Tata's fall :: China's rise?

Late last year Tata motors unveiled production plans for the Nano, what was to be the world's most affordable car with a retail price tag of $2,300. Their plans were derailed today by farmers protesting land acquisitions in the special economic zone of Singur, home to one of three Nano factories in India. The debate has been brewing since the government "bought" the land under a 2005 economic expansion policy. It is certainly reflective of the tense nature of labor relations in India but more tellingly, the outdated nature of the Indian bureaucracy and government.

From my own experience in India (and this can be confirmed by anyone who has worked or lived there), anything the government runs is insanely slow. Employing three people to sell someone a stamp and five people to check your train ticket (not to mention the 4 porters relying only on tips) reflects the far reach of the government and its' woeful inefficiency.

Not only is this frustrating but, as Arvind Subramanian explains, it also spells danger for India's growth and development (especially when compared to China). India is certainly ahead of China in education achievements and political freedoms, but unless the government can be streamlined by selfless reformers (about as likely as it sounds), the country's growth will slow in the coming years. The bureaucratic institutions are a legacy of the British and provided many jobs in the early years of Independence but unless the government can discard this colonial legacy the institutional stagnation will lead to economic stagnation. As Subramanian says, it is easier to create markets than improve a state's capacity. That's good news for China and bad news for India.