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No more of China, invest in India

The Times Of India:  December 20, 2004

Mumbai: Indian rules regarding foreign direct investments (FDI) are more favourable to investors than China's but where New Delhi falters is in marketing the country, according to a US don of Indian origin.

"Indian FDIs rules are more favourable compared to China but India falls short on the last mile commitments in making effective sales pitch," Tarun Khanna, a professor at Harvard Business School said.

He was addressing the National Council meeting of the Confederation of Indian Industry (CII) here on Saturday. The subject of his address was 'The Dragon and the Elephant - Understanding business in modern China and India.'

The fundamental difference between India and China in their growth strategy is that while China has placed an extremely strong focus on foreign investments, the Indian economy is largely driven by a robust private sector, Khanna said.

While China led in sectors like consumer electronics and automobiles, India's strength was in sectors like software, pharmaceuticals, films and advertising, he noted.

Drawing comparisons on the infrastructure front, Khanna said whereas China is substantially ahead of India in roads, power and telecommunications network, India has made good progress on developing its capital markets.

He said the fundamental choices taken by the two countries by focusing on manufacturing and services sector respectively made good sense in view of their historical backgrounds. Both countries however could draw on each other's experiences and learn from successes.

Whereas China could explore a transition from relying FDIs to domestic industry that would ensure a strong patents regime, India would need to focus on educating rural masses.

"India's focus on Primary and secondary education has been dismal," Khanna said.

He noted that in China, the influence of the national government was greater compared to states. China has policies to provide incentives by way of additional funds to states, which were "good performers."

Khanna said the Indian Diaspora could make substantial contributions in fuelling the country's economic growth.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.