technology and fo,owing a rerativery
ciosed.
economy rnay be significant at an initial
stage of
development. But when a certain rninimum
standard
of living is reached, an economy is bound to open up
for trade and sophisticated technology in order to meet
the new needs and demands of the people as it is
now occuring in China much to of our surprise.
Fourth, the old values, attitucles, social institutions
and semi-feudar land tenurship are important
bottrenecks
in increasing the size of investible surplus. India,s
faiiure in this regard offer an important lesson to
other LDCs.
Frnally, a note o.f caution need to be added. Any
lesson to be learned from any histori.rt
.*p.ri.n* oi
economic deveiopment raises the questions
of difference
in time, place and environment which can cast doubt
in the usefulness of such iessons. 1-he question of
transferability of a system is even cruder.
India has
inherited a caste-riden, old society in
one hand and
a British parliamentary democratic system with a strong
middle class upholding rhe lofry iieals of
W"rt"ri
 12r
A. f. M. NuruiAmin
values on the other. Therefore, even if the
Chinese

system conclusively proves to be - a superior

one on
some economic there is little likelihood that
"rir",iu,
it will be practicable in the Indian context'
areas'
Nonetheiess, on some isrues and in specific
both countries offer useful lessons from which other
LDCs can draw on in building their social, political'
administrative and economic institutions'

References and Notes :

l.Wewouldlimitourevaluationtotheperiodbetween
lg47-48to 1975'76 which roughly coincide with the
supreme
the data
reign of Mao Zedong in China' Thus' although
it.should
base of the paper may appear somcwhat dated'
oot necessarily denote a deficienoy' Rather limiting
the

analysis to this poriod is of necessity' For

profoundly
the end
significant .haog., are occuring in china since
thc scopc
of thc Mao era, analysis of which remains outside
of this paper.
deve'
2. t"or Soviet views on 'non-capitalist' road to cconomic
Aspects of Non'
lopment, sec R. Ulayanovsky, "Some
CouDtries"' lYorld
Capitalist Way for Asian and African
Marxlst Review, ( Sept' 1969 )' pp' 687-93'
political
3. See K. Marx, A Contribution to the critique af
p'
Economy ( Chicago : Kerr and Co''
1904;' 12'

4. M. Haq, The Strategy of Economic Planning ( Oxford

UnlversitY Prcss, 1966 )' P' l.
5, Ibid, p. 3.
6. The first four of these studies chronologieally are :
(rl W. Malenbaum, "India and China : Contrasts in Deve-
iopment PerformancE, American Economic Review'
XLIX : 3
( June, l'959 ) ; 1ii; S' Klein, "Recent Economic Experi'
Interpre'
ences iu India and Communist China-'{nother
tation", Amerlcan Economic Rcview, ( May 1965 ) ; (iii)
 t22 Asien Studies / I
K. N. Raj, India, Pakiston and China: Economic Growth
and Outloak ( Bombay : Allied Fublishers, 1967 ) ; and
(iv; Kuan-I Chel and J. S. Uppal, Comparative Dcvelopment
of India and China ( New York : The Free preEs, lgTl ).
7. K. S. Lateef, ..China aud India : Economic performance
and Prospeels", ID,S Communlcation papcr flo. llg ( IDS,
The University of Sussex, Eugland, December lgTS p. I,
).
8. P. Desai, Discussion on T. E. Weisskopf, and B. Richman's
papers, American Economic Revlew, t May lg75
).
o These are : (i) B. il{. Richman, Industrial Soclety in
Communist China ( New York : Random House. 1969
);
(ii) S. Swamy, ,.Economic Growth in China and India, lg52-
1970, A Comparative Appraisal,,, Economic Development
ondCultural Change,2l 4 ( l9Z3y; (iii) T. E. Weiskopf,
"China and India : Contrasting Experielrce in Economic
Development", AmGrican Economic Review, 65: 2 ( May
1975 ; and (ivy Lateef, op. cit.
10. Richman, 1969, op. cit.
M. Richman, .,China and India: Development Durins
I t. ts.
the Last 25 Years. Chinese and Indian Development :
An Interdisciplinary Environmental Analysis.,, American
Economic Rcvieut, papersaad proceedings,65 : 2 (May lg75y.
t2. lbid. , p. 345.
13. Desai ap, cil., p. 366-
14. 1957.65 growth figures in Table t shows thc dip
durirg the
Great Leap.
t5. Richaman, 1975, op. cit, p, 348.
16, Swamy, op. clt.
17. D. H. Pcrkins, ',fssues in the Estioation of China,s Nstio-
nal Froduct.', Harvard Univcrsity, ( mimeo ), 1g64. cite,J
in Lateef, op. cit.,p, 3.
lB. These two papers are : (i) T. E. Weisskopf, ..China and
lndia : A Comparativc Survey of Economic Development,
The University of Michigan 1 miurco ), October 1974 and
1ii; Weisskopf, 1975 2 op. cit,
19. Recent outward-looking policict of China may also be inter_
 A.i'. M. Noruiemln 123

preted in such argument in a reverse ordcr,

20. Latee{, op. cit.
21. C, Ciark, "Econortic Development iu Communist China"
Journal of Politicol Economy, ( April 1976 ):
22,, Weisskopf, 1974, op. cir. p. 5.
23. Edgar Snow, .'Ialks with Chou Eo-lai,', The New Republic
( March 27, l97l 1,
24. Lateef. op. cit,,p.25.
25. The concept is duc to H. Leibensteio, .,Allocative vs. X-
Efficiency' Americaa Economic Reviery ( Juoe 1966 ). It
denotes a gain in cfficicncy that may occur in a organization
of production, due to apt managemont, so that as much out,
put as possible is obtaincd from given amounts of inputs.
26. I am indebted to Prof. N. Camcron of the Uoiversiry of
Mauitoba for his suggestions in following this framowork.
The attempt here howevor remains rough and tentative.
This seems to be an useful direction to derivc precise
results, lt may be applied more fruitfully in some futuro
worL if comparablc data on all variables are available
for both countries.
27. Weisskopf, 1974. , p. 10.
28. Calculatlou is shown in thc Appcndix B.
29. Lateef ,op cit. , p.26.
30. HIa Myiot har made a good critique of this deficiency io
the dcvclopment literature. See his book, Economic Theory
and the Underdeveloped Countrie"r ( Oxford University
Press, l97l 1,
31. Gen,eral belief iB that significant changes aro undergoiug
in tbil reipect siqce Dong Ziao.Zoag cstabliched his firm
coahol ovsr Chioa in the post Mao era. But no data are
ylt available to us which could bc used to quantify. such
changc, if any.
32. Richman, op. clt., 1969.
33. A Report by a group of Amcrican cconomists who visited
China in 1974. The rcport war cponsorcd by the Ford
Foundation ( mimeo ),
 i24 Ariu, Srudies I
/
34. The exchaoge rate I y. g.50. It has been
suggestcd by the
group of five American economists that given
the drfferenccs
of Chiuese and Anrerican prices for standard
food and
clothing, I y actualJy worth somerhing ,likc
t. 50.
35. Gini coefficient measures the degree of ioequality. For
example if
the value of the coefficient is zero, it would impty
perfect equality and I means maximum inequality.
36. "Size, Distributicn of Income : Compilation
of Data,,,
IBRD Staff paper No. lg0 ( Novern ber, tgl4
).
37. D. H. Perkins ( 1975 ) cited in Lateef, op cit., p.35.
38. Latoef, op. cit., p.85.
39. For example the price index of food articles
was 301 as
compared to 262 of all commodities by the
end of I973 from
a base of 100 in I97l-62 see. India year Book, 1g74.
40. N. Krishnaji, ,.Wages of Agricultural Labour,,,
Economic
and Politicol Weekly ( Bombay, India, September 2l,lg7l)
41. IBRD Staffpaper No. 190, op. cit.
42. Wcisskofy, lg?4, op. cit. , p.27.
43. "Growth of Empioyment: 1950-51 to l96g-69',, Resuye
Bank of India Bullain ( Decembcr 1969
)
44. Weisskopf. 1g74, p. 14.
45, Paul E. Ivory and W. R. Lavely, ..Ructication, Demographic
Change and Devetopment in Shanghai", paper pr.r.ot.a
at the Economics Department seminar, University of
Mauitoba ( April l9t7 7.
46.. Ibtd. , p. 1.
47, Originated from the classical article of Artbur
Le*is, ,.Eco-
nomic Developonent with Unlimited Supplies of Labour,,,
The Manchester schoor of Economic and sociar.grzdie.r, these
models postulated that transfer of .surplus, Iabour from
the .rural subsistence sector, would occur with the growth
of the 'modern urban industrial oector'.
48. J. G. Gurley quoted in Weisskopf lg7+, op. cit., p.
, 15.
49. Weisskopf, op. cit, , p,29.
50. Ibid. , p,29.
51. Ibld" , p.30,
A. t. M. Nurul Amio 125

52. Richman. 1975, oP, cit., P. 350.

53. Richman, 1969, oP. cit.
54. Richman, 1975, oP. clt.. P. 351.
55. Scc G. MYrdal, Economic TheorY and UnderdeveloPed
Regions, ( London : Methuen' 1957 1'
56. Sec the Statoment bY Mao Zedong as quoted by K. S.
Lateef, op. cit. , P. 38.
57. Bertrand Rulsell, Power, a New Social Analysis, 1938'
58. Thc reference ls obviously to the Mao era' It is a common
Knowledge now that China has made a radical switch from
lhosc policies sinco thc present leadersbip in thc country
established their firm control'
 126
Asian Studicr / 8

APPENDIX A
Swamy,s Estimation
(a) Rate of Growth of Net Domestic product, (%
per year)
Period China India
52-56 to S7-S9 4,8 3.1
57-59 ro 61-65 1.4 4.A
6r-65 to t9Z0 1.7 3.8
52-56 ro 1970 DO
2.3 rJ. ,
52-56 to 6l_65 3.0 3.6
(b)- Rate of Growth of Value-Added in Agriculture
(% per Year)
Period China India
52-56 ro SZ-S9
4,2 2.3
57-59 ro 6I-65
r,6 2.6
52-56 to 61-65
2.8 2.5
6l-65 to t9T0 1.4 3.3
52-56 to 1970 ,, 2.9
(c) Rate of Growth of Value-Added in Industry
per Year) 1[
Period Chino Indio
52-56 ro SZ-59 15.4 3.1
57-59 to 6l_65 -.03 4.4
6l-65 ro 1970 7.1 3.8
52-56 to 61-65
6.6 3.8
52-56 to 1970 6,9 3,9
A. T. M. Nurl Amim

(d) Rate of I and ICOR

(i) China
Rate of Investment Rate of Growth
o/ in NDP ICOR
/o
1952-59 11.0 4.8 z.,J
57-65 9.4 L.4 6.7
52-65 10.0 3.0 3.3
(ii) India
1952-59 9.8 3.1 3.2
57-65 L3.2 4.0 3.3
52-65 11.5 3.6 3.2
(e) Population Growth Rate
China India
53-58 1.6 2.08
58-65 0.9 2.15
63-70 1.25 2.17
70-75 1.20 2.43
128
Asian Studtec / g

APPENDIX B
Estimated from Equation (S) in page
19
(1) for China :
'09:.8 x .0L24+.2 x .28+%At
% At :' o9-' 00992' -05600
:.09-.06592
:.024
:.%At:2.4y
(2) For India :
.06:.3 x ,02.r.2 x.l5 +%At
%At: '06 -'16 -.030
:.06-.046
-.014
:.%At:.1 4:/"